Interviews 2013

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(Uzakbay Karabalin, Minister of Oil and Gas of the Republic of Kazakhstan)
karabalin- Mr Karabalin, Kazakhstan’s government has repeatedly announced the ambitions of the Republic to become one of the world’s top ten producers of oil and gas. By what means will this goal be achieved, including through production block expansion and efforts to rebuild the state’s legal system?
- In recent years, as has been the case since Kazakhstan gained independence, there has been a positive development dynamic in oil production in the country. For example, in 1991 oil production was 25.2 million tons, in 2000 it was 35.3 million tons, and in 2011 it was 80.06 million tons.
In 2012, oil production in the Republic of Kazakhstan was 79.2 million tons.
Expected production of oil and gas condensate for 2013 is 82 million tons.
Export of oil and gas condensate in 2012 was 68.616 million tons.
We expect that the growth rate of oil production will be maintained, and that by 2014 production volume will be 85 million tons.
As of 1 January 2013, proven recoverable resources in the Republic of Kazakhstan of oil and condensate are 5.3 billion tons, and gas – 3.8 trillion cubic metres.
The possession of large reserves of energy resources has largely determined the development strategy of the country.
At present, the strategy of the Republic of Kazakhstan is aimed at further development of the country’s oil and gas sector, and it requires greater efforts to forecast and identify new promising oil and gas fields and accelerate their exploration, development and commissioning.
The potential of oil and gas resources, an open investment regime, a stable political situation, and far-reaching economic transformations are a guarantee of the future development of the country.
Kazakhstan's national interests in the international arena include the full range of interests of the country. They are to consolidate the position of the Republic at the stage of entering the global market and to develop equal and mutually beneficial relations with all countries and integration organisations.
The increase in oil and gas production and the development of the promising fields of the Caspian shelf require dynamic development of oil and gas transport infrastructure.
In this regard, work to develop new and expand existing export systems is topical. At present, a system has practically been created to give oil companies operating in Kazakhstan the ability to select the most attractive and stable markets for selling Kazakh oil.
- NC KazMunayGas JSC was created 11 years ago. What is the role of the company in the growth results that have been achieved in the oil and gas industry?
- If the oil and gas industry of Kazakhstan is considered to be the backbone of the national economy, then the main structural element of the industry, without a doubt, is the KazMunayGas national company (KMG). It is associated with major breakthrough projects in hydrocarbon production and processing. It is the company with the greatest responsibility for implementing state policy to develop the industry.
NC KazMunayGas JSC is an oil and gas company engaged in the full production cycle, from production of hydrocarbons and transporting and processing them to providing specialised services. The group includes 243 companies – 78 companies in the exploration and production sector, 47 in transportation of hydrocarbons, 66 in oil refining and marketing, and also 52 ancillary service companies.
NC KazMunayGas JSC has a significant share of the oil and gas sector of Kazakhstan: 26.4% in extraction of oil and gas condensate, 83.2% in oil refining, 67% in pipeline transportation of oil, and 95.7% in pipeline transportation of natural gas.
- The start of commercial production at Kashagan is one of the most anticipated events in the oil and gas industry this year. What changes will the start of oil production at Kashagan bring?
- According to information received from the contractor, Kashagan commercial production (75,000 barrels of oil per day) is expected on 1 October 2013. As part of Phase 1 (experimental programme), the contractor plans to increase the oil production rate from 2 million tons per year to the maximum stable level of 13 million tons per year from 2013 to 2016. After stable production level has been reached, gas production will be 9 billion cubic metres per year, of which 4 billion cubic metres per year will be injected into the reservoir, 3.5 to 4 billion cubic metres per year will be sold to KazTransGas JSC, and 1 billion cubic metres will be for the needs of the contractor.
- What environmental safety measures are being taken by the government, including during the implementation of the Kashagan project?
- On June 2013, NCOC (North Caspian Operating Company) held third-level republican tabletop exercises at the Kashagan field with participation from the Ministry of Emergency Situations.
According to NCOC’s press service, the purpose of the large-scale exercises is to check the consortium’s level of readiness for oil spill response operations prior to the start of production. The purpose is also to work out cooperation between the Akimat (Mayoral Administration), the Ministry of Emergency Situations of the Republic of Kazakhstan and regional emergency authorities in the event of an oil spill.
The North Caspian consortium has a specialised oil spill response group. Trained staff are fully provided with all the necessary equipment and facilities that are placed at all strategic offshore and onshore sites.
The Deputy Minister of Emergency Situations of the Republic of Kazakhstan, Zhambulat Smailov, commented on the results of the Kashagan 2013 exercises: "We have seen that the consortium of companies involved in operations in the Kazakh sector of the Caspian Sea can actually eliminate a second-level oil spill themselves."
As the Executive Director of Agip KCO Umberto Carrara noted, the Kashagan 2013 exercises that took place showed the readiness of participants of the North Caspian project to eliminate oil spills and also to neutralise the consequences related to emergency situations.
The Government of the Republic of Kazakhstan has approved a National Plan for Prevention of Oil Spills and Response at Sea and Inland Waters of the Republic of Kazakhstan (Government of the Republic of Kazakhstan, 6 April 2012, number 422).
The purpose of the National Plan is to create a national system to ensure a prompt, efficient and qualified response to oil spills which cause environmental pollution, and to perform the relevant operations to eliminate their consequences.
The main objective of the National Plan is to provide timely, comprehensive and effective measures for the prevention of, and readiness to respond to, oil spills which result in or trigger damage to the environment, based on risk assessment and assessment of environmental impact. The National Plan is valid in the waters of the Caspian and Aral Seas within the boundaries defined by international treaties, and in the inland waters and coastal areas of the Republic of Kazakhstan.

Also, the Construction of the Northern Caspian Ecological Base for Response to Oil Spills (NCEBR) capital spending project is being implemented between the Government of the Republic of Kazakhstan and the members of the North Caspian Operating Company consortium (NCOC), as part of the North Caspian Sea Production Sharing Equipment from 18 November 1997. The creation of the NCERB is an obligation of the Kazakhstani side to the NCOC operator for the North Caspian project.
The project is included in the 2010-2014 Programme for the development of the oil and gas sector of the Republic of Kazakhstan and the Industrialisation Map of the Republic of Kazakhstan for 2010-2014.
The purpose of the project is to build a specialised emergency response base for oil spills during the industrial development and operation of oil and gas fields in the northern part of the Kazakh sector of the Caspian Sea, including the Kashagan field.
The function of the response base centre for oil spills during the development of offshore fields is to carry out environmental and meteorological monitoring and rehabilitation of wildlife.
The NCEBR was put into operation on 28 December 2012.
- The potential of the refining and marketing sector in Kazakhstan is now ready to grow as a result of comprehensive modernisation of oil refineries. What are the long-term goals for the country in terms of refining performance?
- Currently there are three oil refineries operating in the Republic: the Atyrau Refinery (AOR), the Shymkent refinery (PKOP) and the Pavlodar Petrochemical Plant (PPCP).
In 2012, the volume of oil refining at domestic plants totalled 14,213,060 tons. Of this total, 5,037,480 tons was at PPCP, 4,752,807 at PKOP and 4,422,773 tons at AOR.
The volume of oil refining at the three refineries in 1997 was 9.2 million tons, while in 2012 it totalled 14.2 million tons.
There are plans for measures to rebuild and modernise existing refining capacity at domestic refineries. On completion of these, the following is expected:
  • To provide consumers with high-quality petroleum products that meet Euro 4 and Euro 5 requirements, and to reduce harmful effects on the environment
  • To meet the motor and aviation fuel needs of the Republic of Kazakhstan, as well as bringing total crude oil refining capacity to 17 million tonnes per year in 2016.
- The emergence of hard-to-recover oil and oil sands have signalled a growing worldwide interest in new oil technologies. What is the role of the KIOGE conference in exchanging innovations and technologies?
- The KIOGE forum was created as a specialised platform to exchange experiences, solve pressing industry issues, and meet producers, consumers and investors.
The main mission of the event has always been to offer an opportunity to visually demonstrate the latest achievements of the industry, exchange experience intensively, introduce advanced and innovative technologies, and open up new horizons for cooperation between international and domestic companies.
Having successfully passed the twenty-year mark, KIOGE continues to fulfill this mission.


(Sauat Mynbayev, Chairman of the Board, NC KazMunayGas JSC)
Mynbayev- Mr Mynbayev, according to KMG’s investment programme, what are the main areas for investment and what level of investment do they require?
- Taking into account the determining influence of investment on the long-term development and value of the company, KMG carries out long-term investment planning based on principles of cost-effectiveness and feasibility of investment, as well as its compliance with the long-term objectives of the company.
KazMunayGas implements projects both independently and together with its partners in areas such as exploration and production of hydrocarbons, refining and petrochemicals, oil and gas transportation and services.
At present, KMG’s group investment programme consists of 66 planned and currently ongoing projects. The total cost of the programme is estimated at $143.4 billion, of which KMG’s share is $67 billion. There are 38 projects being implemented, and the company has already invested about $15 billion in them.
The main focus for investment is exploration and production projects. KMG’s share of the cost is currently estimated at $28 billion.
Significant investment is planned for oil and gas transportation projects. In the main, we are talking about the construction of trunk gas and oil pipelines and projects for expanding and modernising regional gas distribution networks. The cost of these projects is estimated at $8.9 billion, of which about $5 billion has been spent.
KMG is also implementing certain strategically important investment projects aimed at modernising oil refining assets, envisaging an increase in the level and volume of processing, and an increase in quality and an expansion of the range of products. To date, $1.3 billion has been spent on these projects, and total planned investment in modernisation of oil refineries is around $6 billion.
- Kazakhstan’s main fields, especially the oil-bearing zones of the Caspian Sea, are almost completely explored. In which regions of the country will KazMunayGas be likely to carry out exploration?
- By no means can we ignore the Caspian Basin with regard to prospective hydrocarbon reserves. At the beginning of this year, for the first time since Kashagan opened, KMG and its strategic partners announced the commercial discovery of oil reserves in two other fields in the Kazakh sector of the Caspian Sea. The increase in proven recoverable reserves, according to national methodology, amounted to 98.6 million tons; 67.6 million tons of oil at the Kalamkas offshore field and 31 million at the Khazar field.
At the same time, exploration continues at the promising Satpayev, Makhambet, N Block, Zhambyl and Bobek offshore blocks. Most recently, NC KazMunayGas JSC and     the Korean Consortium KC Kazakh B.V. have reported the results of drilling the first exploration well at the Zhambyl field to a depth of 2,200 metres. According to these results, two promising oil and gas sites were confirmed in Middle Jurassic sediments. A production test of these sites showed a flow to surface rate of 24 cubic metres per day on a 6.35 mm choke and 110 cubic metres per day on a 12.7 mm choke.
KMG and the Korean Consortium will continue exploration at the Zhambyl field. There are plans for 3D seismic exploration work at the Zhambyl structure and exploratory drilling at the Zhetysu structure (ZT-1).
Negotiations with strategic partners are also underway on joint operation of the new Issatai, Abai, Zhenis and Okzhetpes exploration blocks, which according to KMG calculations are very promising.
For the first time, KazMunayGas has engaged independent auditors – Gaffney, Cline & Associates – to assess the group’s reserves, and the company has confirmed KMG’s calculations. According to the assessment made by Gaffney, Cline & Associates, the resource potential of the Kazakh sector of the Caspian Sea is 2.37 billion tons of oil reserves, excluding the North Caspian project.
As a result of the forecast for the next five years, the following high-priority areas of geological research have been set out:
  • First of all, new facilities and horizons in the Caspian Basin subsalt complex associated with the Astrakhan-Aktyubinsk zone of uplifts and cut-off parts. These are large facilities along the promising Devonian-Turnaisian part of the section.
  • The large sites in the Pre-Jurassic formation of the Mangyshlak basin (the Uzen-Karamandybas zone and others), defining at the same time the new unconventional focus of study for this region.
  • The pre-Jurassic Upper Paleozoic complex of the South Torgai basin, which is considered a new main area of focus for this region.
According to the most conservative estimates, exploration work at the sites mentioned above will allow KMG’s recoverable reserves to increase to an estimated 1.4 billion tons by 2022.
- Despite numerous delays, operations at the Kashagan field are expected to begin. Could the development of the Kashagan field result in changes to the oil market?
- Without a doubt, the development of such a large field as Kashagan (its reserves are about 35 billion barrels or 4.5 billion tons) will impact the oil market. The depletion period will be several decades and its development will bring billions of dollars in revenue to our country.
The Kashagan Project is the largest investment of international capital into the oil and gas industry of Kazakhstan. From the beginning of the project to the present day, investment has exceeded $40 billion.
Production from the field is expected to begin in the second half of this year. At the last stage of commissioning, production rates will grow to planned capacity – 20 wells (producing) 180,000 barrels per day in the first phase, with a further increase to 370,000 barrels per day with gas injection during the second phase.
It is worth noting that after the start of production at Kashagan, the oil market may undergo some changes with regard to hydrocarbon transportation, as the development of oil fields often requires the diversification of export routes. To ensure the reliability of export routes of sufficient capacity and to efficiently transport Kashagan’s hydrocarbons, it will probably be necessary to combine different modes of transportation, such as pipeline, rail and sea transportation.
The current plan for transporting the products extracted during the initial stage of field development involves the use of both the existing pipeline system and railway networks.
- The Asian continent is increasingly becoming the driving force of global economic growth. To what extent has the growing importance of countries such as China impacted KMG’s strategy, particularly with regard to development of infrastructure?
- As is well known, for several years KMG has been working closely with Chinese companies, including those working in the oil and gas industry. NC KazMunayGas JSC’s strategic partner among Chinese companies is the China National Petroleum Corporation, with whom we are implementing a number of major oil and gas transportation projects – in particular, the construction of the Kazakhstan-China oil pipeline and the Kazakhstan-China and Beineu-Bozoi-Shymkent gas pipelines.
If we talk about each project, we can note that the construction of the Kazakhstan-China oil pipeline focuses on oil transportation, both for export to China and to domestic refineries, thus ensuring Kazakhstan’s energy security. Work on the separate sections of the Kazakhstan-China pipeline is being carried out by the following companies, with the participation of Chinese companies:
  • The Kenkiyak-Atyrau oil pipeline – North-Western pipeline company MunaiTas JSC, established with the participation of KazTransOil JSC (Kazakhstan) – 51%; CNPC Exploration and Development Company Ltd. (China) – 49%
  • The Kenkiyak-Kumkol and Atasu-Alashankou oil pipelines – Kazakhstan-Chinese Pipeline LLP, established with the participation of KazTransOil JSC (Kazakhstan) – 50%; China National Oil and Gas Exploration and Development Corporation (China) – 50%
Also, the facilities of KazTransOil JSC are also involved in the Kazakhstan-China oil pipeline system (oil pumping stations and oil pipelines from Kumkol to Atasu).
The project is being implemented in phases according to growth in demand for additional oil transport capacity.
Currently, the capacity of the Kazakhstan-China oil pipeline system is 12 million tons per year. The oil pipeline expansion, as a part of the second phase of the second stage, involves expanding the capacity of all sections from Atyrau to Alashankou, in order to reach export capacity of 20 million tons per year in the Alashankou section and to ensure the supply of oil to PetroKazakhstan Oil Products (Shymkent) and Pavlodar Oil Chemistry Refinery (Pavlodar) in volumes defined by the Ministry of Oil and Gas of the Republic of Kazakhstan. In accordance with an agreement with the Chinese side, expansion of the Atasu-Alashankou section to 20 million tons per year, to allow transit of Russian oil to China at the initial stage, is planned to be completed by the end of the year.
At the same time, we want to emphasise that the interest of oil producers in exporting to China will depend on the commercial conditions created by the Chinese side in the Alashankou section (on Kazakhstan’s border with China).
The largest trans-national gas transportation project implemented by KMG together with CNPC is the construction of the Kazakhstan-China gas pipeline, which costs around $7.5 billion in total.
As for the pipeline, it is dual-line, it runs through the territory of three southern regions of Kazakhstan, and it allows 30 billion cubic metres of gas per year to be transported from Turkmenistan to China, via Uzbekistan and Kazakhstan. Given the purpose of the main gas pipeline, the project has commercial benefit for our country in the form of payments to national and local budgets totalling $5.8 billion over the entire period of the project.
At present, the construction of the Kazakhstan-China gas pipeline is expanding through the construction of another line, the third line of the pipeline, which will also be for transit gas transportation. Its entry into operation is scheduled for the middle of 2014, and the projected capacity will be achieved at the end of 2015, after which the total capacity of the Kazakhstan-China trunk pipeline will be around 55 billion cubic metres per year. Direct payments to the state budget of the Republic of Kazakhstan for the entire implementation period of the third line project will total around $4.9 billion. Therefore, total direct payments to the Republic of Kazakhstan’s budget over the whole implementation period for all three lines will amount to $10.7 billion.
Another of the major projects undertaken by our company together with CNPC is the construction of the Beineu-Bozoi-Shymkent gas pipeline, at a total cost of around $3.6 billion. The project is being carried out in accordance with the address of the President of Kazakhstan in 2008, and it is included in the State Programme for Accelerated Industrial-Innovative Development and the Industrialisation Map of Kazakhstan for 2010-2014. The project is very important in social terms. The launch ceremony to release gas through the pipeline for the first time was held in early September of this year as part of the head of the PRC’s visit to Kazakhstan.
Construction of the gas pipeline will ensure the country’s energy security by providing natural gas to the southern regions from the fields of Western Kazakhstan, eliminating dependence on imported gas, diversifying gas export routes from Kazakhstan to China, and creating new jobs and developing infrastructure along the pipeline route.
The gas pipeline runs through the Mangystau, Aktobe, Kyzylorda and South Kazakhstan regions. The implementation of this project will allow the gasification of more than 500 settlements.
At present, construction of the first stage is finishing, but its opening is scheduled for this October, in accordance with the deadlines set by President Nursultan Nazarbayev.
- KMG is strengthening its relations with Romania after the acquisition of Rompetrol Rafinare. What contributed to the targeted acquisition of Rompetrol’s assets and what is KMG expecting to get from strengthening its positions in the country?
- The acquisition of Rompetrol (75% of the shares were bought in 2007, and the remaining 25% in 2009) is the first step in KMG’s strategy of entering key refining markets in Europe with a total population of over 300 million people. In the future, when exports of oil from Kazakhstan significantly increase, Rompetrol will serve as a solid foundation for selling Kazakh energy resources on European markets. By purchasing this asset, KMG has become a global transnational company. Another problem was solved at the same time – the construction of an integrated added-value chain from wellhead to consumer. This involves KMG’s trading and shipping companies, so in 2012 Kazmortransflot entered the market of oil transportation through the Black Sea and the Mediterranean.
- In addition to its assets in Romania, KMG is actively investing in oil refineries in Kazakhstan. How will the modernisation of refining capacities benefit consumers of oil products in Kazakhstan?
- At present, KazMunayGas JSC is carrying out projects to rebuild and modernise domestic refineries.
Feasibility studies have been performed and approval from Gosexpertiza (Kazakhstan’s state agency for examination of construction projects) has been received for modernising and rebuilding the Shymkent and Pavlodar plants. Project documentation is under development, and an accelerated strategy has been prepared and is under implementation in order to finish them by the end of 2015. Production capacity of these enterprises is planned to increase to 6 and 7 million tons per year respectively. Currently, the Shymkent and Pavlodar refineries are carrying out selection procedures for general contractors for construction work.
For all three plants, the motor fuel will meet the Euro 4 and 5 standards from 2016 according to the Technical Regulations of the Customs Union. Total production of between 13 million to 14 million tons of motor fuels per year at a high refining depth of 87-90% will meet the needs of the domestic market.
The start of production of fuels according to Euro 4 and Euro 5 standards also has an environmental dimension. We can see that the European Union, as well as all other countries in its wake, is increasingly toughening quality requirements for motor fuels. Why are they doing this, and do they need to do it? It should be explained that gasoline itself, aside from other hydrocarbons directly involved in the combustion process, contains various components, including harmful and even dangerous ones. Many people remember when tetraethyl lead was added to gasoline to increase the octane number; now this is prohibited. Also, for example sulphur, which when burnt in the engine cylinder is converted into compounds that cause acid rain and benzene, the product of the combustion of which (benzopyrene) has an adverse effect on living organisms.
So, the reduction of these components in motor fuels and consequently in the atmosphere of cities is the ultimate goal of modernising Kazakh oil refineries. As a result, we will have not only high-quality gasoline but also clean air.
- KMG is active in the area of corporate social responsibility. Which social projects are supported by the company?
- KazMunayGas supports social projects in accordance with the main priorities set by the sole shareholder, JSC National Welfare Fund “Samruk-Kazyna”, and within the available financial resources, which are very limited and depend on the financial results of the group over the year.
Particular attention is paid by our company to supporting organisations for veterans, the disabled, orphanages and children’s centres, and other not-for-profit social organisations. Every year, KMG allocates funds for the Republican Veterans’ Organisation and also to its Astana branch for providing financial assistance to needy veterans of the Second World War and the Labour Front (non-soldiers who contributed to the war effort in the Second World War), to the Torch orphanage, the Kazakhstan SOS Children’s Villages corporate fund, the N.A.Marabayev Munayshy public foundation, the Society of Disabled Children in Astana, and to other causes.
Similar sponsorship activities are being carried out by KMG’s subsidiaries in regions where production takes place.
An important area of KMG’s sponsorship and charitable work is support for certain sports, sporting events and the development of sports infrastructure. Sponsorship is also given to high-achieving sports like boxing, judo, tennis, weightlifting and taekwondo. Starting from 2010, the AIBA World Boxing Academy is being created with sponsorship from KazMunayGas. This will enhance the skills of Kazakhstani athletes and strengthen the Republic’s image in the eyes of the international community as an active participant in the development of physical culture and sports.
Another important area is support for social projects, for example the Kazakh TV show Intellectual Olympics, the awarding of the Enlikgul theatrical prize, KAZENERGY educational projects, support for gifted young people (the young singer Maria Mudryak, the children’s dance ensemble Tumar), and other areas.
Also, KMG has allocated funds to implement measures instructed by the Head of State, the Government of the Republic of Kazakhstan or the Sole Shareholder. At present, in accordance with instructions from the country’s President, a climatic and mud resort for 150 people is under construction on the coast of Lake Balkhash. As requested by the Head of State, KMG is entrusted with the construction of the Museum of the History of Kazakhstan in Astana.
In order to increase the prestige and authority of KMG and the whole country in the international arena, KMG annually supports significant country-wide events – the Eurasian Media Forum, the KAZENERGY Eurasian Forum, national and international oil and gas conferences, the Eurasian Women’s Summit, conferences within the World Forum of Spiritual Culture and other significant events at national level.
- The main value for any company is its employees. What measures do KazMunayGas undertake to develop human capital?
- KMG pays special attention to searching for highly qualified specialists, and to their continuing professional development and career advancement. All these principles are reflected in the Human Resources Policy of NC KazMunayGas JSC. Developed for 2011 to 2015 in accordance with the company’s Long-Term Strategy, this fundamental document presents the main focuses and approaches of personnel management to achieve KMG’s mission and strategic goals.
We believe that efficient human capital management in KazMunayGas can be achieved by creating a single human resources management system. It should be aimed at obtaining maximum profit and ensuring leadership in a competitive environment, based on economic incentives and social safeguards and promoting a harmonious combination of interests, both of the employer and the employee, and the development of their relations for the prosperity of NC KazMunayGas JSC.
KMG appreciates its employees' professionalism, initiative, activeness in performing their duties, their discipline and responsibility, and their willingness to support their colleagues, especially young people. Another important criterion is respect for veterans.
In view of the need to find, hire and retain key personnel, KazMunayGas is committed to providing its employees with a competitive wage and social support structure – a structure which makes it possible to attract the best professionals of the oil and gas industry and which has sufficient motivational effect to improve productivity, allowing an objective assessment of each employee’s contribution to the overall goals of the company.
- KIOGE has been a platform for international dialogue for over 20 years. What is the role of the event in the development of Kazakhstan’s oil and gas market? In your opinion, how efficient is the participation of KazMunayGas in the event, taking into consideration that since KIOGE’s launch KMG has been a constant partner of the event?
- Without a doubt, KazMunayGas will continue its longstanding cooperation with KIOGE, the Kazakhstan International Oil and Gas Conference and Exhibition, through support of and direct participation in the event. After all, this event is a unique platform for dialogue which annually provides professionals and managers of leading international and domestic oil companies, international organisations, financial institutions, the diplomatic corps and the media with an opportunity to discuss the most acute issues in the fuel and energy sector.
Every year, the programme and content of the conference and exhibition contribute to the strengthening of mutually beneficial partnerships between oil and gas companies, exchange of experience and the implementation of new projects. Visitors can learn about the latest developments in the industry, and exhibitors can introduce new technologies, products and services at special presentations and seminars. On the whole, KIOGE is a great opportunity for newcomers to the oil and gas industry to assert themselves, and for experienced local and international companies to confirm their status in the oil and gas market.
KMG highly values its cooperation with foreign partners. Participation in events such as the KAZENERGY Forum and the Astana Economic Forum only helps in establishing new contacts. The same applies to KIOGE, because the participation of KazMunayGas in the event always brings joint projects and memoranda for cooperation. It is noteworthy that KIOGE ensures dialogue between national and international partners at public and private levels. This format allows you to make specific decisions and reach specific agreements.


(Almas KUDAIBERGEN, Chairman, Association of Service Companies (Contractors) KAZSERVICE)
KudaibergenJust a few years ago, Kazakhstanis didn’t quite understand what the service market was. To be completely honest, even the professionals themselves got their knowledge during trips abroad. Now, dozens of companies have been brought together within the KazService association of service companies in Kazakhstan. We talked about the work of this young public organisation with its director, Almas Kudaybergenov.
- Mr Kudaybergenov, the service market in Kazakhstan is quite young. Why it was necessary to create a public organisation?
- We created the Association of Service Companies in Kazakhstan in 2011. If you remember, during this period the business sector was trying to consolidate its efforts in order to finally resolve a huge amount of problems which were growing like a snowball every year. Firstly, Kazakhstan's businesses experienced serious difficulties in obtaining contracts and jobs. This is a trend we often see today, when foreign companies get large orders even though domestic companies can easily compete with them on a fair ground and for a much more accessible price. The reason for this is that when entering the Kazakh market, global oil and gas players brought a lot of their own contractors with them.
Another important reason for creating KazService was the pre-qualification process. It is very time-consuming and requires a lot of resources, and every major company has its own pre-qualification requirements. Therefore the situation required consolidated attention.
- Was the issue of tenders the main reason behind this consolidation?
- Again, there were many reasons, and I absolutely do not deny that the tender issue was one of the most important ones. The fact is that at that time, the situation for Kazakhstan’s businesses became so doomed that it came to the point of absurdity. Imagine that there was no information about planned tenders, and many local companies did not know what to expect or how and when to upgrade their production facilities to manufacture the required products or services. How would you feel about circumstances like that? Is it a serious threat to domestic production? Certainly. Today, our association is one of the most active industry organisations supporting the initiatives of the Government of the Republic of Kazakhstan to create an effective support and development system for Kazakh service companies. At present, we can confidently say that the Kazakhstani oil services market has been formed. Thanks to the Association, our companies have strong support and confidence in the future – to obtain full information about major projects and opportunities to subcontract.
- Has this goal been achieved?
- We have done a tremendous amount of work and it is only a small amount of all that we could do. Judge for yourself – in two years we have established cooperation with state bodies and national companies that interact with service companies. At the moment, the Association is involved in many meetings and participates in various working groups on issues of local content, as well as informing people about the problems and issues faced by the members of the Association. In addition, we have successfully implemented the idea of ​​creating an information and dialogue platform through annual conferences and round tables.
- What are you working on now?
- At this point, in the list of priorities there is the question of the participation of Association member companies in the major projects being implemented on the Caspian shelf. We need to continue dialogue with license holders, operators and public authorities, hold annual planned events to attract foreign partners through the networks of partner associations, consider issues of organising new production, and other things. Many important questions depend on the efforts and willingness of our members to get involved in the process of forming the Union. I would like to take this opportunity to thank our active members and inter-regional representatives for their excellent work.
- What range of companies do you represent?
- Right now, we represent companies working in industrial construction, drilling, welding, operational, insulation and electrical work, and also companies that work in design, transportation, trading and other areas. The members of KazService are ready to participate as contractors and sub-contractors in various projects taking place in Kazakhstan. Many companies in our Association work to international standards to meet the strict requirements of international oil and gas companies. As of July 1 2013, the Association includes 67 companies from different cities of Kazakhstan.
- In 2013, the Association will provide official support to the KIOGE 2013 oil and gas exhibition and conference. How would you rate the prospects of this event?
- It is absolutely certain that such events inform those taking part about the basic needs of the oil and gas sector in goods, work and services. They act as an information platform for discussing key industry issues, trends and opportunities in the development of the domestic and foreign markets. Interested companies can find partners for new production, so the need for and benefits of the exhibition and conference are hard to overestimate. We have high hopes for this global meeting. I think it opens up great opportunities for Kazakhstan to successfully develop its potential in the future.
- As far as I know, in recent years the Association has taken part in KIOGE. Were the objectives that you set for yourself achieved?
- The KIOGE exhibition brings together about 500 participating companies from over 20 countries. Key industry players and prominent industry representatives take part in KIOGE, which shows the relevance and significance of this event. The aim of our participation in this event was more of an awareness-raising nature. We conducted a series of meetings, held negotiations with service and oil companies and received full information about the news in the oil and oil services industry.
- What do you think companies need to do in order to make their participation in international exhibitions and conferences more effective?
- I think it is elementary (in this regard). Participation in such forums should be for its own sake – this is very important. Companies need to determine in advance what they want to achieve by participating in exhibitions and conferences, which companies they would like to meet, and what their next steps after the exhibition will be. It is desirable to immediately establish contacts with those companies that were met, because after a week they might not even remember you. It is better to prepare for meetings in advance, study the needs of your partners, try to be more open and to present your proposals in a constructive way and of course to support offers with real business. I am listing obvious things. I think many people are aware of these basic rules of business negotiations but I often noticed that they neglected them. I suppose it is just a matter of time – a whole culture that needs to be nurtured. Fortunately there are favourable conditions for this in Kazakhstan.


(Graeme S. Coombes, Head of Oil & Gas Division, ITE Group Plc)

Coombes- What are your expectations for KIOGE 2013?
- We have made every effort this year to make exhibiting and visiting the KIOGE exhibition a productive and enjoyable experience. Visitors will be provided with an ideal platform to network with leading international and local oil & gas companies.
Exhibitors will showcase their latest products, including new technologies, components and subsystems, as well as innovative new materials, manufacturing technologies and services. KIOGE is still a favoured meeting place for oil and gas players, where a great number of contacts are made, subjects discussed and contracts signed.
- What's new at KIOGE this year?
- We have introduced a range of new features and services for KIOGE 2013 to help exhibitors and visitors arrange meetings, plan their day and achieve their objectives during the course of the exhibition. These include:
Mobile App: With the help of mobile applications based on IOS and Android, each visitor can search KIOGE 2013 in AppStore and PlayMarket to download a free interactive floor plan with descriptions of exhibiting companies and their stand location and number, as well as the full exhibitor list and seminar programme.
Touch Screens: 16 touch-screen kiosks will be available across the exhibition, showing floor plans of all pavilions and giving exhibitor descriptions. A new feature at the event will be the possibility to schedule meetings in advance.
Seminar Zone: Exhibitors and visitors can attend a varied seminar programme sponsored by Maersk Oil. The new format should attract a large audience and we aim to see presentations from most of our exhibitors. Videos will be broadcast from a large screen in the exhibition, to ensure maximum visibility for visitors.
KIOGE Lounge: There will be a large seating area with a coffee bar and sofas, offering exhibitors and visitors space to take a break from their busy schedules and prepare for meetings and discussions. There will be a media zone immediately next door, with a selection of journals produced by our oil and gas media partners.
- What topics will be discussed at this year's conference?
- The conference will bring together key decision makers with Kazakh Government officials and will examine in-depth the current oil and gas market trends and changes in Kazakhstan and the wider Central Asia region.
Topics will include international cooperation in Kazakhstan's oil and gas industry; technology innovations to improve major production projects; expanding exploration efforts to increase the hydrocarbon resources base in Kazakhstan; oil and gas transportation challenges and technological advances; local content regulations; legal frameworks; HSE best practice and protection of the fragile Caspian environment; and offshore technical infrastructure. It promises to offer conference delegates an up to date insight into the dynamics of the Kazakh oil and gas industry.
- ITE organises oil and gas events in many countries. What distinguishes KIOGE from other events?
- KIOGE is a key oil and gas event in the Central Asian calendar. Now in its 21st year, KIOGE has proven to be a forum where real commercial, operational and technical decisions are made and policies discussed by the world's major oil and gas companies, policy makers and the highest levels of Kazakh government.
- What can we expect to see at KIOGE in the future?
- For ITE, the key issue is to ensure KIOGE is constantly relevant to our audience and adapts to changes within both the oil and gas industry and the events industry. We have already implement a number of new initiatives this year and we have more developments in the pipeline for 2014.