Oil and Gas Industry Committee of the Presidium of the NCE Atameken

Key concerns of domestic oilfield services companies involved in large oil and gas projects in Kazakhstan were discussed in Atyrau region during the offsite meeting of the Oil and Gas Industry Committee of the Presidium of the National chamber of Entrepreneurs "Atameken". 

The government of the Atyrau region, Kazakhstan Association of the Oil and Gas and Energy Complex KAZENERGY, Tengizchevroil and NCOC Companies, Union of Oilfield Service Companies, representatives of Algoritmi KZ, and others took part in the meeting.

Representatives of TCO and NCOC spoke about the current situation with regard to the performance of obligations on Kazakhstan content for the projects of the two companies, while representatives of Algoritmi KZ presented the further prospects of the development of the ALASH Unified Database. The participants of the committee took note of the information of the speakers, and recommended to operators use the ALASH system. 

The main barriers faced by domestic oilfield services companies during process of tenders are the closed tendering procedures of large operators, the absence of tender announcement and motives for rejection and protocols of the results of the award. The availability of preferences in contracts for subsoil use put Kazakhstani suppliers in an unequal position compared to foreign suppliers during tender’s procedures. 

"According to the production sharing agreements for the largest fields: Tengiz, Karachaganak and Kashagan, the operators of these fields adhere to a closed system of procurement of goods, works and services. This rule leads to the following consequences: procurement plans provided by subsoil users to the Ministry of Energy are not updated when the operator has changes as a result of which it is different from the actual tenders; manufacturers and suppliers cannot plan the workload of their capacities. Companies prequalified in the supplier base do not understand the principles for selecting bidders. Companies that have not received an invitation are not aware of the status of the tender. In addition, companies cannot determine the direction for the development and implementation of "work on errors", as they do not know the reasons for the rejection of the tender, "said Niyaz Zhumat, project manager of the Union of Oilfield Service Companies of Kazakhstan. 

Also, according to the above agreement, operators and direct suppliers in the fields of Tengiz, Karachaganak and Kashagan are exempted from customs duties and VAT on imported goods. Although there is no delineation of suppliers to Kazakhstani and foreign ones, the current tax legislation places Kazakh suppliers at a disadvantage. 

"The deteriorating situation for Kazakh producers and suppliers is that when purchasing foreign equipment, components and materials, they are obliged to pay customs duties and VAT, which directly affects the cost of the goods supplied and, consequently, the prices in tender applications," - Niyaz Zhumat stressed. 

In order to resolve the issues raised by the participants of the meeting, it was recommended that the National Chamber of Entrepreneurs RoK "Atameken" will present to the management of Tengizchevroil and North Caspian Operating Company a proposal to clarify the conduct of tender procedures in terms of announcing planned tenders, highlighting the reasons for rejection of tenders, and the protocol of the results of the award of the tender. In addition, the National Chamber of Entrepreneurs RoK "Atameken", in conjunction with the Union of Service Companies of Kazakhstan, Ministry of Energy, National Economy and Finance, will work out the issue of creating a working group for the release of Kazakhstan suppliers of operators "TCO", "KPO", "NCOC" from payment of customs duties and VAT on supplied components, subject to availability of a direct contract. 

At the end of the meeting Bolat Akchulakov, General Director of the Association "KAZENERGY", presented a group of Atyrau businessmen with medals for their contribution to the development of the country's oil and gas sector.