Resources in exchange for technologies

Oct 08. Kazpravda

By Alilya Ahmetzhanova

Resources in exchange for technologiesAccording to experts, the proportion of local content in the oil and gas sector of the country is insufficient.

The fact that the oil and gas industry of the republic should become an “engine” which will pull the other sectors of economy on a proper level is repeatedly mentioned from high tribunes. As known, oil production in Kazakhstan in the years of independence has grown by more than 3 times and reached 80 million tons per year; gas production also increased by more than 5 times, up to 40 billion cubic meters a year. As a result, at present domestic oil industry provides about a quarter of the country’s GDP and about two-thirds of the state budget.

The Head of State said earlier that the country should use its natural resources as a strategic advantage in order to ensure the growth of its economy. In particular, the question was the formation of new market niches for domestic producers in such competitive industry as oil and gas. That is why the issue of local content’s development in the domestic oil and gas sector was the main subject discussed at the round table «Development of local content — international experience and best practice» held yesterday in Astana. This was the first event in the program of the VIII Eurasian Forum KAZENERGY.

– We need to attract investors only on the conditions of supply to our country of most advanced mining and processing technologies. We must allow investors to obtain and use our raw materials in exchange for new industries in our country, — quoted the words of the President Minister of oil and gas Uzakbai Karabalin opening the meeting.

According to his information, the share of local content in the procurement of goods by subsoil users in 2012 was 52%, and in the first half of the year the figure was about 59%, or 900 billion.

– The achieved level shows that there is potential for further expansion, — the minister said.

He was supported by Deputy Chairman of JSC «NC» KazMunaiGas «(KMG) Magzum Mirzagaliev who clarified the true state of affairs with local content in three biggest fields of the republic: the Kashagan, Tengiz and Karachaganak.

– In 2012, the proportion of local content in the procurements of goods on Kashagan, Tengiz and Karachaganak ranged from 3 to 8%, — he said, pointing out causes of this situation.

– First of all, it’s lack of information in the Kazakh companies about industry standards, requirements, terminology and technologies; secondly, it is the lack of information about upcoming activities, thirdly, it is the general lack of knowledge about requirements to quality; fourthly it is incompliance of local products with the requirements of operators and, finally, it is the language barrier, – said the representative of JSC «NC» KMG «.

M. Mirzagaliev added that a major obstacle to the local content’s growth in oil and gas projects is a conservative position of operators: they prefer the “tested” suppliers and service contractors, to unknown for them local companies.

– In addition, designs of projects to develop oil and gas deposits are carried out abroad, therefore the products of foreign manufacturers are laid in the project at the design stage already — said the deputy chairman of KMG.

Concrete steps have been taken to improve the situation in the three major oil and gas projects. As known, earlier JSC «NC» KMG” singed the Aktau declaration on joint actions with the major oil and gas operators — TCO, NCOC (North Caspian Operating Company-Kashagan) and KPO (Karachaganak Petroleum Operating).

The Government of the Republic today is also taking steps in this direction.

– In particular, they establish new rules for procurements of goods, works and services at mining operations, such as speedy and transparent procedure for procurement of goods by subsoil, — said Deputy Minister of Industry and New Technologies Nurlan Sauranbayev.

However, Minister of Oil and Gas Uzakbai Karabalin noted that additional measures are necessary.

– First, we need to systematize the overall work to avoid duplication of functions. Second, we need to improve the current system of performance’s monitoring — U. Karabalin said.

Thus, according to him in the first quarter of 2013, major purchases of drilling works where the service companies show 100% -local content were revealed in 15 subsoil users in Kazakhstan.

-But frankly speaking this figure is questionable, as drilling operations are carried out with a significant use of imported materials. For example, if the share of foreign participation in drilling operations in 2011 was 61% (160 billion tenge), in 2012 it was 66% (179 billion tenge), – he said.

The minister believes that the Government also needs to more systematically consider the issues of joint ventures, the use of funds for training of specialists and conduct research.