TCO Achieves Records Results in Kazakhstani Content Development
The Tengiz project occupies a leading position among oil and gas operators in terms of the volume of purchased Kazakhstani goods, works and services.
The indicator of Kazakhstani Content (KC) in the project is steadily growing year by year: the total volume of purchases of goods, works and services by Tengizchevroil (TCO) in 2021 amounted to almost $5.2 billion, of which the share of local content is $3.6 billion. Thus, the share of local content reached 68% in 2021, the highest record figure since 2010!
To clarify the amount spent on purchases from domestic suppliers, $3.6 billion at the current exchange rate is 1.836 trillion tenge.
TCO’s funds help to develop regions
Since the KC development for Tengizchevroil is not a one-off action, but a long-term priority, the company has developed comprehensive programs to support local content. The benefits from their implementation are mutual. Investments in local suppliers not only help grow the local economy, but also help TCO meet the needs of its operations by obtaining world-class work, goods and services at a competitive price.
Moreover, the effect on the local economy from such cooperation is not limited to direct payments in favor of local suppliers. According to a recent study by the well-known international consulting company IHS Markit, each job at Tengizchevroil creates an additional 39 jobs in related industries throughout Kazakhstan. And every dollar spent on buying local goods and services stimulates another dollar of economic turnover. This direct and indirect economic impact makes TCO one of the driving forces of the Kazakhstan economy.
Despite the fact that TCO's activities are concentrated in the western part of the country, it has a beneficial economic effect not only in Atyrau Oblast, but in almost all regions of Kazakhstan. For example, TCO purchases Oil Country Tubular Goods (OCTG) in Mangystau Oblast, automotive lubricants in Shymkent, safety equipment in the North Kazakhstan Oblast, heating, ventilation and air conditioning services and pipeline construction services in Taraz. Also, money for renting equipment goes to the West Kazakhstan Oblast, for purchase of building materials and rail passenger transportation to Aktobe Oblast, for pipeline transportation services and railway freight transportation to Nur-Sultan city. Thus, domestic businesses develop in many regions of Kazakhstan.
TCO constantly works with the business community through cooperation with various associations such as Petrocouncil, KazService and Kazakhstan Union of Machine Builders, as well as with the Head of all regions in order to identify new prospective suppliers in different regions of the country.
Professional growth of suppliers
TCO’s Supplier Capacity Development is implemented via three programs: an internal supplier selection program that TCO administers independently, an external program established jointly with the European Bank for Reconstruction and Development (EBRD), and the recently announced program of the International Machine Building Center (IMBC).
TCO's internal program includes the analysis of upcoming purchases and the search for prospective suppliers together with TCO technical experts. As a result of the analysis, a list of "target goods and services" is made, according to which suppliers are audited and qualified and trial orders are placed.
The list of high potential titles includes electrical services, chemical production, maintenance, repair and operation, and much more. During 2021, several TCO departments at once have developed capabilities of suppliers, delivering more than 18 products in categories such as emergency and rescue equipment, electrical equipment, drilling materials, maintenance services, telecommunications equipment, as well as materials for maintenance, repair and operation, etc.
The TCO EBRD Supplier Development Program (TESDP) is an external support program for prospective suppliers implemented jointly with the EBRD. TESDP evaluates and provides participants with direct consultation and necessary training. The program covers areas of expertise such as access to finance, cost reduction, quality management and security.
Program participants confirm that they have already increased their income and staff employment. Based on survey results, 77% of evaluated companies reported about average increase in turnover for 4 million euros with an average increase at the enterprise level by 35%. In half of the companies, the share of female personnel increased by 43%, and 73% of program participants reported about average increase in labor productivity for 48%.
In October 2021, the International Machine Building Center (IMBC) was established in Kazakhstan with the support of the Government of the Republic of Kazakhstan. Planning and budgeting works are currently proceeding to completion. TCO will cooperate with the center on program to increase opportunities for development of production capacities of engineering products.
Kazakhstani content at FGP-WPMP
The Future Growth Project-Wellhead Pressure Management Project (FGP-WPMP) at the Tengiz field, which is currently 90% complete, is one of the largest investment projects in Kazakhstan in recent years.
To achieve the maximum level of local content in the project, TCO actively involved local manufacturers, engineering companies, design institutes, suppliers of goods, construction contractors and labor resources in its implementation. Under the FGP-WPMP alone, in 2021, TCO purchased Kazakhstani goods and services in the amount of $2.3 billion. The KC indicator in the project was planned at the level of 32%, but in fact it reached 37% in 2021.
The value of the FGP-WPMP lies not only in increasing the production of marketable products at Tengiz. The project also leaves a long-term legacy of skills in engineering, construction and other technical professions for future huge industry projects across the country. In 2022, construction and commissioning specialists successfully completed 1,487 skills assessments and delivered 2,515 man-training sessions. As a result, to date the project in total has delivered 27,267 skills assessments and 23,331 man-training sessions, which is a remarkable achievement in the industry. Applicants are assessed, trained and upgraded by one of 14 service suppliers. These suppliers provide over 55 skills training disciplines ranging from basic to advanced skill levels, as well as free specialized training on hazardous area awareness, bolt and flange assembly, special electrical and instrumentation engineering disciplines, and the “Basics of Foremanship” program accredited by the National Center for Construction Education and Research (NCCER) for fledgling Construction Managers.
In addition, from 2019 to 2021, TCO organized 6 stages of training for interested citizens in Mangystau Oblast, and 5 in Atyrau Oblast, where unemployed Kazakhstanis had obtained a profession completely free of charge and increased their qualifications up to the leading standards and skills suitable for subsequent employment. In March 2022, the 7th stage of training began in Mangistau Oblast. To date, 603 unemployed people in the Oblast and 1,200 unemployed citizens in Atyrau city have successfully completed training. These are 1,803 Kazakhstanis in total who have passed trainings since the program started in the following 11 disciplines: structural welder, pipe welder, pipe fitter, steel structure fitter, scaffolder, electrical fitter, instrumentation fitter, construction worker, sandblaster, painter and insulator. The duration of the course was from two to four months, depending on the chosen discipline. The training was divided into stages and conducted by accredited FGP training centers: West Way Services, Aktau Training Center, APEC College, as well as Industrial and Laboratory Training Center.
The highly qualified workforce trained under the project will be in demand in Kazakhstan’s oil and gas industry in the future, as well as in projects abroad.
How to become a TCO supplier
There are two scenarios:
1. Registration on the Supplier Expression of Interest (SEOI)* portal - Compliance with the supplier requirements** - Participation and winning in tender - Conclusion of contract.
2. Registration on the Supplier Expression of Interest (SEOI)* portal – Non-compliance with the supplier requirements** - Participation in training forums, seminars - Development of the necessary professional qualities - Participation and winning in tender - Conclusion of contract.
TCO has implemented a fair and transparent process for awarding contracts via SEOI portal and identifying prospective suppliers. TCO encourages all interested parties to register on the SEOI portal to get an information about current and future opportunities. In addition, to ensure transparency, TCO publishes an annual contracting and procurement plan on an external website to inform the market about all potential opportunities.
In search of prospective partners in various business sectors, as well as to meet future strategic needs of the company, TCO holds forums and seminars on relevant products and services by inviting local entrepreneurs. As part of these meetings, TCO shares technical specifications and requirements, organizes round tables with participation of representatives of various TCO departments and technical specialists.