Table of Contents
- Forward
- Kazakhstan Local Content Development Blue Print Concept
- Local Content Development Initiative Themes
Forward
Waverley (JD)
Coordinator; Aktau Declaration on Joint Actions
& Advisor to the Chairman, KazMunaigas
(Local Content Development; Major Oil & Gas Projects)
Following the initial meeting (‘’London Process’’) of operators and IOCs at the House of Lords, London in June 2012, there was an opportunity to continue discussions on how to build on a unified approach to strengthen the delivery and improve the outcome of localization & local content development programmes within the oil & gas sector of the Republic of Kazakhstan.
Consultation with operators and investors took place following the first Kazakhstan Local Content Development (KLCD) blue print consultation document. Underlying messages advanced the view that a mechanism to bring together the outcomes of individual local content programmes managed by operators and investors would reduce duplication, accelerate local content achievements and move towards more sustainable outcomes.
Alterations were incorporated accordingly into the KLCD blue print that reflected suggestions received. The formation of a Joint Industry Task Force took place on the role of developing a detailed strategy and implementation plan for the KLCD blue print. Further consultation for support by Republic of Kazakhstan Ministries was scheduled.
A timetable to formalise KLCD by Operators and for other stakeholders to acknowledge support for an Expression of Support within the ‘London Process’ was scheduled for Aktau in September 2012. This allowed for the signing of the Aktau Declaration on Joint Actions (AD) and formation of the Industry Task Force.
It was agreed Final documentation will be provided in Kazakh, Russian and English languages.
2. Kazakhstan Local Content Development Blue Print
The KLCD blue print provides a mechanism to unite the individual Local Content development programmes of operators, investors and agencies, to allow for the exchange of data and the development of new initiatives with achievable, sustainable outcomes and timescales.
AD has a coordinating secretariat unit to deliver the Blue Print and implement KLCD. Individual local content development programmes are to continue under the leadership and branding of operators and investors.
Secretariat will support an Industry Task Force comprising representatives from nominated stakeholders. The function of the Industry Task Force is to contribute knowledge, identify synergies and opportunities to advance the outcomes of current localization & local content programmes and define new tasks to contribute to the growth sustainable of local supply chain capacity.
The Industry Task Force produced terms of reference for the delivery of the KLCD Blue Print. Examples of relevant industry best practice were used to provide guidance.
The terms of reference include;
- The ownership and mechanism for delivery of the KLCD blue print including roles and responsibilities
- Participation of investors and other relevant bodies
- A detailed implementation plan and schedule
- Review of local content themes within the KLCD blue print consultation document to establish priorities and scope specific initiatives
- A dedicated resourcing plan
- Provision for further in depth research and work programmes.
Priority front end activity topics to be addressed by the Industry Task Force are to be;
- The preparation of a comprehensive and clear view of project demand and supply, agreed by operators for sharing information, to ensure that all initiatives within the blue print are founded on a thorough understanding of local content sustainability
- Clarify the constraints for some localization & local content development initiatives as a result of operators working within different contractual frameworks (PSA, JV)
- Consensus on the extent to which harmonization of prequalification, tendering and specification processing can be accommodated, acknowledging that operators work with differing corporate practises
- A review of established and emerging local content development programmes to allow synergies and opportunities for cooperation and support to be indentified
- The themes for the KLCD Blue Print initiatives have been adjusted to incorporate feedback from the consultation undertaken to date with operators and Investors including; information on local content programmes already in progress, possible boundaries and constraints which would potentially restrict a unified approach and the need for further in depth research related to capacity supply and demand.
A focused approach will be adopted to achieve results in the shortest possible time frame taking into consideration the demand schedules of forthcoming majorprojects, whilst equally addressing longer term objectives to ensure that there is continuity and sustainability.
Where applicable tried and tested, ‘best practice’ local content and oil and gas industry development mechanisms are to be used, tailored to take account of the specific circumstances and conditions within Kazakhstan.
3. Local Content Development Initiative Themes
Whilst the proposed local content themes for the KLCD blue print were considered broadly acceptable, the consultation produced a number of contributions which needed to be taken into consideration.
- Front End Supply and Demand Analysis
The strategy of the KLCD blue print and the strategies for the initiatives which are to be implemented as part of its delivery need to be driven by a comprehensive and clear view of demand and supply for the oil and gas industry, together with other industry sectors with related skills and resources.
Recognising that the timing and expenditure commitments for Capex and Opex is a matter of commercial confidentiality to Operators, a supply demand modelling tool is to be considered to band projects in terms of future expenditure levels (US$50-US$100 million) and utilising a breakdown of critical categories for resources (human resources, equipment and materials).
The development of a Capacity Register should focus and use the same critical categories rather than a wider approach.
Harmonisation of Approaches
- A comprehensive review of established and emerging local content development programmes is needed to map the current focus of effort and allow synergies and opportunities for cooperation and support to be identified, avoiding any duplication of effort.
- To consider any opportunity, whilst ensuring regional and global competitiveness, to develop a more unified approach for the prequalification of suppliers and tendering processes that are currently based on differing corporate procedures and recognizing constraints for individual local content development initiatives as a result of operators working within different contractual frameworks (PSA, JV).
Harmonisation of Prequalification, Tendering Processes, Specifications
Objective
Increase the successful response rate of Kazakhstan companies to future prequalification and tenders issued by operators or main contractors (undertaking EPCm scopes)
The Industry Task Force to give careful consideration of any opportunity, whilst ensuring regional and global competitiveness, to develop a more unified approach for the prequalification of suppliers and tendering processes that are currently based on differing corporate procedures and recognizing constraints for individual local content development initiatives; this as a result of operators working within different contractual frameworks (PSA, JV).
The strategy and focus should tie in to the Front End Supply Demand Capacity Analysis based on Critical Categories.
Scope & Mechanisms
- Identify opportunities to simplify and unify prequalification and tendering processes and documentation used by operating companies
- Encourage EPCm / main contractors to undertake a similar process
- Increase awareness campaigns of forthcoming opportunities, without compromising commercial and in confidence information (share fairs, Aktau Declaration web site) to provide companies with an opportunity to prepare
- For smaller Kazakhstan companies provide additional guidance to allow the opportunity to partner with compatible Kazakhstan or international companies in order to achieve the scale of resources / capacities required (SME matching)
- Increase awareness and understanding of critical prequalification success criteria e.g. HSE and Standards
- Although there are limits to the opportunities to standardise technically complex equipment items and materials, undertake a joint review (operators and main contractors ) to identify less complex high volume equipment and components where specification could be standardised, providing more opportunities for local investment in their manufacture and supply ( e.g. cables, cable trays, fittings)
Kazakhstan Oil and Gas Capacity Register
Objective
A clear and comprehensive assessment of capacity assessment is essential for the delivery of the KLCD blue print and all the initiatives that are carried out within it.
Improve the quality of company data through a common database tool making use of currently available data initially with additions through a structured company data gathering process. The gathered data should relate to the critical categories (Supply / Demand Analysis)
Further investigation is needed to assess how existing capacity date bases could be adapted to include critical categories within the oil and gas and related sectors where there could be a transfer of skills and resources.
Scope & Mechanisms
- Assemble all available data on Kazakhstan companies currently involved in the oil and gas and non-oil and gas sectors (National Oil Companies and IOCs, National and Local Agencies)
- Create a data base structure that is aligned with commonly used oil company /main contractor C&P reference codes
- Provide full flexibility to interrogate across key categories including: skills and resources, location, track record
- Identify gaps in the data and use Aktau Declaration web site as a portal to invite companies to submit information using a simple questionnaire (this not to be construed as a prequalification exercise)
- Invite companies to publish ‘success’ cases through the Aktau Declaration website
- Publish regular (2 per year) capacity / capability reports via the web site
| Data Category Examples | |
| Company Data | Main Company and Subsidiaries Location (s) Address / Email/ Website / Tel/ Fax / Skype Foundation Date / Years of Operation Sectors of Operation; O&G, Mining and Metal Processing, Power Generation, Transport, Communications, Aerospace, Agriculture |
| Skills and Resources | Total number of employees and Skills break down: Design Engineers; Process/ Chemical/ Mechanical / Instrumentation/ Electrical/ Civil/ Architectural Technicians; Process/ Chemical/ Mechanical / Instrumentation/ Electrical/ Civil/ Architectural Metal Workers Welders, Mill Wrights, Boiler makers., Fitters, Structural Steel, Plate Steel , Fabricators , Construction; Carpenters, Cement Finishers, Heavy Vehicle Operators, Lifting, Equipment Operators , Insulators, Painters Operators; Onshore Plant, Offshore Plant, Marine/ Shipping , |
| Facilities and Assets | Design and Administration, Manufacturing , Workshops, Supply Bases , Training Facilities |
| Current Projects | 5 examples of projects ( executed in the past 3 years) Sector, Client, Scope of Work, Size ( Value ), Numbers of Personnel Employed |
Training, Skills, Human Resource Development
Objective
Against a background of skills shortages throughout the global oil and gas industry, increase the level of skilled technical and managerial, staff to support the development and operational phases and oil and gas projects within Kazakhstan. Stimulate more on going interest in employment and career development within the sector and create higher value employment. The strategy and focus and will tie into the Front End Supply Demand Capacity Analysis based on Critical Categories.
Scope and Mechanisms
- Utilise available skills gap analysis and recent operator experience to determine the focus of new skills development programme (taking into consideration new training initiatives which are already at various stages of development)
- Set up a governance and operational structure to originate and execute a bursary scheme to provide financial support to trainees
- Select trainees (300) from industry for training, re-training, skills conversion as the basis as an initial ‘fast track programme’ to address critical skills shortages. Include formal training (educational, academic, vocational) throughput Kazakhstan and at suitable international institution plus work place experience
- Use the fast track trainee experience to promote the career benefits of the oil and gas industry (periodic road shows in Schools, Colleges and Universities)
- Work with Kazakhstan’s educational institutes to further develop courses and qualifications which will meet the requirements of the industry going forward (examples can be seen in Netherlands, Scotland, Norway, Italy, USA, Russia)
- Assist the development links between Kazakhstan and international educational establishments
- Encourage universities and colleges to develop relationship with applied R&D programmes/ technology development initiatives and become the centres for new start up businesses creating employment for graduates (business incubator models examples include oil and gas technology parks established in UK, Europe, USA)
Applied Research and Development
Objective
Contribute to Kazakhstan’s standing as a centre for expertise for the oil and gas industry by progressing R&D programme output toward market applications that will add value to Kazakhstan’s hydrocarbon production and create new business and employment opportunities in the national and export markets. The strategy and focus will tie into the Front End Supply Demand Capacity Analysis based on Critical Categories.
Scope and Mechanisms
- Review current status of R&D programmes within Kazakhstan’s oil and gas sector
- Utilising any existing technology needs analysis to determine a focus for a programme of applied technology development
- Create a short list (5 to10) technology applications to bring to market (using such criteria as national and international market potential, competitive advantage, value creation)
- Set up a governance and operational structure to originate and execute a funding scheme to provide support, working with appropriate local agencies (e.g. Innovation Fund ) and international agencies (e.g. EBRD etc)
- Select Kazakhstan supply chain companies (oil and gas and non – oil and gas) with appropriate skills and capabilities to work on the development of technology applications
- Create links with external sources of expertise through partnerships, joint ventures to provide additional expertise and access to international, markets going forward.
- Assist in developing marketing and promotional programmes to launch new products
Environment for Local Enterprise Development and Inward Investment
Objective
Increase the number and capacity of local companies with capability to competitively respond to both national and international project opportunities
The Industry Task Force will give careful consideration to criteria and terms of reference for companies selected for further technical and commercial development to ensure that they have the fundamental qualities.
The strategy and focus and should tie in to the Front End Supply Demand Capacity Analysis based on Critical Categories.
Scope & Mechanisms
- Focus on Tier 2, Tier 3 and SME companies including equipment suppliers, component manufacturers and specialist service providers that are able to support operator and main contractors (EPCm) activities
- Utilize available gap analyses and the collective recommendations of Operator C&P departments, to identify sustainable commercial areas of supply chain business development including new investments and diversification (currently in progress)
- Identify and target Kazakhstan companies with the suitable core capabilities including transferable skills, resources, standards, track record (utilize a Kazakhstan capacity register currently under development)
- Using a frame work Promote, Grow, Develop (below) structure an engagement programme with targeted Kazakhstan companies, tailored to their current status and need
- Programme to be structured around 100 companies initially 20 to 30 within each category (promote, grow, develop) within an option to continue (review and renew on an annual basis);
| Supply Chain Status | Outcomes | Time Frame | |
| Promote | Capability and Capacity with the required standards is already established within the Kazakhstan supply chain |
| 6 to 12 months |
| Grow | Identifiable Capability and Capacity with the potential to grow and diversify |
| 12 to 18 months |
| Develop | Limited capability and capacity but with the potential for start-ups / diversification |
| 12 to 36 months |
Against the background of a highly competitive global environment to attract inward investment, develop a compelling proposition to secure high value investors to domicile manufacturing and production assets for the oil and gas and related sectors within Kazakhstan to service national, regional and international markets. The strategy and focus will tie into the Front End Supply Demand Capacity Analysis based on Critical Categories.
Scope and Mechanisms
- Work with contract and procurement departments to determine the top 10 commercial , sustainable manufacturing opportunities (work underway)
- Identify leading international producers corresponding to each manufacturing opportunity with an analysis of their current manufacturing locations, strategies and export approaches
- Identity Kazakhstan companies as potential partners through such mechanisms as joint ventures, franchises, subcontractors to enter into long term relationships with inward investors
- Develop business propositions with demonstrative advantages for the relocation / expansion / diversification of manufacturing activities within Kazakhstan
- Ensure that any potential barriers, uncertainties ( legal, fiscal ) are identified
- Examine investment incentives used in the early stages of inward investment in other international markets to identify those which could be adopted / applied in Kazakhstan