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Kazakhstan initiated creation of International Center for Development of Oil and Gas Engineering and Service

Friday, 19 June 2020, 13:07:10

At the government session chaired by the Prime Minister Askar Mamin, Minister of Energy Nurlan Nogayev reported on the development of engineering in the oil and gas industry.

As Nogayev noted, the purchases of goods, works and services in the oil and gas industry in 2019 amounted to about 7 trillion tenge, which is 15% more than last year. At the same time, the share of three large operators — TCO, NCOC, KPO — is about 5.7 trillion tenge, which exceeds 80% of the total purchase of goods, works and services.

The total local content in large projects was about 39%, while the share of locally produced goods was only 10%.

“These indicators indicate that the potential of domestic producers is not fully utilized, and therefore the work of the ministry and other departments is aimed at increasing the share of local content in large oil and gas projects of Tengiz, Kashagan and Karachaganak,” Nogayev said.

In April 2019, an interdepartmental working group for the development of oil and gas engineering was created, which included operators of large projects of the Ministry of Energy of the Republic of Kazakhstan, Ministry of Industry and Infrastructure Development, PSA LLP, Kazakhstan Engineering Union and others.

One of the activities of the working group is to conduct an analysis to identify target product groups and interested domestic enterprises.

As input data, procurement plans and a list of installed equipment were used, as well as an analysis of the level of readiness and interest of domestic producers in localizing the necessary equipment.

Based on the analysis of goods, six main categories have been created and 18 domestic producers have been identified who are interested in their production.

The technical specifications of the equipment planned for purchase were transferred to the Union of Mechanical Engineers of Kazakhstan and NCE Atameken for their further distribution to interested domestic producers, as well as a series of meetings of technical specialists of operators and representatives of the Union of Mechanical Engineers at which technical specifications of goods were discussed.

Based on the results of the analysis, the following work was carried out:

  • NCOC conducts work on 5 priority companies for concluding agreements in 2020.
  • TCO has placed test applications for Bemer Armaturen Kazakhstan LLP and Karlskrona LLP. In addition, 9 service providers passed qualifications and began to supply goods and services for TCO.
  • In KPO during 2020-2021, it is planned to localize goods in 13 categories and conclude 5 contracts with domestic producers.

In addition, an action plan for the development of oil and gas engineering in the Republic of Kazakhstan for 2019-2025 was developed and approved.

The phased localization of the production of original equipment in the Republic of Kazakhstan is defined as one of the priority areas of activity for the coming period. In further work, there is a high potential for localization of production.

In the medium term, it is planned to localize such goods and equipment, such as, for example, various consumables (seals, gaskets, filters), fasteners, valves, electrical products, instrumentation and automation).

This work successfully continues with a further increase in the complexity of the equipment being prepared. In addition, work is underway to localize the production of simple goods and to place test applications. Over the past 2.5 years, in the Karachaganak project, domestic producers were awarded contracts for the production and supply of goods of personal protective equipment, heat exchangers, drill bits, casing strings, modular substations, etc.

At Kashagan, contracts worth $53 million were signed during this period. In 2020, 2two contracts were additionally concluded.

TCO has localized goods totaling $30 million. All of these goods were previously imported from abroad.

At the initiative of the Ministry of Energy and the authorized body, work was carried out with NGOs and NCOC on issues of amending the tender procedures in terms of local content.

Unprecedented rules have been introduced for the implementation of the “Contract convertible into investments” mechanism, the extension of the existing contract on the terms of localization of foreign goods, the provision of a conditional discount, and the holding of a tender among Kazakhstani suppliers.

In addition, the procedure for posting procurement plans has been clarified on the operators' websites, which includes the name and a brief description of the goods, work and services to be purchased, the estimated date of the invitation to tender, the contract award period and the estimated procurement budget.

It is expected that the implementation of this initiative will become additional support for domestic producers and will facilitate their maximum involvement in purchases conducted by oil and gas project operators.

“In order to help increase the local content in goods and services, we initiated the creation of the International Center for the Development of Oil and Gas Engineering and Services, which will be a single window between the three operators of the Production Sharing Agreement and coordinate the ongoing work. When creating the center, the experience of similar research and development centers created by SHELL and ENI will be used. The main goal of the center is to localize the production of goods / services for the oil and gas industry of the Republic of Kazakhstan for the needs of three operators, in particular, through the creation of new industries and service centers, as well as expanding the capabilities of existing domestic producers and service companies,” the minister said.

Currently, the conditions for opening the Center are being agreed with the shareholders of three operators.

“We want shareholders of international oil companies to support this center by providing their specialists, technical and engineering competencies. The center will be created on the example of KazEnergy and will be supported by three operators,” Nogayev emphasized.

Nogayev also said that in the medium term, the work of the Ministry of Energy will continue in the following areas: implementation of the action plan in the established areas until 2025, development of service centers for equipment maintenance and production of spare parts, development of local personnel.

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