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The official standpoint of Surhan Gas Chemical Operating Company concerning disseminated publications with false information

The official standpoint of Surhan Gas Chemical Operating Company concerning disseminated publications with false information

False information about the energy sector of the Republic of Uzbekistan is being disseminated in a number of foreign mass and social media, casting doubt on the work of companies that carry out open business activities in the interests of the people of the Republic of Uzbekistan.

In relation to dissemination of false information regarding development of "Mustakillikning 25 yilligi" field, we are making a statement as follows:

Surhan Gas Chemical Operating Company FC LLC is the Operator under the Production Sharing Agreement in relation to "Uzbekiston Mustakilligi" investment block with further exploration and development of "Mustakillikning 25 yilligi" field with construction of a gas chemical complex in the Surkhandarya Region of the Republic of Uzbekistan. The investor under the Agreement is Surhan Investments Limited (Hong Kong).

In 2017, in accordance with the Law of the Republic of Uzbekistan “On Production Sharing Agreements” № 312-II dated 07.12.2001, an Agreement was signed in relation to “Uzbekiston Mustakilligi” investment block in the Surkhandarya Region. This Agreement does not apply to any other fields and blocks in the Republic of Uzbekistan.

The beneficiaries of the investor under the Agreement are the Uzbek entrepreneur B.Sh. Fazylov, and the Russian entrepreneur A.V. Filatov, and 20% of shares belong to the state-owned company JSC "Uzbekneftegaz". There are no other investors and shareholders in the shareholder structure.

At the time of signing the Agreement, there was neither development nor production at the field. The first well in the field was drilled in 1975 by "Uzbekneft" association. Over past forty-odd years, it was not possible to place the field under operation, since its reserves are difficult to recover, the gas is sour, and the field itself is characterized by very complex drilling and geological conditions which is confirmed by the leader in petroleum industry consulting services DeGolyer & MacNaughton International Company. Moreover, Petronas International Company exploration efforts within 2006-2008 failed to proceed to the further development and production of the field.

The Investor has undertaken to carry out geological exploration, to develop the field, to construct the plant and necessary infrastructure. At the same time, the Investor bears all financial and geological risks for the Project in accordance with the PSA Law.

The amount of necessary investments to the Project is estimated at more than USD 2 bln, with the potential to increase. All investments are being attracted by the Investor, without any government funds or guarantees, in accordance with the PSA Law.

In accordance with Law "On Production Sharing Agreements", all work under the Agreement shall be carried out by the Operator established in the Republic of Uzbekistan. To perform the work, the Operator engages the most qualified personnel from Uzbekistan and abroad with extensive experience in the oil and gas industry. The activities of the Operator are directly controlled by the Government at several levels, including through the Steering Committee, whose members are comprised of representatives of Ministries and the Cabinet of Ministers of the Republic of Uzbekistan. Annual work programs, budgets, significant contracts and audited financial statements of the Operator are reviewed and approved by the Steering Committee.

Upon completion of construction of the Gas Processing Plant and start of production, the income from gas sale (after taxes and reimbursement of expenses) will be distributed at the ratio of 50% to 50% between the Republic of Uzbekistan (the “Government”) and the Investor, and in case of good financial performance of the Project, the share of the Government will be 80%.

Upon expiration of the Agreement, the Plant, infrastructure and equipment built at the field will become the property of the Republic. Besides, the Investor is obliged to create an Abandonment Fund that will cover all costs related to the field decommissioning in accordance with the PSA Law.

The Operator's activities are carried out in full compliance with the legislation of the Republic of Uzbekistan, in accordance with the best international standards and practices, Operator is transparent and accountable to the Government, and is carried out at the expense of the Investor.

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