The head of Petrocouncil.kz Assylbek Jakiyev spoke at the KIOGE 2020 conference about how the pandemic has greatly influenced local businesses working on the Kazakh oil&gas projects.
“Recently I spoke with colleagues from Houston which as a global oil&gas hub has suffered widely. Employees of companies as Chevron and Exxon have lost their jobs due to the pandemic. What to say about the Kazakhstani market even if the Western oil&gas market has a strong negative effect on the coronavirus. We analyzed procurement data of KPO, TCO, NCOC, and we see that during the pandemic large operators reduced their costs, postponed many projects for several years. They reduced procurements between 20 to 40%. All these changes have impacted the industry accordingly. There are no new projects, and therefore there is no scope of opportunities for the business; unemployment is growing since contractors and subcontractors are in a difficult situation,” Assylbek Jakiev said.
But on the other hand, in his opinion, the pandemic also brought interesting surprises. Over the past 20-25 years, Kazakhstan has been struggling for the development of local content with “some success”, for instance, despite various industrial programs and roadmaps the localization of goods reached only 7% of the total costs of operators.
“But the pandemic has led to the fact that operators began to abandon foreign labor in favor of Kazakhstani as it is economically more profitable. They began to attract Kazakh companies due to restrictions on border movements. Accordingly, it was possible and necessary to push the interests of Kazakhstani business, and now we are told WTO 2021 rules are implied, “says Assylbek Jakiev.
In his opinion, sometimes actions of some state bodies have a ‘specific’ effect on the development of local content in the oil&gas industry.
“Now there are talks that“ from 2021 the local content norms will be canceled under WTO rules, as the Minister of Investment and Infrastructure Development of the Republic of Kazakhstan Beibut Atamkulov recently said. It was kind of a ‘surprise’ for us. It is clear that the ministry is subject to the WTO rules but the market, of course, reacted to this differently. People began to ask what to do next, ”Assylbek Jakiyev said.
When you work with business and lobby the local content development with difficulties, and when an minister makes such statements, the market have mixed feelings. According to Assylbek Jakiyev, it could be that the minister said that he was prompted by his advisers.
“Sometimes it seems that there is a lot of uncertainty in the development of Kazakh content. We asked to support the business and postpone the payment of social and pension taxes until the end of the year. But unfortunately, they did not react. We do not ask for additional contract preferences. We asked for help to stimulate the localization since under the PSA operators are exempted from paying customs duties and there is no support here, although everyone knows how this barrier hinders the development of localization.
We get formal replies from governmental agencies and nothing goes further than talks. However, over the decades, our companies have already grown. Even after the pandemic, they will be able to compete with foreign companies. Some Kazakhstani oil service companies operate in the Arctic, the Far East of Russia, Mozambique, and the Middle East. We only need to support our companies as countries like Malaysia does so Kazakh companies can stand firmly on their feet, ”Assylbek Jakiyev said.