Long-term initiatives

In the reporting year 2019, KPO continued activities on implementation of long-term initiatives approved within the Memorandum of Understanding on development of domestic industry (MoU), which was signed between KPO, PSA LLP and KAZENERGY Association and the Memorandum of Understanding on localization of the OEM  goods signed between the RoQ Ministry of Energy, PSA LLP and KPO.

Examples of successful projects are presented further in more detail.

Sucess story № 1

CONTRIBUTION TO LOCAL MANUFACTING

Context:

In order to develop local content as a contribution to the economy of Qazaqstan, it is essential for KPO to increase within its purchases the share of goods, works and services made in Qazaqstan.

 

The Ministry of Energy and the Ministry of Industry and Infrastructure Development of the Republic of Qazaqstan have launched the initiative to maximize the range of products produced in the country including production of original equipment and spare parts, as well as licensing services.

 

As part of these initiatives, KPO has identified a preliminary list of 33 continuous demand products.  In result of analysis of the list for compliance with criteria, such as presence of continuous demand and economic feasibility of product localization, eight of the OEM manufacturers were identified.

Goal:

To promote the development and growth of Qazaqstani mechanical engineering industry by attracting original equipment manufacturers to localize production of goods required at the Karachaganak field in the Republic of Qazaqstan.  Localization implies both production itself and assembly of equipment.

Solution / actions:

Under the initiative of the RoQ Ministry of Energy and PSA LLP, a round table on localization of original equipment production was held with the participation of KPO, TCO and NCOC.  During the round table, a Memorandum of Understanding was signed between KPO, the RoQ Ministry of Energy and PSA LLP.

 

Pursuant to the Memorandum of Understanding and the decisions reflected in the protocol as the outcome of the round table, KPO had negotiations with seven OEM manufacturers interested in localization.The Company started working with each of the manufacturer on Localization Roadmap.

 

Result:

At the end of 2019, some agreements were reached with OEM manufacturers as part of the development of roadmaps' localization.  The categories of goods and spare parts for potential localization, timing of implementation and the estimated production scope in Qazaqstan with companies such as Petrovalvz, John Сrane, Baker Hughes, Flowserve, Honeywell were defined.

 

Implementation of the roadmaps in the next two years depends on KPO's production and project needs, the contracting strategy for major projects, and meeting the conditions of original equipment manufacturers, namely:

  • signing of a long-term contract between KPO and an OEM manufacturer;
  • guaranteed annual purchase scope during the contract life;
  • exemption from relevant taxes or acceptance of equivalent rate increases.
 

Sucess story № 2

IMPLEMENTATION OF EARLY TENDERS AND TRIAL ORDERS

Context:

In July 2014, in support of the RoQ government initiatives to develop production and service clusters and taking into account potential expansion of projects in the Karachaganak field, KPO, PSA LLP and KAZENERGY Association signed a Memorandum of Understanding on the National Industry Development.

Goal:

 
  • Expand the range of products manufactured in Qazaqstan through early tenders and trial orders;
  • Provide conditions to local suppliers for production of new goods and services for KPO needs through a contract award with a guaranteed order scope from KPO and provision of time for creating a production.
 

Solution / actions:

In its contract strategy, KPO has identified 15 types of goods, works and services that have potential for localization using mechanisms, such as early tender and trial order. A mandatory requirement for early tenders and/or trial orders is that goods, works and services are to be produced in Qazaqstan.

Result:

Since the implementation of the Memorandum in 2015 using early tenders and trial orders, KPO has awarded localization contracts for 29 types of works and services worth US$ 490 mln and 22 categories of goods worth US$ 61 mln, which were previously imported. In 2019, among the goods seven contracts were awarded worth US$ 11.2 mln for production in Qazaqstan of the following goods required at the Karachaganak field:

  • fastening materials,
  • gaskets,
  • flanges,
  • filter elements,
  • cable trays,
  • engine oils,
  • rescue hoods.