Results of the Year
Kazakhstan❜s Oilfield Services Enter the International Market
In an exclusive interview with Petroleum, Rashid Zhaksylykov, Chairman of the Presidium of the KazService Association of Oil Service Companies of Kazakhstan, reviews the year's outcomes in the country's oilfield service sector.
– Rashid Khasenovich, how would you describe the past year for the oilfield services sector? Can it be considered successful? What notable events took place in the market this year?
– Do you remember the movie where Alice in Wonderland said, "Any year in which I don’t die, I consider incredibly successful"? A year can only be deemed successful when the industry reaches a level of development where the need for professional associations disappears entirely.
We can confidently call it a success when 100% of work in Kazakhstan’s oil and gas industry—from services to logistics and product manufacturing—is carried out using local resources. True success will come when we achieve localization levels comparable to Norway or Saudi Arabia. For now, fortunately, or unfortunately, there’s still much to work on and develop.
Declaring full success is premature, but we can already see partial success. This year, we began detailed discussions and took steps to ensure that the design of major projects is finally done in Kazakhstan. We are laying the groundwork and assessing the resources needed to make this happen.
Secondly, we are actively working to increase the share of local goods and are closely collaborating with manufacturers across the country to integrate them into major projects such as Tengiz, Kashagan, Karachaganak, Kalamkas-Khazar, and chemical projects like KPI and Silleno.
We have also made serious progress in exporting Kazakhstan’s oilfield services. There have been significant achievements here as well: our companies have signed contracts in Saudi Arabia and Qatar, each worth over $100 mln. This is a major success for the industry and the Association, which was established to support such initiatives.
This year, we also helped over ten manufacturers initiate discussions about future partnerships with three major operators: KPO, NCOC, and TCO. This work is ongoing and represents a considerable success. When we met with enterprise leaders in the regions, they were surprised that representatives from the oil industry were seeking them out. We are actively identifying manufacturers and striving to create a competitive environment so that as many companies as possible—not just monopolies—can participate in supplying goods, whether it’s footwear, gloves, or helmets.
In this sense, the year was productive and delivered significant results.
– What does the sector look like in terms of numbers today?
– When the Association was founded, our key objectives were focused on three main areas: workforce localization, contract localization, and access to financing. The goal was to enable Kazakhstani companies to compete equally with Western companies in tenders. Today, workforce localization has reached 96–97%, and contract localization is nearing completion.
Almost all construction work, services, and equipment provision are performed by domestic companies. For example, on the Tengiz expansion project, with a total cost of approximately $50 bln, it was initially planned that 27% of funds would remain in Kazakhstan. That figure has now reached 34–35%, equating to over $18 bln. This is a significant achievement.
While our ambitions are great, we must also consider our resources. Setting a localization target of 100% or even 200% is admirable, but without local production of components like Bosch or Siemens engines, achieving such goals is unrealistic. Some objectives are inherently overly ambitious and impractical, as these industries already exist globally. We aim to focus on achievable tasks.
In numerical terms, our sector pays three times more taxes than the banking sector, contributing nearly 1 trln tenge to tax revenues. These figures speak for themselves and underscore the industry's importance.
– Has the situation with Kazakhstani content in the oil and gas industry improved recently? Do you see growth and development among local contractors?
– Absolutely, the situation is improving. Kazakhstan’s oil and gas industry is still young and continues to grow each year, much like a newborn. Over the past 30 years, we’ve made significant progress. This is no longer the industry of the 1990s when we struggled to find work with minimal equipment.
Today, our leading companies employ more than 11,000 Kazakhstani workers and operate over 3,000 pieces of equipment. Many have factories, and some own two or three manufacturing facilities. This is substantial progress.
We now compete with operators for every contract, maintenance, and repair job. This demonstrates that the sector is confident and determined, as Kazakhstani companies are fully capable of meeting these challenges. Moreover, we are actively engaging the government with proposals to review production-sharing agreements with investors as they expire better to align them with the needs of local businesses. This is another indicator of our growth and maturity.
Every company today has skilled workers, technical bases, and training centers. Entering international markets has become a reality for us and is undoubtedly a success. However, I wouldn’t boast too much—it’s only the beginning. We are still at the starting line, with a long way to go before the finish. Nonetheless, our start has been strong.
– Looking back at the past year, were any government measures taken to stimulate local content development?
– You know, initiatives should always come from the business community, not the government. The more proactive businesses are, the more willing the government is to address issues. For instance, someone in an office can’t possibly know all the details about Tengiz, Yersai, or contracts between Kazakhstani companies.
In our work processes, many questions arise, and we bring them to the Ministry of Energy. If the request aligns with legislation, the ministry actively engages and helps.
Currently, there’s no discussion about changing tax preferences or introducing legislative incentives. Efforts are focused on managing current challenges. No matter what laws or rules we adopt, they cannot override the authority of production-sharing agreements. We simply have to wait for these agreements to expire and then negotiate new contracts that benefit the government, Kazakhstani businesses, and citizens alike.
While there haven’t been legislative changes, the relationship between the government and businesses is strong. For example, the National Tender Council is very responsive to our concerns, and we appreciate that. Sometimes, disputes arise over specific contracts announced by operators. In such cases, the ministry helps to balance the interests of businesses and fosters productive dialogue.
Domestic businesses cannot operate at a loss for the sake of a client’s profit. Both parties must benefit, and this is a genuinely healthy approach.
– Next year marks the completion of the Tengiz Future Growth Project. Consequently, dozens of Kazakhstan’s contracting companies will lose orders, and tens of thousands of workers will be unemployed. Is the Association addressing this issue? What solutions are being proposed?
– Completing the Tengiz Future Growth Project has been an ongoing process for over a year and a half. At its peak, the project employed up to 90,000 people. It’s important to note that not just dozens but hundreds of Kazakhstani companies were involved. To date, over 50,000 people have already been demobilized, and fewer than 20,000 remain on site.
What’s crucial to understand is that our companies operate on a contract-to-contract basis. For instance, if a company is contracted to build a warehouse or house, it completes the project within the specified time, receives payment, and then looks for the next contract. This is a normal business process and should not be transformed into a permanent social responsibility for the client. When companies are hired to build a plant, their involvement ends when construction is completed. Ensuring their continued employment is not the client’s obligation. Contracts do not stipulate that a company, after fulfilling its duties, must provide long-term employment for its workers.
The issue of employment post-contract falls under the responsibility of the contractors themselves. Companies are established not for one-off projects but for sustainable growth and development. A company must have a strategy that extends beyond a single year. While we certainly care about the fate of employees, we understand that once a contract is fulfilled, the company should exit the project without losses and seek new opportunities for its workforce.
Our response to this challenge is to strengthen export directions. Kazakhstan currently does not have enough projects to sustain all companies, creating a vacuum. This is not solely an issue for clients or the government—it is also the responsibility of private businesses to seek new contracts abroad to retain staff and ensure stability. We actively participate in international projects, which is a completely normal global practice. Even here in Kazakhstan, many construction projects, such as Abu Dhabi Plaza or the LRT, employ specialists from various countries—Indians, Vietnamese, Malaysians, Turks, Canadians, and Chinese. This is a natural process, and our task is to follow this example and strengthen our position in international markets.
– Are Kazakhstani oilfield services successfully entering foreign markets? Are there any notable success stories?
– We are actively and purposefully expanding into international markets. Over the past two years, this effort has yielded tangible results, with contracts signed totaling around $100 mln. But we are not stopping there and continue to grow. On December 9 this year, we are hosted a roundtable in Qatar, bringing together over 30 Arab companies with extensive experience working in Qatar, Saudi Arabia, Oman, Kuwait, and Dubai. The event’s sponsor was Bereke Bank, which also participated and supported our initiatives. The event aims to discuss potential cooperation areas and make Kazakhstani companies attractive and valuable to Arab partners.
Our ambitions are substantial. In addition to services, design, and construction, we are discussing the promotion of domestic manufacturers with international colleagues. For instance, this year, Kazakhstani factories have started receiving orders from Italy. Two orders were placed by Italian companies at a plant in Atyrau owned by KazTurboRemont. We actively collaborate with local manufacturers and have compiled a database of over 100 enterprises, each of which we plan to involve strategically in international projects.
Our efforts are yielding success and producing concrete results. I am confident that the December roundtable will lead to new contracts. Kazakhstani companies are already conducting preliminary online negotiations with more than 30 Arab companies, and this is just the beginning.
– What are the Association of Oil Service Companies’ plans for next year, for 2025?
– We are part of the global economy, and we need to not just talk about this but truly integrate—to "blend in," as psychologists say—and become an indispensable part of the global process. This is challenging, given our national mindset. While transitioning to a market economy, our mentality still largely adheres to a planned system, with expectations of government support. We want to change this approach and genuinely compete on the global stage.
How can we achieve this? One promising path is to stay informed about global changes, such as initiatives in the United States, where the outgoing Biden administration allocated $6 trillion for a program to improve living conditions on Earth. These investments are giving rise to a second Silicon Valley, where new technologies are being developed, and we cannot afford to be left behind. Another ambitious project is the "Neom City" in Saudi Arabia—a 170 kilometers long city designed for comfortable and eco-friendly living.
These global projects address critical questions that are relevant to us as well. How livable are Almaty and Astana? We face traffic congestion, air pollution, and the resulting chronic illnesses in children. Traffic jams in our cities are inconvenient and ecological threats directly impacting public health. Countries worldwide are rethinking urban planning to create livable environments free from traffic congestion, with infrastructure within walking distance.
We, too, must monitor these changes and be ready to adopt the best global practices when the time comes. Unfortunately, we are often late to act. If we delay now, we may find ourselves forced to rebuild our cities 30 years from now to make them comfortable and safe for residents.
As global leaders invest heavily in developing innovative urban infrastructure, we should study their experiences so that when these changes affect us, we can seamlessly integrate rather than remain on the sidelines.