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- Mechanisms for supporting Kazakhstani suppliers×
MECHANISMS TO SUPPORT KAZAKH SUPPLIERS AND LOCALIZE PRODUCTION
NAME OF THE MECHANISM DESCRIPTION EARLY TENDER a form of Advance Procurement
The method of awarding the contract is a competitive tender process
The goal is to organize the production of goods in the Republic of Kazakhstan.
A tender for the supply of goods based on the results of which the Operator enters into a contract for the supply of goods with a suspensive condition or with a long-term delivery schedule until the Operator has a need for such goods.
TRAIL ORDER Contract Award Methods - Tender, Negotiation, Single source, Sole source.
The purpose of such a contract is to purchase samples of Goods from Kazakhstani manufacturers for testing and checking for compliance with technical standards and operational requirements of KPO.
Basic conditions of the Trial order
• Conformity of the Goods to the type for oil and gas operations
• Minimum purchase volume
• Objectivity of tests and inspections
• Financing of the Trial Order from the annual Work Program and BudgetCONTRACT
IN EXCHANGEA contract in exchange for investment is a long-term contract concluded on a Single source basis, under which the supplier undertakes to produce goods of local origin that are the subject of a procurement contract in the territory of the Republic of Kazakhstan.
Methods of contract award are negotiations, Single source basis.
The goal is to organize the production of goods in the Republic of Kazakhstan.
Basic terms of the contract in exchange for investment
• Long-term contract;
• Single source basis;
• Obligation to organize the production of goods of local origin on the territory of the Republic of Kazakhstan.KAZAKH TENDER Procedure for participation of Kazakhstani suppliers
The method of awarding the contract is a competitive tender process exclusively among Kazakhstan suppliers of GWS.
The goal is to award contracts to Kazakhstani suppliers of GWS.
Conditions for holding a tender among Kazakhstani suppliers
Given that:
Pre-qualification procedure
(i) applying an appropriate prequalification procedure to evaluate Suppliers against mandatory technical criteria proposed by the Operator, and
Minimum number of Kazakhstan suppliers
(ii) the presence of at least 5 pre-qualified Kazakhstan suppliers, the Contractor undertakes to conduct the tender exclusively among Kazakhstan suppliers. - Local Content Policy
- Local Content Initiatives×
Actions and initiatives to support Local Goods Manufacturers (LGM)
Support of LGMs and Kazakhstani suppliers of works and services is implemented as part of an in-house “Supplier Excellence Program” aiming to improve their qualification This program was adopted to extend capabilities of Kazakhstani suppliers and ensure their compliance with the strict oil & gas industry parameters. It includes a complex choice of training and development opportunities oriented towards such important areas as operational efficiency, quality management, and safety standards.
The program envisages assistance in accreditation of an LGM in conformity API / ASME to international standards by engaging a contractor for consulting services subject to an approval of a budget for the implementation by the Authority. Additionally, as a measure to support LGM in verifying its certificate, KPO considers an option of placing a trial order to purchase their goods manufactured in the RoK in conformity to the international standards.
The qualification improvement program for suppliers is presented in more detail below
“Supplier Excellence Program” to improve the suppliers’ qualification
DESCRIPTION Basic knowledge and technical skills Best industry experience: training in the oil & gas industry international standards HSE: training in compliance with HSE protocols widespread in the oil & gas industry. The training includes safe working methods, emergency response procedures, and compliance with the environmental regulations QCS: an emphasis on the quality control methods, management of non-conformances and continuous improvement processes Specific technology: tailored training in specific processes, technical standards, related to concrete goods and services, based on the previous projects and needs of suppliers Business development and skills Talks about the contracts and tenders: provide suppliers with information about the tender process and skills, allowing them to understand the sense of the tenders and submit competitive bids Local Content management*: the LC calculation method, forecasting, efficiency indicators, reporting, bonus program (for high LC indicators) Transparency and communications*: practical workshops, informing about the upcoming procurement plans, standards and technical specifications related to concrete goods and services Finance management: a workshop on finance planning, forecasting and cost estimation tools for an efficient management of resources Efficiency management: individual interviews to get a positive feedback on contract implementation, recommendations on corrective actions, development opportunities Supplementary measures Industry-wide collaboration: collaboration with industry associations and government authorities to gain from the existing initiatives, extend the database on suppliers, use the platform for communication and experience exchange KPO actions: an annual forum where KPO achievements in reaching the LC targets, the project status and the forthcoming procurement plans, successful LC development stories, and recognition awards are announced Transparency: communication with Kazakhstani ventures via Internet by means of publishing procurement plans and localisation opportunities, attracting localisation offers and problem solving Site visits: assessment and verification of manufacturing capacities to produce goods in RoK, to be declared as localised or planned to be localised (road maps, trial orders etc.) KPO will go ahead with its practices of applying the “must-have-package”, which is a list of GSW to be supplied obligatorily by Kazakhstani suppliers on contracts to achieve the ICV share in the GSW procurement, wherever it is applicable. A “must-have-package” is an integral part of the contract and a contractual commitment that indicates the volumes with an undertaking to purchase from local manufacturers and works and services suppliers.
KPO is also ready to include the following conditions in the “must-have-package” while developing contracting strategies where applicable:
design by local design institutions, or joint ventures with the local partner’s share not less than 50%,
performance of not less than 50% of the SoW by a local design institution as part of a consortium with a commitment to gradually increase the SoW,
a commitment to reach at least 50% in the total ICV share in the contract fulfilment with a gradual ICV share increment.
mandatory fulfilment of engineering activities in the RoK territory,
the payroll share of Kazakhstani engineers should be not less than 50% in the total payroll,
at least 70% in the total headcount of the engineers and technicians should consist of Kazakhstani engineers with a commitment to gradually increase the number of Kazakhstani engineers through training and nationalisation programs.
International Centre for Development of Oil and Gas Machine Building (IMBC)In the framework of the Relationship Agreement signed between three major operators and IMBC on April 8th, 2021, the Annual Work Plan and Budget with Key Performance Indicators (KPIs), which are proposed by the IMBC and approved by the Operators, is reviewed on an annual basis. The IMBC also twice a year submits for consideration a report on the implementation of the Annual Work Plan and Budget, in accordance with the format and report templates approved by the Operators.
The following is planned in the forthcoming period as part of collaboration with the IMBC:
Potential award of the trial orders as a result of successfully implemented Capacity Development Plans (CDP);
Execution of a work plan with companies on 12 categories of goods as per Annex 11.5 hereto;
Approval by the Operators of the Action Plan on enhancement / extension of the IMBC authorities.
“KazService” Union of Oilfield Service Companies of Kazakhstan and “Kazakhstan Union of Machine Builders” Association of Legal Entities
It is important to stress the interaction between KPO and industry associations such as “KazService” and “Kazakhstan Union of Machine Builders” Association of Legal Entities. This interaction plays a key role in achievement of the ICV targets and support of local economy. As part of co-operation with “KazService”, KPO actively participates in joint projects aiming to increase the ICV share in the oil & gas industry. This includes organising workshops and conferences for local suppliers, as well as work on joint initiatives to support and develop local businesses. Participation in the forums and workshops organised by “KazService” and “Kazakhstan Union of Machine Builders” serves as a platform for exchange knowledge and best practices with other industry participants It allows to improve the internal processes aiming at the ICV share increment in the Karachaganak Project.
Collaboration with industry associations is intended to boost competitiveness of local suppliers and expansion of their participation in our supply chain.
The interaction between KPO and industry associations such as “KazService” and “Kazakhstan Union of Machine Builders” ALE is an important element of the KPO local content development strategy. Through joint efforts and partnership, we strive to create a sustainable and competitive local economy, promoting development of local businesses and improving qualifications of local specialists.
- Local Content Performance×
LOCAL CONTENT DEVELOPMENT
Since the beginning of the development of the Karachaganak field, KPO company has been actively working on increasing the share of local content in the Karachaganak project by involving Kazakhstani commodity producers and service providers. This implies a decrease in imports and an increase in the volume of goods, services and works of domestic production in the total volume of goods, works and services purchased for the Karachaganak project. KPO has been continuously developing and implementing the Local Content Development Programme for the Karachaganak Project since 2001. The objectives of the Programme for the period 2022-2024 are consistent with the state initiatives for the development of mechanical engineering, industrialization and digitalization of the Republic of Kazakhstan and with the KPO corporate policy in the field of local content. This Program defines the goals and objectives for the development of local content, as well as key indicative data for monitoring and evaluating the effectiveness of activities.
In 2024, KPO Local Content Development Initiatives allowed to achieve the following results:
- The share of local content in the procurement of goods, works and services in the Karachaganak project in 2024 amounted to 65% (equivalent to US$ 679,7 million);
- Kazakhstani produced goods were purchased in the amount of 88,3 million US dollars, which is 42.3% of the total volume of purchases (of which the share of local content is 18.2% under the ST-KZ certificate[1]).
Share of local content in KPO total procurement, 2014 – 2024
- External Cooperation with IMB Centre×
International Centre for Development of Oil and Gas Machine Building (IMB Centre)
Association of legal entities “International Centre for Development of Oil and Gas Machine Building” (IMB Centre) has been established at the initiative of the Government of the Republic of Kazakhstan, Operators of largest oil and gas fields in Kazakhstan (Tengizchevroil LLP, Karachaganak Petroleum Operating B.V. and North Caspian Operating Company N.V.) which are the sole members of the Association.
IMB Centre was registered on February 25, 2021 and acts in accordance with RoK legislation as non-commercial organization in the form of Association established by two legal entities: “Kazakhstani Association of Petroleum Geologists” Public Association and “Veterans of Oil and Gas Industry” Republican Public Association. Operators (KPO, TCO, and NCOC) have been the members of the Association since April 8,2021.
The mission of IMB Centre is to contribute to the development of the manufacturing of oil and gas goods in Kazakhstan, linking major Operators with the machine building industry of the Republic of Kazakhstan through analysis, qualification, development of the potential and investment facilitation initiatives.
The purpose of establishing the “International Centre for Development of Oil and Gas Machine Building” (“International Centre”) is to provide support (of non-financial nature) to:
- increase competitive ability of Kazakhstani machine building companies in terms of manufacturing of equipment and vehicles for further use by the Operators;
- increase local content by improving the quality of the goods supplied;
- develop potential for domestic manufacturing of new goods in accordance with international standards for their use by Operators; and
- review the possibility to bring equipment and vehicles used by Operators into line with specifications/ standards, in the same manner and in details, as currently provided by the Operators to suppliers.
Key directions of the International Centre’s activities:
- Information exchange: data collection and review of the Operators’ demands, as well technical specifications to identify opportunities for the goods localization and technical specifications simplification;
- Market research: Identification of potential suppliers for the Operators and explanatory works;
- Development of manufacturers’ potential: technical support for domestic manufacturers in terms of developing capabilities for the supply of oil and gas industry goods to Operators, as well as capabilities to act as potential suppliers for the Operators;
- Investing activities facilitation: providing support as to ensure facilitation of investing and localization activities in oil and gas industry by domestic and foreign companies;
- Outreach activities: cooperation with the Republic of Kazakhstan and international concerned parties aimed at contributing to the development of oil and gas machine building in the Republic of Kazakhstan.
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