Local content as a priority

February 8, 2013, Delovoy Kazakhstan (Almaty) by Olga Lanskaya

Karachaganak Petroleum Operating BV operations’ direct and indirect impact on Kazakhstan’s economy since 1997 had a value of $4.2 billion in monetary terms, or 4% of gross domestic product. They helped create 137,000 jobs.

This conclusion is based on the results of independent studies conducted by two respected scientific organisations - the Oxford Institute for Economics and the Kazakhstan Institute for Economic Strategy.

These figures are the result of dedicated effort, and KPO’s well-constructed policy for Kazakhstani producers and suppliers. The company became one of the first large enterprises in Kazakhstan to successfully introduce a local content programme.

KPO publishes all needed information on its website and its annual, mid-term and long-term plans for the procurement of goods, work and services. This allows them to form their own production strategy, plan and provide stable and sustainable business to existing and potential Kazakhstani suppliers.

"The use of Kazakh goods and services is a priority for the efficiency of the company’s operations and has a positive impact on the development of the regional and national economies," KPO’s Local Content Development Controller, Kairat Kapashov said .

KPmakes it possible to register potential suppliers electronically on the database after they complete pre-qualification. At the present moment, there are about three thousand Kazakh suppliers registered on KPO’s database.

The company not only sets conditions and requirements for suppliers, but also actively prepares potential partners through a variety of business seminars, forums and conferences.

An important goal is to acquaint potential suppliers with the technical requirements and standards used at KPO and to inform local companies on production needs at Karachaganak. This work has been systematically carried out for many years.

Thanks to KPO, many Kazakhstani suppliers have been able to achieve compliance with international standards for the oil and gas industry. This is particularly so in workplace safety, environmental protection and safe operations.

Our company strives to maximise Kazakhstani participation in the projectThis strategy applies to all areas and directions of the Karachaganak operations. KPO is actively involved in the development of Kazakh suppliers, and is implementing a number of initiatives. These include improving local enterprisescapacity and transferring best practices. These initiatives have had a positive impact on the sustainable development of Kazakhstan's oil and gas industry,”said KPO General Director, Damiano Ratti.

During the implementation of the local content development programme, which has been ongoing ever since 2001, more than $4 billion worth of services and goods have been provided by domestic enterprises. In 2012, local content in the Karachaganak project totaled 56%.

Currently, a localization project for goods and services production with the participation of West Kazakhstan Oblast companies is being implemented. The project has been developed as per the results of a needs analysis on goods and services, as well as domestic market studies. It is expected the project will help identify opportunities and potential for local producers to develop these further.

The ultimate goal of the project is to develop a strategic plan for the phased development of local production. Such policies and positive growth dynamics in domestic content have created a favourable social image for the company.

As is well known, Karachaganak is one of the largest international projects in Kazakhstan. It is being implemented by the BG Group, Eni, Chevron, LUKoil and NC KazMunaiGas JSC.

On February 14, 2013, KPO will participate in the conference -- Kazneftegazservis-2013 organised by the Union of Kazakhstan Service Companies. It is officially supported by the Oil and Gas Ministry.

About 500 executives and government officials, subsoil users, domestic and foreign oil and gas and service companies will attend. Participants will receive information on the basic needs of the oil and gas sector for goods, work and services. They will also discuss prospects for participating in projects.

KPO is actively engaging local resources, which not only improves the production capacity of companies, but also enhances the development of economic and intellectual potential of the West Kazakhstan Oblast over the long-term. This policy has a stimulating effect on the overall development of the national economy. It creates an environment in which local companies can achieve competitiveness through the application of best practices gained in the international business sector. They also acquire technologies that can be extended beyond the oil and gas industry.

Projects completed over the 12 years of our cooperation with KPO, have allowed us to gain invaluable experience in the construction of facilities of various level of difficulty and responsibilityThanks to these joint efforts and the high work standards required by KPO, our employees were able to significantly improve their skills. This was particularly the case in production management and workflow organisation. But it also applies to occupational safety and environmental protection,” General Director of Uralskstroyinvest Alex Bezyanov said.

KPO’s requirements for local content are distributed to all of KPO’s major foreign contractors. “This means there are requirements for local content, the transfer of knowledge and technology, as well as to assistance in the professional development of local staff at Kazakhstani companies stipulated in the contract. KPO also conducts projects that contribute to the localisation of the production of spare parts and equipment that are in demand at Karachaganak. This encourages joint cooperation of western and domestic manufacturers and creates a positive environment for the development of Kazakh companies and the transfer of advanced technology in Kazakhstan,” Expert on Local Content Development, Kenzhegulova Elmira said.