Oil and gas engineering – one of the most import-dependent sectors of the economy of Kazakhstan

In 2018, the volume of engineering production in Kazakhstanreached $3.1 billion. However, the share of production of oil and gas engineering in the structure of the industry was only 5% or about 53 billion tenge.

According to the Minister of Industry and Infrastructure Development of the Republic of Kazakhstan Roman Sklyar, the oil and gas industry creates a significant potential for the growth of local engineering,in particular, due tothe procurement of goods by operators of oil and gas projects of the country. Local enterprises could meet the existing demand of the industry for rather a wide range of imported engineering production.

According to the Minister, last year, the total volume of the country’s import accounted to $32.5 billion, where the share of expenses on the engineering production reached 39% or $12.7 billion.

And the most import-dependent sectors of the economy are: electrical equipment – $2.7 billion worth products imported, auto industry – $1.8 billion, oil and gas engineering –$1.3 billion, mining engineering – $1.04 billion.

“We have analyzed the procurement of subsoil users in the field of hydrocarbons over the past three years by22 major commodity groups. It was found out that the share of the engineering production import in the procurement of subsoil users accounted to 88% or about $2 billion,” says the Minister.

According to him, the negotiations held with business representatives showed that 12 local engineering enterprises are ready to participate in the supply of products for more than $21 million in the procurement of Tengizchevroil LLP (TCO). Moreover, there is an additional potential for the development of new production for more than $62 million.

These data reflect only the current demand for goods within the current production. Procurement of goods in promising projects to expand production are not included in this analysis. For example, the procurement of goods for the TCO Future Growth Project has already been contracted for 90%, which does not allow Kazakhstani companies to participate in this project.

For the procurement of Karachaganak Petroleum Operating (KPO) – 18 local mechanical engineering enterprises expressed interest in the supply of products worth more than $84 million. There is an additional opportunity to supply domestic engineering production for $149 million.

14 local companies are ready to supply goods for $45 million to the North Caspian Operating Company (NCOC). There is a potential for another $60 million.

For procurement of other subsoil users – 19 domestic enterprises expressed interest in the supply of engineering goods for more than $60 million. There is an additional potential for placing orders for another $150 million.

In general, about 80 Kazakhstani producers are ready to providethe oil and gas industry with their products.

“The preliminary three-year production volume of our producers in supply is more than 56 billion tenge. In addition, it is important to note that there is a high potential for the development of 6 new categories of goods in the procurement of three major operators worth more than $270 million,” Roman Sklyar said.

In general, on the basis of the analysis carried out by the Ministry of Industry and Infrastructure Development, a plan of measures to develop domestic oil and gas engineering until 2025 was developed together with the Ministry of Energy.

Let’s recall that at a recent meeting on the development of oil and gas engineering, Minister of Energy Kanat Bozumbayev said that the operators of oil and gas projects with the participation of JSC NC KazMunayGas and the authorized body PSA LLP need to negotiate with all manufacturers and conclude agreements on localization of production during 2019-2020.

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