Do Kazakhstan companies participate in construction of petrochemical factory?

«Kazakhstan Petrochemical Industries Inc.» LLP (KPI) and «China National Chemical Engineering Company» (CNCEC) company held a forum of entrepreneurs, in the course of which they told about Kazakhstan local content in the project of construction of integrated gas and chemical facility in Atyrau region. Currently the first phase is realized: construction of polypropylene factory.

As chairman of the executive board of  Kazakhstan Petrochemical Industries Inc. LLP – Daniyar Tiyessov – told, as of today the progress of construction and assembly works is 25,3%. 88% of concrete works have been completed, which is more than 91 000 cubic meters, 750 tons of metal structures have been mounted, around 8 thousands meters of underground pipelines.

“Whereas 89% of construction and assembly works have been performed by Kazakhstan companies and 11% – by foreign companies”, – stated he during his speech at the forum.

According to him with the purpose of performing construction and assembly works 42 construction and assembly companies have been involved, 39 of  which are Kazakhstan companies and  3 – foreign ones.

In particularly, AtyrauNefteMash LLP was commissioned with manufacture of critically important equipment – splitter of propane and propylene 1100 tons, 105 meters long, with diameter of more than 8 meters.

“In order to manufacture the column AtyrauNefterMash factory reconstructed and increased thermal treatment oven, finalized outfit of its workshop with additional diagnostic equipment”, – says Daniyar Tiyessov.

“Petropavlovsk factory of  heavy machine building” and Sewon-Vertex factory of Aktau, which have ASME certificates, received orders for manufacture of capacitive and heat exchange equipment in quantity of  35 units and with total weight of around 770 tons.

For the purpose of manufacturing and supplying of steel structures 8 Kazakhstan enterprises were involved. 42% or around 9000 tons of steel structures are manufactured in Kazakhstan.

“When selecting suppliers the main emphasis was placed on availability of sufficient production capacities, quality and periods of manufacture”, – says mr. Tiyessov.

Whereas the manufactures of basic equipment in quantity of 155 units are basically foreign companies: large international companies – 56%, international corporation in China – 12%, China – 25% and only 7% in Kazakhstan.

Concerning equipment with long period of manufacture Kazakhstan supplies received 1% of the order of 123 units of equipment. 78% of equipment with long period of manufacture are produced in Europe, 14% – in Asia, 1% – in USA and 6% in China.

In the meantime, as Nurlan Zhumagulov – general director of the Union of Kazakhstan Oilfield service companies – said, Chinese companies got used to involve their affiliated enterprises to subcontracting works; and it is difficult for Kazakhstan companies to compete with them due to damping of  prices to services being provided. As an example he spoke of participation of  Chinese companies in upgrade of  Atyrau oil refinery.

As a rule when China issues a loan the compulsory condition, which it sets, is selection of a Chinese company as a general contractor and purchase of  Chinese equipment.

“Sinopec Chinese company involved more than 30-40 small Kazakhstan subcontractors, which having worked for several months with law rates experience loss and leave the  project. Sinopec involves new local subcontractors instead of them”, – says mr. Zhumagulov.

During realization of the project at Atyrau oil refinery not less than 30% of  total staff were citizens of  People’s Republic of China (PRC). Equipment and accessories, steel structures and electric equipment were also of  Chinese origin. Even banking services are provided by Chinese banks registered in Kazakhstan.

It is necessary to note that general contractor of the propylene production factory construction project with capacity of  500 thousands of tons per year is a Chinese company – China National Chemical Engineering Company.

Total cost of the project with consideration of  infrastructure facilities construction, financing arrangement and other costs is more than 2,6 billions of  US dollars; including cost of the contract on engineering, procurement and construction is estimated as equal to more than 1,8 billions of  US dollars. The loan in the amount of 2 billion of US dollars for construction of the factory was provided by the state bank of  China development.