During the period from 2004 to 2018 North Caspian Operating Company (NCOC) spent 14,1 billions of US dollars for purchasing of Kazakhstan goods, works and services.
In the first half of 2019 the share of local content in purchases of the consortium made 290 millions of US dollars. 9,7 millions US dollars of which were spent on local goods, 178,2 millions – on works, 102,5 millions – on services.
Over the period from 2006 to 2019 within frames of suppliers’ improvement program aimed at support of local manufacturers NCOC successfully certified 8 local manufacturers for compliance with standards of the American Society of Mechanical Engineers (ASME) and American Petroleum Institute (API).
As Yermek Marabayev – NCOC deputy managing director – advised at the forum of original equipment manufacturers’ forum, which took place in Atyrau, the company developed “Memorandum on understanding concerning local content” within frames of the strategy for local content development in production and it actively works with many equipment manufacturers. At the moment 27 memoranda have been signed with equipment manufacturers.
As an example of local content development in goods a NCOC representative pointed to manufacture by ZhigerMunaiService Kazakhstan company of 121 fraction tanks in the amount of 5,6 millions of US dollars for major repair carried out in May of the current year on Kashagan project. Also for the major repair Bemer Armaturen Kazakhstan LLP manufactured 225 ball valves with diameter of 3 to 18 inches. The amount of contract was equal to 2,6 millions of US dollars. The order for maintenance of critical rotating equipment in the amount of 135 millions of US dollars was received by KTR Ethos Energy company – a joint venture of Kazturboremont and Ethos Energy.
According to Yermek Marabayev in order to achieve local content development in production it is necessary to have mutual understanding and support from all involved parties including from the Authorized body (PSA LLP), equipment manufacturers and local machine builders, close cooperation and solution of technical as well as of legislative issues.
“We are speaking of capacities and taxation scheme issues, possibility of equation of local companies and foreign equipment manufacturers in order to increase the interest of foreign manufacturers to invest into local production”, – he said.
The company has developed the mechanism of “Early tenders”. Its basic idea is to find suppliers at the local market according key categories, which will assume obligations to invest and to closely cooperate with operator with clearly determined scope within a long-term contract.
“At each of such stages supplier’s business plan gets from the level of simple warehouse storage of imported goods to the level of assembly, tests and certification within the Republic of Kazakhstan, then to the level of manufacture of basic items and finally to the level of manufacture of sophisticated items with application of domestic raw materials. Each step leads to increase of added value in Kazakhstan. Each step also requires assumption by supplier of obligations to gradually increase investments on the basis of a feasible business plan with thorough monitoring of local content by operator”, – says Yermek Marabayev.
Today NCOC and the Authorized body continue to work on new initiatives of local content promotion. Currently the consortium published a purchase program on its website. Under consideration are issues of application of conditional discount for local goods manufacturers, prolongation of contract for placement of goods production facility in the Republic of Kazakhstan and the issue of obligation to consider first of all local companies then to consider conducting of tender among joint enterprises.
With the purpose of developing of domestic market of equipment manufacturers in oil and gas industry the company performed analysis of enterprises including visiting their production sites; professional and technical training courses were held.
“According to results of visits NCOC determined strengths and weaknesses of enterprises, direction of further work for improvement thereof and possibilities of cooperating with world leaders among equipment manufacturers”, – advised Yermek Marabayev.