30 November 2017

Andrey Filatov Makes His Debut in Uzbekistan

By becoming a participant in a gas production and conversion project.

Photo: Sergey Bobylev/TASS
Photo: Sergey Bobylev/TASS
Globaltrans and Global Ports co-owner Andrey Filatov has diversified into a new business, becoming a participant in a gas production and conversion project in Uzbekistan.

Strangely enough, this story [of participation in a PSA project] is rooted in chess. I first heard about it [the project] while familiarizing myself with the history of creation of a junior chess school in Tashkent, which, according to FIDE, later became the best of its kind in Asia. «It was chess that served as the basis for communication that subsequently resulted in this project», says Andrey Filatov, Head Coach of the Russia men’s national chess team, President of the Russian Chess Federation and co-owner of two large transport and logistics companies, explaining to Vedomosti how he became interested in the gas business.

On Wednesday, Brighttree Holding Ltd, registered by Filatov in Cyprus in 2016, reported that it has acquired 50% in Cyprus Altmax Holding Ltd. The latter owns 75% of the Surhan Gas Chemical Operating Company, operator of the «25 Years of Independence» gas field (reserves of more than 100 bcm), to be developed under a production-sharing agreement (signed on April 5). Filatov acquired the stake in Altmax from Bakhtiyor Fazylov. The transaction terms are not disclosed. Depending on the infrastructure component, market value of a license to develop a field with such a volume of proven gas reserves may be anywhere between US$100 million and US$300 million, according to an estimate by Andrei Polishchuk, a research analyst at Raiffeisenbank. According to the Cyprus registry, Fazylov created Altmax Holding in November 2015. Since 2004, Fazylov has been serving as Chairman of the Management Board of the oil service company Eriell Group.

The remaining 25% of the Surhan Gas Chemical Operating Company is owned by Gas Project Development Central Asia AG (a Gazprom entity) and Uzneftegazdobycha (member of the state-owned Uzbekneftegaz). The proportion is not disclosed. An employee of one of the participants in the consortium has confirmed the entry of a new participant.

Filatov did not specify his source of information about the project to develop the «25 Years of Independence» gas field. From December 2013 to February 2017, the Chess Federation of Uzbekistan was headed by Alisher Sultanov. In 2015, Sultanov was appointed Chairman of the Management Board of Uzbekneftegaz, and on November 1, 2017 - Deputy Prime Minister of Uzbekistan. «Filatov knows new leaders of Uzbekistan and, thanks to these ties, is trying to find new areas for investment. It's straightforward diversification», says a source close to the businessman.

According to Forbes, Filatov's 2017 wealth is estimated at US$950 million. His core assets include stakes in Globaltrans (11.5%) and Global Ports (10.25%). As of yesterday, the value of these stakes on the London Stock Exchange was US$260.4 million. In addition, Filatov serves as Chairman of the Board of Directors of the Tuloma Investment Company, whose portfolio includes shares of the largest Russian oil and gas players.

However, the Uzbek gas project is much bigger. Its total value is estimated at approximately US$5 billion, including a capital investment of US$2 billion at Stage 1. Precise investment metrics are expected to be determined at a later stage, following the development of commercial terms and conditions. The businessman intends both to invest in the project personally and attract international financial institutions and private investors.

The «25 Years of Independence» development project is expected to be implemented in two stages. Following additional exploration and organization of production it will become a resource base for a gas conversion facility and gas chemical production (polyethylene, polypropylene and sulfur). In the future, the complex is expected to ensure deep conversion of gas and production of olefins (ethylene glycol, rubber, polyethylene terephthalate, etc.), according to a press release. The volume of gas conversion is expected to reach up to 2 bcm annually at the first stage and up to 4 bcm annually at the second stage, as reported in September by the Sputnik Uzbekistan news agency. «The «25 Years of Independence» project is one of the largest in Uzbekistan. Moreover, it is at an advanced stage, explains Filatov. «Overall, the country is highly attractive to investors, considering rapid development of the economy, conditions and a large-scale government program to increase conversion and boost exports of finished products.»

Gas production in combination with conversion is an excellent solution for Uzbekistan; especially given limited availability transport infrastructure, according to Andrey Kostin, Head of Rupec Business Intelligence. «Cheap raw materials should allow developing a quite competitive gas-chemical capacity. It will take at least five years to build such a complex, not counting exploration and modeling of the gas production and composition profile», says Kostin. China and India will be the key sales markets for the project, Kostin suggests. «In the mid-2020s, competition in the polyethylene and propylene market is expected to be fierce, and those with the lowest production costs will be the winners», adds Kostin. From this point of view, the project could be quite successful, suggests the expert.

Arthur Toporkov, Alexandra Terentyeva/Vedomosti