30 years of TCO in Kazakhstan
How Has TCO Become a National Driver for the Development of Kazakhstan’s Oil and Gas Industry Over the Past 30 years?
Tengizchevroil (TCO), Kazakhstan's largest crude oil producer, celebrates its 30th anniversary in April. Over the years, TCO has transformed into a global producer in the oil and gas industry. This Petroleum Journal's interview with Kevin Lyon, General Director of Tengizchevroil, covers such topics as TCO's current production developments, the advancement of local talent, nationalization, as well as environmental protection efforts while increasing production.
- Dear Mr. Lyon, I would like to congratulate you and all Tengizchevroil employees on the company's 30th anniversary. The success achieved so far is obviously a result of the hard work and dedication of each employee who has made Tengiz an integral part of their lives. What key milestones would you highlight, on the thirty-year path of the company's development?
- Rakhmet! Thank you, we really appreciate it. First and foremost, I would like to acknowledge that TCO’s achievements and success are possible thanks to the unwavering support from the Government of Kazakhstan, the trust of our shareholders, as well as the talent and dedication of our employees. We are grateful to each of them for their contribution to the development of Tengizchevroil.
This year marks the 30th anniversary of TCO’s formation, and over the years we have invested in people andtechnology to continually improve TCO’s operational performance and significantly expand production capacity. TCO is now a different company from what it was 30 years ago, but our goals and priorities remain unchanged: safe and reliable operations and creating value for the Republic of Kazakhstan, our shareholders, and the Atyrau community, where we live and work.
I can highlight several significant achievements. In 1993, TCO employees, now industry veterans, encountered challenging and ambitious goals to develop the Tengiz field, most of which they have achieved with great success. During the first year of TCO’s operations, production at the two existing trains amounted to approximately 1 million tons per annum. At the end of 2022, we achieved a production record of 29.2 million tons per annum, which represents about 34% of the total crude oil production in Kazakhstan. Nevertheless, we also reduced air emissions intensity to the lowest level in our company’s history. Tremendous achievements indeed!
Looking to the future, we are currently executing the Future Growth Project - Wellhead Pressure Management Project (FGP-WPMP). Upon completion, the project will allow for an additional 12 million tons of crude oil production, taking our company to about 1 million barrels of oil-equivalent production per day.
Over the course of its 30 years of TCO’s operation, and indeed for the FGP-WPMP, we have continuously introduced modern technologies to improve operational performance. For example, we launched an Integrated Operations Control Center (IOCC) at Tengiz, as part of the FGP-WPMP project. The IOCC will integrate the management of all TCO’s production plants into one control center and operating model. This state-of-the-art facility applies the latest technologies and is the only facility of its kind in Kazakhstan’s oil and gas industry. The utilization of the IOCC will help TCO maintain safe and reliable operations, as well as deliver incremental value to the Republic of Kazakhstan
- How would you assess the contribution of TCO to Kazakhstan's economy?
TCO is the largest taxpayer in Kazakhstan. Last year alone, TCO's direct financial payments to the Republic of Kazakhstan amounted to $14.5 billion. Of this amount, over $10 billion were taxes and royalties. Recently, the Ministry of Finance recently awarded TCO the “Best Taxpayer” in the Subsoil User category, at a formal award ceremony in Astana.
In general, over its 30-year existence, TCO has contributed over $176 billion in direct financial payments to Kazakhstan, including $43.6 billion spent on local goods and services. This has had a multiplier effect, stimulated economic activity across Kazakhstan, and supported the country’s further development.
I am particularly proud of TCO’s local content performance. In 2023, our company reached its highest Kazakhstani content performance for the last 6 years of over 70%. We will continue to support the development of local companies as it makes business sense for TCO, and it’s good for the economy and for society.
- During the early years of TCO's existence, many expatriates were employed and they introduced western standards to Kazakhstan’s post-Soviet oil and gas industry. Over time, expatriates were gradually replaced by Kazakhstani employees. Can you provide more information on the process for sharing knowledge, technology, and experience and the results achieved by TCO regarding workforce nationalization?
At TCO, people have always been at the heart of what we do. They are our greatest asset. The Tengiz field is known as one of the world's most technically challenging oil fields. In the early 1990s, international expertise was essential to maintain safe operations and therefore the development of local personnel was a key focus area for our company.
Over the last 30 years, we have maintained that focus and we have nurtured the development of successive generations of highly qualified world-class personnel. How have we done this?
One of the early practices that we have maintained, is to establish a personnel development strategy, which includes an onboarding program for young professionals. Also, experienced employees provide mentorship and guidance for both professional and personal growth. Additionally, we offer various in-house advanced training courses to our employees, investing in the development of complex skills for critical areas such as process safety, reservoir management, process design, and drilling, among others. We also leverage the capabilities of our shareholders, including Chevron, by sending our employees to international locations to learn best practices and apply them at Tengiz.
Since 2010, our people have taken over 86,000 training courses, which include technical and professional training for oil and gas industry professionals, leadership development, language courses, and other soft skills training. TCO also implemented the Digital Scholar Program, which allows local TCO employees to enroll at Rice University and the Massachusetts Institute of Technology in the U.S.A, for a one-year master's program in engineering, management, and digital technology. Our company has helped create hundreds of thousands of jobs across Kazakhstan, where people can gain unique international experience which can be applied to other projects in Kazakhstan and abroad.
And the results are evident! TCO has gradually reduced the number of expatriates, and currently, 95% of TCO employees are citizens of Kazakhstan, compared to 50% in 1993. This is an impressive achievement that we are proud to accomplish!
In addition to investing in our people, over $360 million has been invested since TCO’s inception, in more than 100 social infrastructure projects to construct and improve social facilities such as schools, hospitals, recreational areas, kindergartens, and other common facilities in the Atyrau region. TCO also supported more than 120 social projects within its community investment program, focused on improving the well-being of communities in the areas of health, education, and economic development.
- What advanced work methods and modern technologies have you introduced in Kazakhstan over the last 30 years? Are there any unique ones used exclusively in Kazakhstan?
- Technology, digitalization, innovation, and human ingenuity are crucial for the further development of the Tengiz field. There are only a few fields in the world that have Tengiz-type reservoirs in which gas injection has been used as a method to recover oil. High-pressure injection of sour gas is rare in our industry and unique to Tengiz. TCO’s outstanding reservoir modeling capabilities allow us to better understand the field, optimize development and maximize recovery.
Also, one of our latest innovations is the Electronic Permit-To-Work System (e-permit). I want to note that TCO became the first company in Kazakhstan's oil and gas sector to switch to e-permits. This technology has allowed us to optimize the time required for employees to safely plan work activities which helps improve the safety and increase the productivity of our people.
Another example worth mentioning is our pipeline integrity monitoring program, where we are able to inspect equipment in advance to anticipate and manage process safety and maintenance needs. Furthermore, the technologies we use to maintain and repair plant equipment are very important for safe and reliable operations, although not unique to Kazakhstan.
- For several years now, TCO has been implementing the large-scale Tengiz Future Growth Project. What is the project's current status, and how will Tengiz production grow after completion? What economic benefits will the project bring to shareholders and the Republic of Kazakhstan?
- The construction phase for the Future Growth Project-Wellhead Pressure Management Project (FGP-WPMP) is largely complete. This expansion project is of national importance and will help create a legacy of a trained skilled workforce, new facilities, technology transfer through partnerships between Kazakhstani and international companies, and upgraded infrastructure in the region.
It is also worth noting that since the beginning of FGP/WPMP, TCO has spent more than $15.6 billion on Kazakhstani goods and services. Kazakhstani companies participated in work scopes for engineering, logistics, fabrication, and construction as well as many other services. Over 2,000 Kazakhstani companies were pre-qualified for FGP-WPMP, and 1,250 contracts were awarded to almost 600 Kazakhstani companies. The project’s annual Kazakhstan Content spend continues to have a positive economic impact on several regions across the country.
- Oil production at Tengiz has increased, but does this mean that TCO has simultaneously increased its environmental impact?
- TCO strives to operate in a safe and environmentally responsible manner. We continue to focus on protecting the air, reducing greenhouse gas emissions, minimizing water use, protecting the soil and land, handling waste carefully, and raising environmental awareness.
Even before the high focus globally on the “green economy,” TCO has already taken prudent and practical, actions over the years, to reduce its environmental footprint. Since 2000 to date, the company has invested over $3.15 billion in projects to reduce emissions. Over the same period, TCO’s air emissions per metric ton of crude oil produced have been reduced by 75%, - the lowest in our company’s history. Additionally, last year, we reduced our flaring volumes by 57% when compared to 5 years ago. We also recognize water as a precious resource in Western Kazakhstan, and our water reuse rates are close to 50%. In addition, we continue to focus on effective waste management and nature conversation activities. All these actions and investments demonstrate our company’s commitment to running TCO operations safely and responsibly.
- Kazakhstan has intensified efforts to diversify hydrocarbon export routes in the changing geopolitical environment. Is TCO considering alternative oil transportation routes beyond CPC?
- Our primary focus is on maintaining safe operations, and we routinely manage transportation requirements to help ensure uninterrupted exports. The Caspian Consortium Pipeline continues to be a very reliable pipeline for us. We transport most of our production through this pipeline and will continue to use this as our primary route for TCO's export flows.
- In the context of the global energy transition, the importance of natural gas as a "greener" fuel and valuable feedstock for the gas chemical industry is growing. What role does gas play in your marketing basket?
- TCO plays a leading role in meeting the growing gas demand of Kazakhstan's petrochemical industry and its domestic market. We actively support the Ministry of Energy's plans to develop Kazakhstan's petrochemical industry and collaborate with the government to advance petrochemical projects to ensure further industrial and economic growth for the country.
Currently, TCO supplies propane to the Kazakhstan Gas Chemical Complex in Atyrau, covering 100% of the plant's feedstock needs. In November 2022, we also signed an agreement with Butadiene LLP to support butane supplies to the petrochemical plant for the production of butadiene in Atyrau. Moreover, TCO provides most of the gas used in Kazakhstan's residential and industrial sectors. We strive to ensure uninterrupted and reliable gas supply to the community and enterprises in the Atyrau region.
- Mr. Lyon, what words would you like to address to the people of Kazakhstan on the eve of the 30th anniversary of the Tengizchevroil? What would you like to wish the company employees and its partners?
- The past three decades have been a remarkable story of growth, progress, and achievement; not just for the industry, but for the people of Kazakhstan. Our company’s history is closely interlinked with that of Kazakhstan. Over our 30-year presence in Kazakhstan, TCO has helped drive the country’s economic progress and supported its importance as a global energy producer.
TCO’s 30-year partnership with Kazakhstan is a shining example of the tremendous results that can be achieved together. As we celebrate this significant milestone, I would like to acknowledge and pay tribute to the tens of thousands of current and former employees, particularly the Tengiz pioneers, who discovered and developed Tengiz into the success that it is today. Once again, our success would not be possible without the unwavering support from all four of TCO’s shareholders, the Government of Kazakhstan, from the communities where we work, and from our talented and dedicated workforce.
We look forward to continuing to play a role in advancing Kazakhstan’s economic progress, in supporting the development of this noble industry, and in creating opportunities for future generations of Kazakhstanis.
- Thank you!