PetroKazakhstan: Policy of Stability
The president of PetroKazakhstan, Wang Zhongcai, answers questions from the Kazakhstan magazine.
Before coming to PetroKazakhstan in September 2008, you headed JSC “CNPC-Aktobemunaigas”. What is the difference between these two companies?
Just like JSC “CNPC-Aktobemunaigas”, which I headed earlier, PetroKazakhstan is one of the major oil and gas companies in Kazakhstan. Both of them have comprehensive oil production systems and powerful technical facilities – these are their similarities. At the same time, PetroKazakhstan was created as a foreign company from the viewpoint of management, procedures and positions. They adopted international standards, their own styles and managerial experience. In addition, the company’s shareholders – CNPC and KazMunaiGas – are taking a direct and active part in the management of the company. This gives it its own specific character.
A new manager is always linked to change. What do you like in the company and what do you want to change?
A very short time has passed since I came to PetroKazakhstan and I am still studying the company’s business. However, I have drawn certain conclusions. I think that the system of evaluation of employees and the system of payment for labour are quite rational and well designed. Of course, there are things that need to be improved. First of all, it is necessary to make the access to information faster and more transparent for the top and lower-level managers, and all the other employees of the company. In my view, it is highly important to improve the technical staff’s service. There are issues related to structural optimisation. For instance, each department has a lawyer in its staff, so it would be more logical and efficient to combine all of them into a separate legal department.
The next aspect is the evaluation of production indicators, predominantly in production activities. I think that it is necessary to increase bonuses for the implementation and overfulfilment of production plans.
What is PetroKazakhstan’s position in the total structure of CNPC and what are the company’s tasks in this area?
Today, CNPC is running businesses in over 30 countries and implementing several dozens of projects overseas. As CNPC’s third most productive company among its 50 sister enterprises, PetroKazakhstan has a special position among these foreign projects.
As you know, the construction of the second stage of the Kazakhstan-China oil pipeline, the Kenkiyak-Kumkol section, is underway. When it is finished, the west of Kazakhstan will be connected to the west of China with the pipeline system. The Kumkol group of fields, where we are extracting oil, is not the final source to fill this pipeline. This is why we aim to stabilise and constantly expand our extraction capacity. In order to achieve this, it is necessary to intensify prospecting activities and to recover resources. Presently, PetroKazakhstan has already five licensed prospecting areas with the total area of about 16,000 sq km.
What economic and production performances is the company planning to achieve in the end of 2008? What are you plans for next year?
Considering our two joint ventures, the plan is to extract 9.6 million tonnes of oil by the end of this year. At the same time, our profit should amount to $5bn (of course, this figure may be corrected considering the landslide of oil prices). As to the production expected in 2009, our task is to maintain the current level. This year, we found new reserves of 35 million barrels of oil thanks to exploration. As a result, we will be able to keep up this year’s production level next year as well.
It is well known that your company plans to radically update the Shymkent Refinery. What are the objectives of this project and how is it advancing?
CNPC supports the modernisation of the Shymkent Refinery and is paying close attention to this project. The refinery’s current oil processing level is not sufficient – the output of oil products only stands at 60%. Therefore, our first task is to improve the technology and, after the modernisation, to increase this rate to 85% of the total oil volume. Secondly, in line with state requirements, Kazakhstan will shift to the Euro-3 standard in 2013, and to Euro-4 in 2014, and we need to improve the processing quality.
Following the official approval of the project by the stakeholders, including KazMunaiGas and the Ministry of Energy and Mineral Resources, the total period of modernisation will be three years. At the moment, committees, which include representatives of the shareholders and the plant, are resolving technical and financial issues.
The Chinese business style is usually characterised by a component like long-term planning. Bearing this in mind, what are the company’s long-term priorities and strategic tasks?
As I already mentioned, the company’s priority in its development is to improve exploration activities. We also plan to ensure integrated recycling of associated gas. This is necessary for improving the environmental situation. The Kazakh government fixed quite strict legal requirements.
In addition, the natural gas is a valuable energy source, which can be, and has to be, used for generating electricity for production needs, or as gas supply to the population in the region. Therefore, PetroKazakhstan’s every department has developed its own programme for gas utilisation. We will continue to implement these projects so that we can finish them within the fixed timeframe.
Another strategic task is to introduce new equipment and technologies for oil field development. Only by this way will it become possible to stop the decrease in oil extraction and the loss of reservoir pressure. Then we will be able to maintain and strengthen the potential of our field.
How can the current global crisis influence the development of the oil sector? How will the sector overcome current problems?
The global financial crisis is already expanding to various sectors of the economy. This will naturally have an adverse effect on the oil business. There is a reduction in global production, in the demand for energy resources, and these have led to a landslide of oil prices. Today they dropped to lower than $60 per barrel. In this situation, investors will reduce their investment in the primary sector, and that will limit oil companies’ investment in the development of their projects. Therefore, I think that countries rich in natural resources, whose economies are directed to hydrocarbon exports, will have to adjust their policies in the oil sector, optimise their tax laws and adopt new models of regulation.
After joining PetroKazakhstan, you were given another position – the chairman of the Higher Editorial Council of the corporate magazine Munaishy. What was your attitude to this?
Every company has the objective to fulfil its production tasks and bring maximum profit to its shareholders. At the same time, as an element of society, each company has also social commitments. We are aware of this responsibility and are implementing a number of programmes in this sphere. The company’s own corporate magazine is a wonderful opportunity to describe our successes in this field and to report the fulfilment of our commitments to the government. It is like a bridge between the company, its staff and the public. Therefore I strongly support this project, which is a big stride forward and which characterises our company as a socially responsible corporate citizen of Kazakhstan.
Mr Wang Zhongcaiwas born on 30 October 1959 in Hebei Province, China. In 1982, he graduated from the Huandun Oil Institute’s oil and gas development department (majored in oil prospecting). After finishing his post-graduate study in the Russian State Oil and Gas University in 2004, he became a Ph.D. in economics.
In 1982, Mr Wang began to work as an engineer, and in 1991 he became the deputy head of the Department for Oil Well Operations and Production Management of the Xinjiang Oil Directorate in Karamay. In 1992, he became the head of Xinjiang’s First Oil and Gas Directorate. In 1995, Mr Wang was assistant to the president and then the deputy president of the Xinjiang Oil Directorate.In October 1997, Mr Wang was appointed as an authorised representative of CNОDC in JSC “Aktobemunaigas”; in April 1998, the chairman of board of JSC “Aktobemunaigas”; in May 1999, the chairman of the board of directors of JSC “Aktobemunaigas”; between March 2000 and April 2001, the general director of Aktobemunaigas; between July 2004 and October 2005, the general director of the international investment company CNPC in Moscow, Russia; in November 2005, the general director of JSC “CNPC-Aktobemunaigas”; and since September 2008, the president of PetroKazakhstan.
Mr Wang Zhongcaihas made a big contribution to the friendship between Kazakhstan and China. By the Kazakh President’s decree, on 7 December 2007 he was awarded the Dostyk Order of Second Class.
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