Sustainability

Long-term initiatives

In 2020, KPO continued activities on implementation of long-term initiatives approved within the Memorandum of Understanding on development of domestic industry (MoU), which was signed between KPO, PSA LLP and KAZENERGY Association and the Memorandum of Understanding on localization of the OEM1 goods signed between the RoQ Ministry of Energy, PSA LLP and KPO.

The Agreement on Intents for the establishment of an International Centre for the Development of Oil & Gas Machinery was signed in 30 November 2020 between the Ministry of Industry and Infrastructure Development, Ministry of Energy, PSA LLP, the Machinery Builders’ Union of Kazakhstan and three major petroleum operators: KPO, TCO and NCOC. The International Centre will conduct its activities on behalf of the three operators and will closely interact with relevant ministries, the PSA LLP Authority and petroleum associations involved in the development of the national oil and gas machinery building.

Within the framework of the Memorandum of Understanding on localization, in 2020 KPO continued activities on development of roadmaps with OEM manufacturers. The categories of goods and spare parts for potential localization, timing of implementation and the estimated production scope in Republic of Qazaqstan. At the end of 2020, roadmaps were signed with companies such as Baker Hughes, Honeywell, nVent, Stewart-Buchanan Gauges Ltd.

Example of successful project is presented further in more detail.

 

1 OEM – original equipment manufacturer

Sucess story

CONTRIBUTION TO LOCAL MANUFACTING

Context / short description of issue:

In order to develop local content as a contribution to the economy of Qazaqstan, it is essential for KPO to increase within its purchases the share of goods, works and services made in Qazaqstan.

 

The Ministry of Energy and the Ministry of Industry and Infrastructure Development of the Republic of Qazaqstan have launched the initiative to maximize the range of products produced in the country including production of original equipment and spare parts, as well as licensing services.

 

As part of these initiatives, KPO has identified a preliminary list of 33 continuous demand products. In result of analysis of the list for compliance with criteria, such as presence of continuous demand and economic feasibility of product localization, eight of the OEM manufacturers were identified.

Goal:

To promote the development and growth of Qazaqstani mechanical engineering industry by attracting original equipment manufacturers to localize production of goods required at the Karachaganak field in the Republic of Qazaqstan. Localization implies both production itself and assembly of equipment.

Solution / actions:

Under the initiative of the RoQ Ministry of Energy and PSA LLP, a round table on localization of original equipment production was held with the participation of KPO, TCO and NCOC. During the round table, a Memorandum of Understanding was signed between KPO, the RoQ Ministry of Energy and PSA LLP.

 

Pursuant to the Memorandum of Understanding and the decisions reflected in the protocol as the outcome of the round table, KPO had negotiations with seven OEM manufacturers interested in localization. The Company started working with each of the manufacturer on Localization Roadmap.

Result:

Implementation of the roadmaps in the next two years depends on KPO’s production and project needs, the contracting strategy for major projects, and meeting the conditions of original equipment manufacturers, namely:

  • signing of a long-term contract between KPO and an OEM manufacturer;
  • guaranteed annual purchase scope during the contract life;
  • exemption from relevant taxes or acceptance of equivalent rate increases.

Within the framework of the Memorandum of Understanding on localization, in 2020 KPO continued activities on development of roadmaps localization with OEM manufacturers. The categories of goods and spare parts for potential localization, timing of implementation and the estimated production scope in Republic of Qazaqstan. At the end of 2020, roadmaps were signed with companies such as Baker Hughes, Honeywell, nVent, Stewart-Buchanan Gauges Ltd.