30 years of TCO in Kazakhstan
Working with TCO as a Quality Seal for a Kazakhstani Company
The key role played by Tengizchevroil (TCO) in the Kazakhstani economy is not limited to the volume of oil and gas produced. Over 30 years of operation, the joint venture has allocated more than 43 billion US dollars for the purchase of goods, works and services from Kazakhstani suppliers. Thanks to cooperation with TCO, hundreds of domestic companies have expanded production volumes, improved the quality of their products and certified them according to international standards, found new sales markets and created new jobs for Kazakhstanis.
How it all started
Chevron Corporation started developing the Tengiz field when the young Republic of Kazakhstan was less than two years old. After the collapse of the Soviet Union and the destruction of the established supply chains of raw materials and sales of products, the industrial production of the country lay in ruins. One of the priorities of the Tengizchevroil Joint Venture was the improvement of the competencies of local entrepreneurs, the development of the business environment, and assistance to Kazakhstan in creating a market economy.
From the first days of its operation, Tengizchevroil sought to involve domestic suppliers and contractors in the project, although this was not an easy task as almost the entire industry continued to work according to outdated former Soviet standards. Painstaking work started on nurturing Kazakhstani producers who could provide services and goods that meet new, global requirements for a project of such a level as Tengiz. At first, many of them were former contractors of the Tengizneftegaz production association who went through privatization and radical reform. Thus, they continued to provide services to the Tengiz Utility Vehicle Department Joint Venture, TINGS (Tengizinterneftegazstroy), PECC (Production and Engineering Communications Control) and others.
In 1997, by order of Tengizchevroil, Aktau NIPI Munaygas Institute carried out a Pilot Operation Project of the Tengiz field, designed for four years and involving the implementation of a complex of studies to refine the geological model of deposits and subsequent recalculation of reserves. In the same year, TCO signed the first contract for the equipment supply with the Almaty Belkamit plant, which, with the help of a partner, Bechtel, managed to establish the production of equipment that the Tengiz project needed at that time. Thanks to this, the company was able to develop further. It was the first in Central Asia to receive a certificate from the American Association of Mechanical Engineers as a manufacturer of pressure vessels. In the early 2000s, when Tengizchevroil began implementing a large-scale Sour Gas Injection and Second-Generation Plant (SGI/SGP) expansion project, Belkamit won a contract for the construction of air heat exchangers designed to reduce the temperature of process gases and liquids at the gas processing plant units.
Other domestic suppliers and contractors were also involved in the SGI/SGP project. The Almaty Imstalcon carried out the production and installation of metal structures. The contract for the construction of the Shanyrak rotation camp, at that time the largest ever concluded with Kazakhstani firms, was awarded to a consorting of the United Construction Corporation, Intergazstroy, Munaygazkurylys. After the completion of construction, the rotation camp became the most modern and comfortable in the industry, and specialists from domestic construction companies developed their professional skills and improved their qualifications and business reputation. The renewal of the fleet of machines and mechanisms and the purchase of new equipment as part of the execution of the contract allowed them to later participate in major oil and gas projects, such as the Karachaganak and North Caspian.
In particular, Munaygazkurylys has since completed more than 50 industrial and civil projects with a total value of over 500 million US dollars, working for Tengizchevroil, Ajip KKO, Karazhanbasmunai, Karachaganak Petroleum Operating, Karakudukmunai, etc. The company's integrated management system (IMS) is certified following the requirements of the quality management standard ST RK ISO 9001:2009, environmental management standard ST RK ISO 14001:2006, industrial safety and health management ST RK OHSAS 18001:2008.
Integrazstroy, starting cooperation with TCO, became a major contractor of the Karachaganak Petroleum Operating Consortium in the construction of the GTU-2 and GTU-3, carried out the construction of the pump station in Atyrau and worked on the linear part of the Caspian Pipeline Consortium.
After privatization, the former SU-4 construction management, which had been cooperating with Tengizneftegaz since the 80s of the last century, in 1994, was transformed into Ariadna LLP. And over time, it grew into a large private construction and installation company. During the first quarter of a century of work, the annual production volume in the company has grown 1,754 times, and the staff has grown to almost two thousand employees! The company's fleet comprises about 400 machines and mechanisms and 900 pieces of equipment. Production sites include welding and assembly, electrical and repair shops, sandblasting and painting workshop, hydraulic testing, reinforced concrete products, carpentry, ventilation and others. Having gained extensive experience on the Tengiz project, Ariadna became a contractor for complex types of work on Karachaganak and Kashagan and completed dozens of other projects in the industry.
From the first years of its creation, the Atyrau Neftestroyservice LTD LLP has been actively cooperating with Tengizchevroil. Founded in 1997, it first specialized exclusively in providing qualified local labor to foreign customers. Thus, competencies and experience were acquired, and technology transfer and consolidation of financial resources were carried out. Today, LLP is one of the largest domestic construction companies in Western Kazakhstan, performing the entire range of work from general construction to commissioning and work on electrical equipment and instrumentation. Neftestroyservice remains one of the key partners of Tengizchevroil, carrying out ongoing repairs and planned equipment overhauls.
A dollar from TCO gives another dollar of economic turnover
The development of the potential of TCO suppliers has been carried out through three programs: an in-house supplier selection program, which TCO administers independently; an external program created jointly with the European Bank for Reconstruction and Development (EBRD); and the program of the International Center for the Development of Oil and Gas Machine Building" (IMB Center).
The process of supplier development is carried out in several stages. At the initial stage, the manufacturers' market is studied and correlated with the needs of the company, and a preliminary plan for the development of suppliers is drawn up. At the next stage, a team of TCO experts visits selected enterprises that meet the criteria, gets acquainted with the production conditions and reports on the preliminary assessment results. Detailed information about potential suppliers is entered into the project database. Then a trial order is placed, laboratory analysis of the manufactured products is performed, possible shortcomings are identified, and ways to eliminate them are developed. The conclusion of the process is the award of the contract and the placement of the production order.
From 2015 to 2022, TCO and the European Bank for Reconstruction and Development (EBRD) conducted a joint supplier development program. It has helped small and medium-sized businesses succeed and become a catalyst for developing the business environment in their regions. The program's objective was to connect business owners and managers with domestic and foreign experts in quality management, cost reduction, and marketing, who helped scale the business and master the production of new types of products.
The main support tools within the program's framework were consultations, business trips, technical training, webinars and seminars, and entrepreneurship development in selected communities through business skills.
The task of the IMB Center is to promote the development of the production of a range of products used in the oil and gas industry through the interaction of customers – operators of large projects – and potential suppliers. To create conditions for import substitution, TCO has identified five priority commodity items for localization, including shut-off valves, flanges/fittings, pressure vessels, instrumentation and electrical equipment. Also, over 50 types of goods and services were identified as having a high potential for production within Kazakhstan.
The effect on the Kazakhstani economy from the implementation of development programs of local suppliers, ultimately, is not limited to direct payments for purchased products, goods and services. According to a recent study by the well-known international consulting company IHS Markit, from 2010 to 2019, TCO stimulated cumulative local sales worth more than 48.4 billion US dollars over ten years. At the same time, the total costs of TCO in the local market amounted to $24.4 billion, and these funds stimulated an additional turnover in the economy of Kazakhstan in the amount of another 24 billion. Thus, every dollar spent in Kazakhstan contributed to the turnover of another dollar.
But that's not all. Each workplace in the TCO itself creates an additional 39 jobs in related industries throughout Kazakhstan. If, at the time of the study, 3,654 citizens of Kazakhstan worked in Tengizchevroil, then, thanks to the company's activities, 140,012 jobs were created in Kazakhstan in different regions and different sectors of the economy. Such direct and indirect economic impact makes TCO one of the driving forces of the Kazakhstani economy!
Case studies of success
Here are a few examples of how cooperation with Tengizchevroil allowed a local company to transform its business, establish production that meets international standards and become a successful enterprise.
Sartai Trans Service LLP was established in Aktau in the late 90s of the last century. Since 2014, the company has cooperated with TCO as a subcontractor and later on a direct contract. Now the company provides lifting mechanisms for Tengizchevroil. "Our company is one of four that provides similar transport services for TCO, and we try to maintain our reputation. This is necessary, first of all, for us and our development. For example, many customers have confidence in the fact that our company cooperates with TCO. It's like a quality seal," says Yerkin Ybrashev, the company owner.
Another Mangystau company − TasCom Supply & Services LLP − started in 2011 with a comprehensive supply of industrial enterprises and eventually concluded dealer agreements with major Russian manufacturers of metal furniture, safes and shelving. The company began to receive requests from large oil companies for the supply of furniture for offices and rotation camps, which prompted the creation of its furniture production in 2013. Today, the company is not only a furniture manufacturer but also an official, and in some cases, an exclusive distributor in Kazakhstan of leading manufacturers of various equipment, such as cable systems and fittings, electric and gas water heaters, generators and heat guns, etc.
In Aktobe, the family business, which began with several sewing machines, eventually became a respected enterprise. FIBC KAZAKHSTAN LLP won the first contract to supply railcar liners for the transportation of Tengiz sulfur at a tender in 2018. Cooperation with TCO has become a growth driver, and already in June 2019, a factory for the production of polypropylene fabric containers was launched. "Our company was not even three years old when we got a contract with TCO – although it seemed impossible," says Botagoz Taikubenova, director of the company. According to her, the first order was placed for 150 railcar liners, and in two years, the volume of deliveries increased almost ten times! Today, the company supplies products not only to TCO but also to Kazakhoil Aktobe LLP, Temirservice LLP, and Araltuz LLP. In total, to more than 25 cities of the Republic of Kazakhstan and neighboring countries.
The next stage of development should be the launch of a workshop on the factory's territory for the production of polypropylene fabric – raw materials for manufacturing containers. If the company had to rent premises for storing manufactured products earlier, it recently built its own 3 thousand square meters warehouse.
The first world-class lubricants manufacturing plant in Kazakhstan, HILL Corporation, appeared in Shymkent in 2010. In December 2011, TCO placed its first order for 4 tons of engine and transmission oils for its automotive management. "By May 2013, the Railway Department of Tengizchevroil also joined the orders. From the moment the first contracts were signed, and the first applications were received, we already had the right to declare that we are suppliers of such a reputable oil-producing enterprise as Tengizchevroil," says Murat Nasyrov, Commercial Director of HILL Corporation. This has become a kind of quality seal, and now oil producers from Shymkent are bound by long-term contracts with such prominent companies as KazMunayGas, KazTransOil, Kazakhmys Corporation, Arcelor Mittal and others. Moreover, HILL oils have won the export market and are successfully sold in Russia and China.
In total, 32 domestic companies in 13 regions of the Republic of Kazakhstan have been qualified under the TCO Supplier Development Program. Work on the development of Kazakhstani content continues!
How to become a TCO supplier
There are two scenarios.
1. Registration on the Supplier Expression of Interest (SEOI)* – Compliance with the supplier's requirements** – Participation and win in the tender – Conclusion of the contract.
2. Registration on the Supplier Expression of Interest (SEOI) portal* – Non–compliance with the supplier's requirements** – Participation in training forums and seminars - Development of necessary professional qualities – Participation and win in the tender – Conclusion of the contract.
To identify potential suppliers, the company has implemented the SEOI portal. TCO encourages all interested parties to register on the SEOI portal to receive information about current and future opportunities. In addition, to ensure transparency, TCO publishes an annual contract and procurement plan on an external website to inform the market about all potential opportunities.
In search of potential partners in various business sectors and to meet the future strategic needs of the company, TCO holds forums and seminars on relevant goods and services with the invitation of local entrepreneurs. Within the framework of these meetings, the TCO shares technical specifications and requirements and organizes round tables with the participation of representatives of various TCO departments and technical specialists.