An ambitious economic transformation effort gaining steam in Uzbekistan hinges on Chinese technology. At the heart of the plan is a project that would make value-added products from natural gas instead of simply burning it for energy.

Source: NIKKEI ASIA

The Central Asian country's largest private oil and gas company, Sanoat Energetika Guruhi (Saneg), is working with Chinese state energy giant Sinopec to build what would be the world's first methanol-to-olefin gas chemical plant outside China. Olefins are raw materials for a range of polymer products such as plastics and films.

The $3.3 billion facility would be able to turn 1.3 billion cubic meters of natural gas into 1.11 million tonnes of polymers a year by 2026. About 44% of the output is to be exported, mainly to China and Turkey.

China is considered the pioneer in methanol-to-olefin technology, often simply known as MTO, and built the industry using methane from coal fields. "Lean" Uzbek natural gas is well-suited to the technology, according to Ruslan Navruzov, technical director of Uzbekistan's new MTO Gas Chemical Complex.

The project underscores the deepening relationship between Uzbekistan and Beijing, with China overtaking Russia as the Central Asian nation's largest trading partner in 2023. China also accounted for a quarter of total foreign investment in Uzbekistan last year, in sectors ranging from renewables to churning out construction materials, medicines and electric buses.

The hope is that the Saneg plant will not only bring in plenty of export revenue but also spur development of related industries. In addition to the MTO plant, the Karakul free economic zone in the southeastern Bukhara region will house factories for textiles, carpets, shoes, plastic pipes and fittings, as well as other products made from polymers.

Since coming to power 2016, Uzbek President Shavkat Mirziyoyev has looked to liberalize the economy and foreign trade, prioritizing the production of high-value-added products through processing of the country's natural resources. The nation's gross domestic product grew 6.0% in 2023 and is seen expanding at a 5.5% clip in 2024, according to the Asian Development Bank, while the average nominal monthly wage roughly doubled to $360 between 2017 and last year, official statistics show.

Uzbekistan's MTO Gas Chemical Complex plans to produce 300,000 tonnes of polyethylene terephthalate (PET) annually, 350,000 tonnes of polypropylene (PP) and other materials. This is expected to decrease the country's imports of polymers by $500 million a year and raise $350 million a year from exporting them, said Bakhodur Khafizov, director of the Karakul free economic zone. Uzbekistan's trade deficit stood at $13.7 billion last year, including $8.8 billion with China. Net imports of plastics and unspecified chemical products were $1.2 billion in 2023.