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 KAZAKHSTAN International Business Magazine №1, 2005
 The Largest Oil Project in Kazakhstan
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The Largest Oil Project in Kazakhstan
 
Kazakhstan is developing the country’s natural wealth jointly with foreign investors. One of the largest joint enterprises in the oil sector of this young Central Asian state is Tengizchevroil (TCO). Set up in April 1993, its main goal was to develop the Tengiz oil field, one of the gigantic oil fields in the world situated in Western Kazakhstan on the territory of Atyrau Oblast. According to the contract, foreign investments required for this project sum up to $20 billion. Currently TCO is made up of partners, which include the national oil and gas company KazMunaiGaz (20%), Chevron Overseas Company (50%), ExxonMobil Kazakhstan Ventures Inc. (25%) and LukArko (5%).
 
Extractable reserves from this gigantic deposit are estimated between 750 million to 1.125 billion tonnes of crude oil. Figures for predicted volumes of geological reserves are put at 3.133 billion tonnes.
 
In 2004 Tengizchevroil produced a total of 13.7 million tonnes of oil putting the daily average production at 296 thousand barrels. Looking back during the past decade, the company increased volumes of production by 13 times compared to production volumes of 1993.
 
TCO is also developing the neighbouring Korolev oil field. Test production started here in November 2001. Earlier, developments were held back due to transportation limitations. The situation took a positive turn with the launch of the Caspian Pipeline Consortium.
 
Now the CPC plays the role of the main pipeline along which Tengiz oil is transported. Volumes of oil transported first exceeded 13 million tonnes of marketable oil in 2003. Before the launch of the CPC, up to 70% of the crude produced by TCO was transported to the Black Sea terminal by rail, while the remaining 30% went along the Atyrau-Samara pipeline. Targeting different sales markets has been the strategy of Tengizchevroil. The company aims to attain maximum profits through the flexible use of different transportation schemes and cutting back expenses.
 
The completion in 2001 of work on "Programme-12" allowed TCO process all the volumes of raw gas for the production of European standard propane and butane which is mainly sent for export. It was also around that time construction of two industrial plants for granulated sulphur started. These projects will enable TCO export up to 75% of produced sulphur and they also reflect the constant effort of TCO to continue the production and realisation of such important raw material like sulfur, while adhering to the strict safety regulations and care for the environment. In 2004 TCO’s sulphur sales exceeded 960 thousand tonnes. The Joint Venture is presently working to raise the output of the current plants.
 
For the Welfare of Kazakhstan
It is considered at Tengizchevroil that a joint business does not only concern production. Development of their oilfield right from the onset, was blended with a programme for local development. The company took it upon itself to help development in the surrounding districts and it has become an integral part of the life of Atyrau Oblast. TCO uses the services and goods of enterprises in the region. With the objective to maximise the purchase of Kazakhstani services and goods, the management of materials, equipment and office supplies has been transferred to the Total Supply Management department. Supporting the efforts of Kazakhstan to aggressively increase the use of the national resources, TCO has, at a steady pace from year to year, increased the share of local goods and services of the country, reaching in 2004 a spending of $689 million.
 
The company’s contribution to the economy of Kazakhstan includes wages for local personnel, payment of goods and services of local companies, tariffs and payments for the services of government enterprises as well as taxes and royalties paid into the country’s budget. In 2004 this contribution into the economy amounted to $2.846 billion.
 
However the main emphasis in the programme for the local development of the country was made in the social, culture, public health and education spheres. During the first five years of the activities of the company the social programme "Atyrau Bonus Fund" was realised and in 1998, replaced by a programme at the company’s initiative, called Igilik, which in Kazakh stands for ‘benefit’. It envisaged allocating funds for the realisation of projects in the field of education, public health and social infrastructure. Its first step was the large-scale engineering and rehabilitation work on the bridge over the Ural River in the centre of Atyrau. With the achieved results, the bridge took on a new appearance and has become a landmark for the city.
 
Igilik is always coming up with urgent initiatives to set in place. Its programme philosophy best sums it up: benefit significant number of community members, be visible and self sustainable. In 2004 a total amount of $8 million was allocated for the development of infrastructure in Atyrau and Zhylyoi Region and the same amount has been earmarked for this year. This Igilik programme is an example of fruitful cooperation between the authorities of Atyrau Oblast and Tengizchevroil Management. In February 2005 the Akim of Atyrau Oblast Aslan Musin and the General Director of TCO Alexander Cornelius signed a memorandum on this programme and an agreement on a regional programme for the modernisation of the professional training system in Atyrau Oblast for the period 2005–2007.
 
"Apart from the Igilik programme projects, we have another important issue which, when solved, would give us true satisfaction", – notes the General Director of TCO Alexander Cornelius. "This concerns the resettlement of the oil village Sarykamys. In accordance with the agreement reached with the partners of TCO, we are financing the project, which is resettling over seven hundred families to new houses being erected in the micro-districts of the city of Atyrau and Noviy Karaton. Colossal work has been achieved jointly with the Oblast authorities to determine concrete challenges, content of the project and standards to be used."
 
Since the past decade of its history, TCO has spent over $90 million on social projects.
 
Noting the success of the realisation of social initiatives, Tengizchevroil is proud of its contribution in this process and believes that, in the near future, the people of Atyrau Oblast will become witnesses of new greater changes in the economic and social development of their oil-rich land.
 
Development Vector
Tengizchevroil is undertaking one of the largest technical projects in the company’s history. In April 2003 at the meeting of the Partnership Council, TCO plans for the construction of the Sour Gas Injection (SGI) and the Second Generation Projects were approved. The current year is the defining moment for these projects and that also means the strategic prospects of the company.
 
"Planned investments for the SGI/SGP are estimated at $4.5 billion", emphasised TCO General Director Alexander Cornelius. "In the summer of last year our huge construction surpassed its equator: 50% of the investment had been assimilated. Today the panorama of the construction site does not resemble lengthy foundations and network of concrete reinforcement. Installation of technological processes is in progress using the latest methods and techniques for assembling the units and hoisting them on the foundations. This Tengiz project has broken the world record for the transportation of extra-large cargo and the installation of constructions weighing over hundreds of tonnes. Recently the most powerful compressor built, ordered by TCO to the well known Italian company Nouvo Pignone in Florence, was delivered to Tengiz. This unit will enable us overcome seam pressure exceeding 600 atmospheres and inject back into the earth sour gas… But on both projects we still face very serious challenges."
 
The Second Generation Project will enable TCO attain production levels of 24 million tonnes of crude oil per annum. This new complex combines all the advantages of the current plant with new qualities such as high technological effectiveness, exclusive production safety and maximal automation of processes. "It will be one of the most modern oil complexes in the world," maintains Mr. A. Cornelius, adding that several brilliant technological solutions were incorporated into its designing.
 
A distinguishing feature of these new projects is the wide use of Kazakhstani goods and services. Several huge technical orders for future production have been placed at well-known Kazakhstani companies such as Belkamit, Imstalkon and others to name a few.
 
Today, the contours of these new huge construction sites at Tengiz show that installations of unique equipment are in full progress on both projects.


Table of contents
Oil in the CIS: Economic and Sovereign Rating Implications  Special Report of Fitch Ratings Agency 
The Science of Selling  Harry Frisch, Michael Bang 
All People Are Different  Fatima Chapkhaeva 
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· 2005 №1  №2  №3  №4
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· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
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