On September 24-26, Aktau hosted an investment forum that gathered 500 guests from 35 countries to discuss the possibility of creating new productions in West Kazakhstan.
WHAT'S ON IN ASTANA?
The idea of holding the forum belongs to Kazmunaygas JSC National Company supported by the akimats of Mangystau, Atyrau and the West Kazakhstan Oblasts. Three major project operators of the region - Tengizchevroil LLP, NCOC and Karachaganak Petroleum Operating sponsored the event.
International companies were represented by top managers, whereas the majority of high rank government officials did not attend the forum - on the first day, coincidently, the entire cabinet resigned and the ministers invited to speak did not show up. According to Lord Waverley, Advisor to CEO of KMG JSC NC and a mediator in the Kazakh content negotiations, for the rest of the day all the guests kept track of the staff reshuffles in the AkOrda and Parliament through ipads and mobile phones and actively discussed the new assignments on coffee-breaks.
NO MORE ZHANAOZEN EVENTS
As a matter of fact, the addresses of the lead mediator and vice-ministers ended up with exchange of courtesies and quoting widely known information. Lyazzat KIINOV, CEO of Kazmunaygas JSC NC raised the actual issue of the forum - international companies, like us, are interested in creating new productions in the west of Kazakhstan. In particular, he emphasized the William J. Clinton Foundation.
- The very reason of the last year's events in Zhanaozen is the high unemployment rate. An unemployed person has no perspectives. This is not only Mangystau Oblast's problem. Thousands of people will be released after the completion of the Bolashak Plant construction in Atyrau Oblast. We need to think where would we smoothly employ these people.
Kiinov also said that foreign companies that have decided to arrange their own production in the region, will not come off the loser upon extension of selling market after Kazakhstan's joining the Customs Union.
NINTH IN THE WORLD
Oil and Gas Vice Minister Berik Tolumbayev explained the situation in the domestic oil sector. Kazakhstan is the world's 9th country by proven oil reserves (5.3bn tons). Over the last 20 years production of oil tripled and of gas grew five-fold. It is among the few countries which have not reached the peak of production yet.
The fields being developed at the moment are Tengiz, Kashagan, Satpayev, N sites, Zhemchuzhina, Jambyl. The plan is to develop Abai site, Khvalynskoye and Tsentralnoye projects.
- This is not the full list of the projects that would help boost oil production, noted Tolumbayev.
As a whole, the speech of the vice-minister was a word-to-word repetition of his boss Sauat MYNBAYEV's statement made a year ago. Particularly, Tolumbayev said the situation over the second phase of the Kashagan project is still blurred. Concerning the first phase, the start up time of crude production remains the same: between December 2012 - June 2013. Oil production volume in phase 1 is expected to be 370-450 thousand barrels a day.
Tolumbayev also voiced an intention to build another refinery, yet he did not specify where it would be located.
I WISH I HAD YOUR OPTIMISM
During the forum, a memorandum on creating a joint venture to produce hi-tech oil and gas equipment in one of the western oblasts was signed with Chinese National Petroleum Corporation. Its future location was not announced as well.
I addressed a question to Mr Tolumbayev about the future flagship of domestic petrochemistry - the gas and chemical complex he mentioned in his speech before. To recall, the design of this complex has not been presented to the public yet. Vice Minister tied up the delays of the project's public hearings to its complexity:
- You need to understand that it is a technologically complex equipment. It takes half a year to place order to fabricate it plus the time needed to deliver it.
- The design is ready, but not approved by public yet, respectively, it has not passed state expertise. What orders are you talking about?
- You're talking about the details. Don't worry. Everything will be good, said vice minister with optimism clapping my shoulder in a friendly way.
In the light of the situation with TCO, we may conclude - the public opinion and the negative verdict of the Environmental Ministry is no more than just a formality for oil companies.
THE NORWEGIAN OPTION
Another old issue is the Kazakh content, that does not exceed 4% in the above mentioned major projects. At the forum, it was said that low rate of Kazakh content is due to the lack of production of high-tech equipment, obsolete production facilities and shortage in qualified domestic workforce.
As a solution, the Norwegian experience was proposed by Shur Bratland, Director of INTSOK, the Norwegian Industrial Association. After his speech, behind the scene, they whispered that Norwegians, unlike us, were wisely using their oil deposits.
It is worth looking at the Oil Act Norway had adopted in advance of field development. The main concepts are:
1. Oil resources must be managed in longterm perspective;
2. The entire society must get benefit from resources;
3. Resources must be used as a warrant of budget revenue;
4. Oil and gas resources must contribute to general welfare, employment of people, benefit to environment and industrial development;
5. Regional stakes must be taken into account.
By the way, Bratland didn't make it secret that at the beginning they had problems during nationalization of the US and France dominated Norwegian oil sector.
According to the Norwegian, trade unions helped a lot in building relations with foreign employers. Preferences to local companies over foreign ones contributed to this as well, without threatening the economic effectiveness.
The relevant ministry thoroughly monitored tender processes in oil projects, therefore Norwegian service companies used to receive all the required information about tenders in advance. Today's Norway is the world's third largest oil and gas exporter with the oil and gas sector oriented at development of technologies and production of high value added goods and services.
KICKBACKS AND LAWYERS
In the reality, information about tenders and strategic plans of major oil and gas projects is closed for domestic service providers in Kazakhstan. That's what they voiced at the forum. Nevertheless, they received no support from the speakers. Moreover, a famous person, who heads a domestic manufacturer rights protection organization, was actively defending TCO.
Behind the scene, business people were complaining about the corruption component of tender procedures and kickback systems both in national and foreign companies. Allegedly, all the best contracts are given to doubtful companies of foreign origin or entities affiliated to influential people from national companies.
Our entrepreneurs expressed their concerns if local manufacturers or service companies would survive after Kazakhstan joins WTO, where they will have to compete against global producers of goods and services. The Norwegians, who went through the same difficulties, advised to create joint ventures in the country.
On the last day of the forum, the Mangystau Oblast Akimat, KMG and foreign companies signed memorandums on creation of an industrial park in the city of Zhanaozen and other various productions, particularly, within the free economic zone of MorPort Aktau (Sea port of Aktau).
The Aktau Declaration on Joint Actions between KMG and major oil and gas operators TCO, NCOC and KPO was signed as well.
By Laura SULEIMENOVA