Kazakhstani companies have great chances to be involved in Eni international projects

Harsh natural conditions at Kazakhstan’s offshore projects have created a pool of Kazakhstani oil workers with unique knowledge and experience. For example, Kazakhstani companies know how to work in an acid and harsh environment and can help Italian and other international partners to develop gas fields with acid content. This was discussed in Italy, in the framework of the Italian-Kazakh business meeting on strategic cooperation “Internationalization and local content 2.0”, organized with the support of the General Confederation of Italian Industry (Confindustria), Assomineraria Association, Eni Company, KazService Association, and Strategic Partnerships Development Council (Petrocouncil) established under the auspices of KAZENERGY Association and National Chamber of entrepreneurs Atameken. Luca Vignati, Executive Vice President for Central Asia Region at Eni, told more about what types of goods, works and services professionals at Eni expect from Kazakhstani business.

– Eni plays an important role in Kazakhstan’s Oil and Gas market. Eni has known Kazakh oil and gas service companies for many years. Is there any opportunity to work with Eni on other projects around the world?

– Eni always played a major role in supporting, developing, incentivizing and fostering the creation of JVs in Kazakhstan, made up of foreign and national companies, each of them adding their own values and contribution. I see major opportunities for Kazakh local companies or JVs to be part of the Eni international activities. It no longer matters where you come from, what matters is how you deliver on the commitment you are willing to undertake, having in mind that safety is not a negotiable commitment Globalization has brought all of us to no geographic border conditions, real open market and real open competition. And competition no longer means a better price, but providing a 360-degree service. Considering safety while carrying out any job a given, the shared feeling of a real partnership between company and contractor is the key driver for a success story. We prize long-run objectives, through quick implementation. We prize commitment in the long-term, looking for the shortest time-to-market, without short-cutting or compromising on safety. We prize tomorrow’s multiple collaborations, through today’s continuous and open partnership, where none is second to anyone: the win-win approach.

We prize open mind and innovative approach to business, supported and steered by digitalization and new technologies’ deployment, for the benefit of the business and values creation for all our stakeholders, through and towards safety maximization, asset integrity assurance, decarbonisation and circular economy. Eni’s digital transformation, which is specifically designed to cover all areas of the company’s activities, has wide-ranging transversal objectives: from the improvement of staff health and safety in the workplace to higher levels of reliability, operability and technical integrity of the facilities, with knock-on benefits in terms of both safety and environmental impact; from the lengthening of economic-operational performance to the development of new business models and the acceleration of decision-making processes, which will become increasingly data-driven.

For Eni, technologies and new skills are strategic choices. In the long term, the digital transformation, part of a broader process of evolution, will make Eni even more integrated in its processes, as well as increasingly capable of combining emerging digital competencies with traditional technical skills, open to innovation, in collaboration with the most advanced technological start-ups and deployments, quicker in operational and work processes, and increasingly attractive to young talent. We consider human resources the second pillar of the rapid modernization process.

Anyone, from any country, sharing this approach can be a long-term partner of Eni.

– What do you think about the features of the Kazakh local companies, their strong and weak points? What do they have to develop to work globally?

– Undoubtedly, the overall business environment in Kazakhstan has first challenged the local companies and then helped them reach high standards. The majority of them had the opportunity to be- involved in harsh environment conditions, both onshore and offshore, dealing with high-sulphur content assets, and most of them had first taken up the challenge and then the opportunity to grow in such complex working environments. On top of that, many aspects and situations faced during the last 20 years were first experienced in Kazakhstan, thus leading to the introduction and adoption of cutting-edge approaches and technologies. So, those external factors and extreme conditions have mandatorily steered the growth of the Kazakh service companies, while somehow limiting and sometimes even impairing the localization of the goods manufacturing: too special and specific to be delocalized from the original manufacturing countries.

Additionally, the (Kazakh) national arena attended by international players made local national companies international enough, internationally fine-tuned in terms of expectations and standards, and internationally integrated in the local market. As we say, a pretty good training ground!!!

What do they need to work abroad, not only internationally, or globally? There are not weak points, actually, I rather believe some soft skills to be further developed, further because these additional requirements have not been (or considered) necessary so far. Working abroad is different from working in your own country. On top of most likely different legislative frames, just imagine yourselves seating on the other side of the table, facing usual matters such as local content, communities, life styles, integration, and partnership, but from a different perspective.

In few words, it’s about discernment and understanding, nothing really more than that. Experienced joint ventures (between Kazakh and international contractors), already proven and tested in Kazakhstan, are the quickest way forward to Local Content 2.0 !!

– Earlier it was mentioned that the Kalamkas project development is estimated to cost $7 billion. Is this a correct figure? When is the project due to kick off? When is oil production expected to start?

NCOC intends to submit a proposed plan of development by mid-2019. An agreement was signed by the Contracting Companies, the Ministry of Energy and “PSA” LLC on 12th December 2018, which confirms the mutual desire of the parties to proceed with the actual development of the Kalamkas field as soon as possible.

The Development Plan is a fundamental document defining work plans and cost estimates for development and production at the Kalamkas-Sea field.

The preferred concept is a cooperative development of Kalamkas-Sea field and Khazar field (developed under the “Pearls” PSA). Cooperative developments facilitate the development of smaller, more marginal resources and are common in oil provinces such as the UK North Sea and the US Gulf Coast. Kalamkas-Khazar would be the first of this type in Kazakhstan.

Estimated cost and schedule are being finalized and will be presented in the plan NCOC is going to submit by mid-2019.

There are no barriers but multiple commercial, legal and administrative issues associated with this first-of-a-kind cooperative development in Kazakhstan that need to be addressed and will require effective inter-ministerial resolution for a successful cooperative development.

– Can you share more detail about the plans for contractors’ attraction? What is the amount of funds to be allocated for:

–        design and engineering;

–        drilling operations;

–        construction and installation work;

–        maintenance and repair?

– The project will be managed by NCOC. Preliminary assessment indicates a positive impact from all variants of Kalamkas-Sea development on the job market, education, scientific and engineering fields, investment activity, local living standards and income, and on local economic development, in general.

NCOC is now developing a plan to involve local suppliers of goods, works and services, to the maximum possible extent, in the Kalamkas-Sea and Khazar project. The project team is surveying local capacities in fabrication, laying of pipelines, artificial islands, equipment manufacturing, materials and service provision. NCOC is also working to maximize local content with the Republic of Kazakhstan Government, and with industry associations Atameken and KazEnergy in the framework of the new Oil and Gas Strategic Partnership Development Council.

 – What will be the contractors’ requirements on this project?

– I cannot really list all the requirements for the contractors and suppliers of this project, or rather I would say that nothing different is expected from them, with respect to what the best performers have been doing during last 15+ years. In other words, not ideal contractors, but true partners are expected to join the project, qualified and willing to maximize the value of the asset, starting from the safety of the people directly and indirectly involved, during construction and the project’s full life. Therefore, the right partners of the consortium would be the ones looking for the best global outcome, and not the one-side outcome, acknowledging that a good result would and will imply future additional collaborations, future value sharing. So, the desired mindset would bring everyone and each of us to a continuous starting-point feeling, rather than an arrival one, to appetite as opposed to satiety.

Competence, skills, understanding are there; the next step is to feel like a single entity, with a common target, common values and double–side ownership of the project. That’s what can bring us, stakeholders (including shareholders) and contractors, to be competitive in Kazakhstan and in the world, achieving challenging time-to-market and design-to-cost projects, and attracting more and more investments in the country.

– In your opinion, what goods should be localized in Kazakhstan first of all?

– It is not my intention to set out a Local Content Development Plan by answering this question, but I think we should try to focus on what is physically and materially possible to be done in the country, what is worth being done at a domestic level (repetitively in future, large enough numbers, etc.), and drop what is not worth producing in Kazakhstan for many reasons, such as too much time required to establish manufacturing in the country, limited future and not competitive market (both in the country and worldwide), unbalanced investment and deployment, etc.

 I would consider, by way of example but not limited to, vessels, valves, fittings, pipe-racks, electrical motors, pumps, and, whenever full manufacturing would not be possible, final processing, assembling and testing should take place in the country. Naturally, the list of goods will expand as soon as the specs and standards to be used in Kazakhstan (or in any single project) are narrowed down and reduced: there is a tight and reverse correlation between them. In fact, the quantity of each item to be produced increases as the types of standards reduce, implying worthiness in localizing production and price competitiveness.

Therefore, great attention is to be paid to the programs and future needs of projects, including projects of asset integrity and maintenance.

– What do you think of the In Country Value program? What are the features of your local content development strategy.

– For Eni, “being local” means understanding and anticipating local needs and contributing to local development. This is the well-known Eni “dual flag“ approach – whose aim is to ensure access to energy with a sustainable energy mix and to reach out and engage with local people and companies in an effort to further promote the development of local communities.

Sustainability is the way to create a context through which things can be designed and executed, such as Local Content Development. Consortia always deemed it important to work hand-in-hand with the local industrial community to develop a proactive network of suppliers, contractors and support. And that’s exactly what happened (Tenaris, Aksai Industrial Park, and others).

Over the last few years, local content has evolved, assisting with production and manufacturing mobilization in the country, and providing quicker and higher quality service/support to the joint ventures. On some occasions, it was the JV that triggered it, but no matter who receives praise, it is just important to know and acknowledge that the mindset is changing, or should I say, evolving. I am sure there will be many similar examples in the near future – it is not just a commitment, but a true need.

Sustainability also applies to the business itself, ensuring it remains sustainable not only throughout the contract’s duration and validity but also after its expiration date. That is why human resources, people, skills, training and nationalization have become – and continue to be – the top priority. Technology cannot be supported without properly trained people, especially when it comes to very complex assets such as Karachaganak and Kashagan.

Situations have evolved and moved forward adequately, moving past initial resistance to enjoying the benefits stemming from high-quality local content. The local content is no longer important, it becomes essential, and the benefits are for both sides of the table.

Sustainability takes on several aspects and definitions, and Eni fits them all through several channels. We consider sustainability to be a driver in the process of continuous improvement that guarantees results over time, while reinforcing our business performance and reputation. For example, our commitment to social initiatives has been a distinctive characteristic in engaging with the local communities in countries where we operate – one which dates back to the days of our founder Enrico Mattei – and has been a key element in two notable contracts (FPSA and NCSPSA).

 For reference

Through our KPO and NCOC JVs, Eni cooperates with a large number of contractors, vendors and counterparties both in Kazakhstan and worldwide to ensure that the best goods, services and works are delivered for the Karachaganak and Kashagan operations. We acknowledge the impact of our presence in Kazakhstan and contribute to local sustainability goals through local content development and procurement opportunities. KPO, for example, is one of the first companies in Kazakhstan that successfully introduced the Local Content Development Program. Since the implementation of this program in 2001, some 4600 local suppliers have been registered in its database. From the beginning of FPSA (Final Production Sharing Agreement) in 1997 up to 2018, the Local Content share in goods, works and services exceeded USD 7.2 bln.

The development of local suppliers is promoted through a series of initiatives: for example, KPO’s support for local businesses in adapting to international standards in terms of quality, health and safety. Through the NCSPSA JV, the Kashagan project marked the start of the offshore oil development in Kazakhstan. When the decision to implement this highly challenging project was taken, support bases, infrastructure, construction equipment, marine vessels and drilling rigs needed for the development of the project did not exist in the Caspian region. Substantial investment in the development of local suppliers, workforce and infrastructure has resulted in the establishment and growth of various industries in Kazakhstan.

– Eni plays an important role in Kazakhstan’s Oil and Gas market. Eni has known Kazakh oil and gas service companies for many years. Is there any opportunity to work with Eni on other projects around the world?

– Eni always played a major role in supporting, developing, incentivizing and fostering the creation of JVs in Kazakhstan, made up of foreign and national companies, each of them adding their own values and contribution. I see major opportunities for Kazakh local companies or JVs to be part of the Eni international activities. It no longer matters where you come from, what matters is how you deliver on the commitment you are willing to undertake, having in mind that safety is not a negotiable commitment Globalization has brought all of us to no geographic border conditions, real open market and real open competition. And competition no longer means a better price, but providing a 360-degree service. Considering safety while carrying out any job a given, the shared feeling of a real partnership between company and contractor is the key driver for a success story. We prize long-run objectives, through quick implementation. We prize commitment in the long-term, looking for the shortest time-to-market, without short-cutting or compromising on safety. We prize tomorrow’s multiple collaborations, through today’s continuous and open partnership, where none is second to anyone: the win-win approach.

We prize open mind and innovative approach to business, supported and steered by digitalization and new technologies’ deployment, for the benefit of the business and values creation for all our stakeholders, through and towards safety maximization, asset integrity assurance, decarbonisation and circular economy. Eni’s digital transformation, which is specifically designed to cover all areas of the company’s activities, has wide-ranging transversal objectives: from the improvement of staff health and safety in the workplace to higher levels of reliability, operability and technical integrity of the facilities, with knock-on benefits in terms of both safety and environmental impact; from the lengthening of economic-operational performance to the development of new business models and the acceleration of decision-making processes, which will become increasingly data-driven.

For Eni, technologies and new skills are strategic choices. In the long term, the digital transformation, part of a broader process of evolution, will make Eni even more integrated in its processes, as well as increasingly capable of combining emerging digital competencies with traditional technical skills, open to innovation, in collaboration with the most advanced technological start-ups and deployments, quicker in operational and work processes, and increasingly attractive to young talent. We consider human resources the second pillar of the rapid modernization process.

Anyone, from any country, sharing this approach can be a long-term partner of Eni.

– What do you think about the features of the Kazakh local companies, their strong and weak points? What do they have to develop to work globally?

– Undoubtedly, the overall business environment in Kazakhstan has first challenged the local companies and then helped them reach high standards. The majority of them had the opportunity to be- involved in harsh environment conditions, both onshore and offshore, dealing with high-sulphur content assets, and most of them had first taken up the challenge and then the opportunity to grow in such complex working environments. On top of that, many aspects and situations faced during the last 20 years were first experienced in Kazakhstan, thus leading to the introduction and adoption of cutting-edge approaches and technologies. So, those external factors and extreme conditions have mandatorily steered the growth of the Kazakh service companies, while somehow limiting and sometimes even impairing the localization of the goods manufacturing: too special and specific to be delocalized from the original manufacturing countries.

Additionally, the (Kazakh) national arena attended by international players made local national companies international enough, internationally fine-tuned in terms of expectations and standards, and internationally integrated in the local market. As we say, a pretty good training ground!!!

What do they need to work abroad, not only internationally, or globally? There are not weak points, actually, I rather believe some soft skills to be further developed, further because these additional requirements have not been (or considered) necessary so far. Working abroad is different from working in your own country. On top of most likely different legislative frames, just imagine yourselves seating on the other side of the table, facing usual matters such as local content, communities, life styles, integration, and partnership, but from a different perspective.

In few words, it’s about discernment and understanding, nothing really more than that. Experienced joint ventures (between Kazakh and international contractors), already proven and tested in Kazakhstan, are the quickest way forward to Local Content 2.0 !!

– Earlier it was mentioned that the Kalamkas project development is estimated to cost $7 billion. Is this a correct figure? When is the project due to kick off? When is oil production expected to start?

NCOC intends to submit a proposed plan of development by mid-2019. An agreement was signed by the Contracting Companies, the Ministry of Energy and “PSA” LLC on 12th December 2018, which confirms the mutual desire of the parties to proceed with the actual development of the Kalamkas field as soon as possible.

The Development Plan is a fundamental document defining work plans and cost estimates for development and production at the Kalamkas-Sea field.

The preferred concept is a cooperative development of Kalamkas-Sea field and Khazar field (developed under the “Pearls” PSA). Cooperative developments facilitate the development of smaller, more marginal resources and are common in oil provinces such as the UK North Sea and the US Gulf Coast. Kalamkas-Khazar would be the first of this type in Kazakhstan.

Estimated cost and schedule are being finalized and will be presented in the plan NCOC is going to submit by mid-2019.

There are no barriers but multiple commercial, legal and administrative issues associated with this first-of-a-kind cooperative development in Kazakhstan that need to be addressed and will require effective inter-ministerial resolution for a successful cooperative development.

– Can you share more detail about the plans for contractors’ attraction? What is the amount of funds to be allocated for:

–        design and engineering;

–        drilling operations;

–        construction and installation work;

–        maintenance and repair?

– The project will be managed by NCOC. Preliminary assessment indicates a positive impact from all variants of Kalamkas-Sea development on the job market, education, scientific and engineering fields, investment activity, local living standards and income, and on local economic development, in general.

NCOC is now developing a plan to involve local suppliers of goods, works and services, to the maximum possible extent, in the Kalamkas-Sea and Khazar project. The project team is surveying local capacities in fabrication, laying of pipelines, artificial islands, equipment manufacturing, materials and service provision. NCOC is also working to maximize local content with the Republic of Kazakhstan Government, and with industry associations Atameken and KazEnergy in the framework of the new Oil and Gas Strategic Partnership Development Council.

 – What will be the contractors’ requirements on this project?

– I cannot really list all the requirements for the contractors and suppliers of this project, or rather I would say that nothing different is expected from them, with respect to what the best performers have been doing during last 15+ years. In other words, not ideal contractors, but true partners are expected to join the project, qualified and willing to maximize the value of the asset, starting from the safety of the people directly and indirectly involved, during construction and the project’s full life. Therefore, the right partners of the consortium would be the ones looking for the best global outcome, and not the one-side outcome, acknowledging that a good result would and will imply future additional collaborations, future value sharing. So, the desired mindset would bring everyone and each of us to a continuous starting-point feeling, rather than an arrival one, to appetite as opposed to satiety.

Competence, skills, understanding are there; the next step is to feel like a single entity, with a common target, common values and double–side ownership of the project. That’s what can bring us, stakeholders (including shareholders) and contractors, to be competitive in Kazakhstan and in the world, achieving challenging time-to-market and design-to-cost projects, and attracting more and more investments in the country.

– In your opinion, what goods should be localized in Kazakhstan first of all?

– It is not my intention to set out a Local Content Development Plan by answering this question, but I think we should try to focus on what is physically and materially possible to be done in the country, what is worth being done at a domestic level (repetitively in future, large enough numbers, etc.), and drop what is not worth producing in Kazakhstan for many reasons, such as too much time required to establish manufacturing in the country, limited future and not competitive market (both in the country and worldwide), unbalanced investment and deployment, etc.

 I would consider, by way of example but not limited to, vessels, valves, fittings, pipe-racks, electrical motors, pumps, and, whenever full manufacturing would not be possible, final processing, assembling and testing should take place in the country. Naturally, the list of goods will expand as soon as the specs and standards to be used in Kazakhstan (or in any single project) are narrowed down and reduced: there is a tight and reverse correlation between them. In fact, the quantity of each item to be produced increases as the types of standards reduce, implying worthiness in localizing production and price competitiveness.

Therefore, great attention is to be paid to the programs and future needs of projects, including projects of asset integrity and maintenance.

– What do you think of the In Country Value program? What are the features of your local content development strategy.

– For Eni, “being local” means understanding and anticipating local needs and contributing to local development. This is the well-known Eni “dual flag“ approach – whose aim is to ensure access to energy with a sustainable energy mix and to reach out and engage with local people and companies in an effort to further promote the development of local communities.

Sustainability is the way to create a context through which things can be designed and executed, such as Local Content Development. Consortia always deemed it important to work hand-in-hand with the local industrial community to develop a proactive network of suppliers, contractors and support. And that’s exactly what happened (Tenaris, Aksai Industrial Park, and others).

Over the last few years, local content has evolved, assisting with production and manufacturing mobilization in the country, and providing quicker and higher quality service/support to the joint ventures. On some occasions, it was the JV that triggered it, but no matter who receives praise, it is just important to know and acknowledge that the mindset is changing, or should I say, evolving. I am sure there will be many similar examples in the near future – it is not just a commitment, but a true need.

Sustainability also applies to the business itself, ensuring it remains sustainable not only throughout the contract’s duration and validity but also after its expiration date. That is why human resources, people, skills, training and nationalization have become – and continue to be – the top priority. Technology cannot be supported without properly trained people, especially when it comes to very complex assets such as Karachaganak and Kashagan.

Situations have evolved and moved forward adequately, moving past initial resistance to enjoying the benefits stemming from high-quality local content. The local content is no longer important, it becomes essential, and the benefits are for both sides of the table.

Sustainability takes on several aspects and definitions, and Eni fits them all through several channels. We consider sustainability to be a driver in the process of continuous improvement that guarantees results over time, while reinforcing our business performance and reputation. For example, our commitment to social initiatives has been a distinctive characteristic in engaging with the local communities in countries where we operate – one which dates back to the days of our founder Enrico Mattei – and has been a key element in two notable contracts (FPSA and NCSPSA).

 For reference

Through our KPO and NCOC JVs, Eni cooperates with a large number of contractors, vendors and counterparties both in Kazakhstan and worldwide to ensure that the best goods, services and works are delivered for the Karachaganak and Kashagan operations. We acknowledge the impact of our presence in Kazakhstan and contribute to local sustainability goals through local content development and procurement opportunities. KPO, for example, is one of the first companies in Kazakhstan that successfully introduced the Local Content Development Program. Since the implementation of this program in 2001, some 4600 local suppliers have been registered in its database. From the beginning of FPSA (Final Production Sharing Agreement) in 1997 up to 2018, the Local Content share in goods, works and services exceeded USD 7.2 bln.

The development of local suppliers is promoted through a series of initiatives: for example, KPO’s support for local businesses in adapting to international standards in terms of quality, health and safety. Through the NCSPSA JV, the Kashagan project marked the start of the offshore oil development in Kazakhstan. When the decision to implement this highly challenging project was taken, support bases, infrastructure, construction equipment, marine vessels and drilling rigs needed for the development of the project did not exist in the Caspian region. Substantial investment in the development of local suppliers, workforce and infrastructure has resulted in the establishment and growth of various industries in Kazakhstan.

– Eni plays an important role in Kazakhstan’s Oil and Gas market. Eni has known Kazakh oil and gas service companies for many years. Is there any opportunity to work with Eni on other projects around the world?

– Eni always played a major role in supporting, developing, incentivizing and fostering the creation of JVs in Kazakhstan, made up of foreign and national companies, each of them adding their own values and contribution. I see major opportunities for Kazakh local companies or JVs to be part of the Eni international activities. It no longer matters where you come from, what matters is how you deliver on the commitment you are willing to undertake, having in mind that safety is not a negotiable commitment Globalization has brought all of us to no geographic border conditions, real open market and real open competition. And competition no longer means a better price, but providing a 360-degree service. Considering safety while carrying out any job a given, the shared feeling of a real partnership between company and contractor is the key driver for a success story. We prize long-run objectives, through quick implementation. We prize commitment in the long-term, looking for the shortest time-to-market, without short-cutting or compromising on safety. We prize tomorrow’s multiple collaborations, through today’s continuous and open partnership, where none is second to anyone: the win-win approach.

We prize open mind and innovative approach to business, supported and steered by digitalization and new technologies’ deployment, for the benefit of the business and values creation for all our stakeholders, through and towards safety maximization, asset integrity assurance, decarbonisation and circular economy. Eni’s digital transformation, which is specifically designed to cover all areas of the company’s activities, has wide-ranging transversal objectives: from the improvement of staff health and safety in the workplace to higher levels of reliability, operability and technical integrity of the facilities, with knock-on benefits in terms of both safety and environmental impact; from the lengthening of economic-operational performance to the development of new business models and the acceleration of decision-making processes, which will become increasingly data-driven.

For Eni, technologies and new skills are strategic choices. In the long term, the digital transformation, part of a broader process of evolution, will make Eni even more integrated in its processes, as well as increasingly capable of combining emerging digital competencies with traditional technical skills, open to innovation, in collaboration with the most advanced technological start-ups and deployments, quicker in operational and work processes, and increasingly attractive to young talent. We consider human resources the second pillar of the rapid modernization process.

Anyone, from any country, sharing this approach can be a long-term partner of Eni.

– What do you think about the features of the Kazakh local companies, their strong and weak points? What do they have to develop to work globally?

– Undoubtedly, the overall business environment in Kazakhstan has first challenged the local companies and then helped them reach high standards. The majority of them had the opportunity to be- involved in harsh environment conditions, both onshore and offshore, dealing with high-sulphur content assets, and most of them had first taken up the challenge and then the opportunity to grow in such complex working environments. On top of that, many aspects and situations faced during the last 20 years were first experienced in Kazakhstan, thus leading to the introduction and adoption of cutting-edge approaches and technologies. So, those external factors and extreme conditions have mandatorily steered the growth of the Kazakh service companies, while somehow limiting and sometimes even impairing the localization of the goods manufacturing: too special and specific to be delocalized from the original manufacturing countries.

Additionally, the (Kazakh) national arena attended by international players made local national companies international enough, internationally fine-tuned in terms of expectations and standards, and internationally integrated in the local market. As we say, a pretty good training ground!!!

What do they need to work abroad, not only internationally, or globally? There are not weak points, actually, I rather believe some soft skills to be further developed, further because these additional requirements have not been (or considered) necessary so far. Working abroad is different from working in your own country. On top of most likely different legislative frames, just imagine yourselves seating on the other side of the table, facing usual matters such as local content, communities, life styles, integration, and partnership, but from a different perspective.

In few words, it’s about discernment and understanding, nothing really more than that. Experienced joint ventures (between Kazakh and international contractors), already proven and tested in Kazakhstan, are the quickest way forward to Local Content 2.0 !!

– Earlier it was mentioned that the Kalamkas project development is estimated to cost $7 billion. Is this a correct figure? When is the project due to kick off? When is oil production expected to start?

NCOC intends to submit a proposed plan of development by mid-2019. An agreement was signed by the Contracting Companies, the Ministry of Energy and “PSA” LLC on 12th December 2018, which confirms the mutual desire of the parties to proceed with the actual development of the Kalamkas field as soon as possible.

The Development Plan is a fundamental document defining work plans and cost estimates for development and production at the Kalamkas-Sea field.

The preferred concept is a cooperative development of Kalamkas-Sea field and Khazar field (developed under the “Pearls” PSA). Cooperative developments facilitate the development of smaller, more marginal resources and are common in oil provinces such as the UK North Sea and the US Gulf Coast. Kalamkas-Khazar would be the first of this type in Kazakhstan.

Estimated cost and schedule are being finalized and will be presented in the plan NCOC is going to submit by mid-2019.

There are no barriers but multiple commercial, legal and administrative issues associated with this first-of-a-kind cooperative development in Kazakhstan that need to be addressed and will require effective inter-ministerial resolution for a successful cooperative development.

– Can you share more detail about the plans for contractors’ attraction? What is the amount of funds to be allocated for:

–        design and engineering;

–        drilling operations;

–        construction and installation work;

–        maintenance and repair?

– The project will be managed by NCOC. Preliminary assessment indicates a positive impact from all variants of Kalamkas-Sea development on the job market, education, scientific and engineering fields, investment activity, local living standards and income, and on local economic development, in general.

NCOC is now developing a plan to involve local suppliers of goods, works and services, to the maximum possible extent, in the Kalamkas-Sea and Khazar project. The project team is surveying local capacities in fabrication, laying of pipelines, artificial islands, equipment manufacturing, materials and service provision. NCOC is also working to maximize local content with the Republic of Kazakhstan Government, and with industry associations Atameken and KazEnergy in the framework of the new Oil and Gas Strategic Partnership Development Council.

 – What will be the contractors’ requirements on this project?

– I cannot really list all the requirements for the contractors and suppliers of this project, or rather I would say that nothing different is expected from them, with respect to what the best performers have been doing during last 15+ years. In other words, not ideal contractors, but true partners are expected to join the project, qualified and willing to maximize the value of the asset, starting from the safety of the people directly and indirectly involved, during construction and the project’s full life. Therefore, the right partners of the consortium would be the ones looking for the best global outcome, and not the one-side outcome, acknowledging that a good result would and will imply future additional collaborations, future value sharing. So, the desired mindset would bring everyone and each of us to a continuous starting-point feeling, rather than an arrival one, to appetite as opposed to satiety.

Competence, skills, understanding are there; the next step is to feel like a single entity, with a common target, common values and double–side ownership of the project. That’s what can bring us, stakeholders (including shareholders) and contractors, to be competitive in Kazakhstan and in the world, achieving challenging time-to-market and design-to-cost projects, and attracting more and more investments in the country.

– In your opinion, what goods should be localized in Kazakhstan first of all?

– It is not my intention to set out a Local Content Development Plan by answering this question, but I think we should try to focus on what is physically and materially possible to be done in the country, what is worth being done at a domestic level (repetitively in future, large enough numbers, etc.), and drop what is not worth producing in Kazakhstan for many reasons, such as too much time required to establish manufacturing in the country, limited future and not competitive market (both in the country and worldwide), unbalanced investment and deployment, etc.

 I would consider, by way of example but not limited to, vessels, valves, fittings, pipe-racks, electrical motors, pumps, and, whenever full manufacturing would not be possible, final processing, assembling and testing should take place in the country. Naturally, the list of goods will expand as soon as the specs and standards to be used in Kazakhstan (or in any single project) are narrowed down and reduced: there is a tight and reverse correlation between them. In fact, the quantity of each item to be produced increases as the types of standards reduce, implying worthiness in localizing production and price competitiveness.

Therefore, great attention is to be paid to the programs and future needs of projects, including projects of asset integrity and maintenance.

– What do you think of the In Country Value program? What are the features of your local content development strategy.

– For Eni, “being local” means understanding and anticipating local needs and contributing to local development. This is the well-known Eni “dual flag“ approach – whose aim is to ensure access to energy with a sustainable energy mix and to reach out and engage with local people and companies in an effort to further promote the development of local communities.

Sustainability is the way to create a context through which things can be designed and executed, such as Local Content Development. Consortia always deemed it important to work hand-in-hand with the local industrial community to develop a proactive network of suppliers, contractors and support. And that’s exactly what happened (Tenaris, Aksai Industrial Park, and others).

Over the last few years, local content has evolved, assisting with production and manufacturing mobilization in the country, and providing quicker and higher quality service/support to the joint ventures. On some occasions, it was the JV that triggered it, but no matter who receives praise, it is just important to know and acknowledge that the mindset is changing, or should I say, evolving. I am sure there will be many similar examples in the near future – it is not just a commitment, but a true need.

Sustainability also applies to the business itself, ensuring it remains sustainable not only throughout the contract’s duration and validity but also after its expiration date. That is why human resources, people, skills, training and nationalization have become – and continue to be – the top priority. Technology cannot be supported without properly trained people, especially when it comes to very complex assets such as Karachaganak and Kashagan.

Situations have evolved and moved forward adequately, moving past initial resistance to enjoying the benefits stemming from high-quality local content. The local content is no longer important, it becomes essential, and the benefits are for both sides of the table.

Sustainability takes on several aspects and definitions, and Eni fits them all through several channels. We consider sustainability to be a driver in the process of continuous improvement that guarantees results over time, while reinforcing our business performance and reputation. For example, our commitment to social initiatives has been a distinctive characteristic in engaging with the local communities in countries where we operate – one which dates back to the days of our founder Enrico Mattei – and has been a key element in two notable contracts (FPSA and NCSPSA).

 For reference

Through our KPO and NCOC JVs, Eni cooperates with a large number of contractors, vendors and counterparties both in Kazakhstan and worldwide to ensure that the best goods, services and works are delivered for the Karachaganak and Kashagan operations. We acknowledge the impact of our presence in Kazakhstan and contribute to local sustainability goals through local content development and procurement opportunities. KPO, for example, is one of the first companies in Kazakhstan that successfully introduced the Local Content Development Program. Since the implementation of this program in 2001, some 4600 local suppliers have been registered in its database. From the beginning of FPSA (Final Production Sharing Agreement) in 1997 up to 2018, the Local Content share in goods, works and services exceeded USD 7.2 bln.

The development of local suppliers is promoted through a series of initiatives: for example, KPO’s support for local businesses in adapting to international standards in terms of quality, health and safety. Through the NCSPSA JV, the Kashagan project marked the start of the offshore oil development in Kazakhstan. When the decision to implement this highly challenging project was taken, support bases, infrastructure, construction equipment, marine vessels and drilling rigs needed for the development of the project did not exist in the Caspian region. Substantial investment in the development of local suppliers, workforce and infrastructure has resulted in the establishment and growth of various industries in Kazakhstan.

– What are your favorite 3 books of the last 3 years?

●       Legacy: What the All Blacks Can Teach Us about the Business of Life, James Kerr, 2013

●       Homo Deus: A Brief History of Tomorrow, Yuval Noah Harari, 2015

●       Shoe Dog: A Memoir by the Creator of Nike, Phil Knight, 2016

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