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Corporate Responsibility Report 2011-2012

Tengizchevroil


About our Reporting This report covers 2011 and 2012 and is our third biannual report. Our first report was published in 2008. Our next report will be published in 2015. Until then, please continue to visit the Corporate Responsibility (CR) section of www.Tengizchevroil.kz for updates and more details.

*All dollar amounts throughout this report are USD.

What is Corporate Responsibility? Corporate Responsibility is defined by governments, businesses, non-governmental organizations and communities in many different ways. The evolving concept has as many names as there are definitions; designations such as corporate citizenship, sustainable development, business responsibility, social responsibility, the triple bottom line, earning the license to operate and many more. The purpose of this report is to share with you, Tengizchevroil’s stakeholders, our company’s definition of CR and to share our progress toward excellence. Tengizchevroil will continue to report on its efforts and activities in CR on our Web site. We welcome your comments on Corporate Responsibility. Please share your thoughts about the topic and stay up to date on our efforts at www.tengizchevroil.kz.


Contents 06 Tengizchevroil Overview

12 Tengizchevroil and the Environment

22 Contribution to Kazakhstan’s economy

36 Strategic Workforce Development


A Message from Our Leadership

Dear Readers, Tengizchevroil (TCO) defines Corporate Responsibility (CR) more broadly than most Kazakhstani companies. At TCO, CR is not just what we give back to our communities or how we treat our employees. CR includes our ethics and the integrity that guides our interactions with each other and with our stakeholders. CR is our environmental performance and our substantial contribution to the economy of Kazakhstan. It is how we collaborate as employees and with Government and local communities. Corporate Responsibility is a fundamental part of our company and our commitment to Kazakhstan. This report presents an overview of how that commitment guides everything we do. TCO has worked hard to continuously strengthen our CR efforts. We are proud to share these results with you. Tengizchevroil’s mission, vision and core values are the foundation for our accomplishments and leadership in Corporate Responsibility. Core

4

Corporate Responsibility Report 2011-2012


values are defined in the TCO Way and through our Strategic Intents. At TCO, we measure success in CR in the following areas: Corporate Responsibility and Governance Excellence in Operational Performance as it relates to Health, Environment and Safety Strategic Workforce Development Community Investment and Engagement In this report, you will read about our ongoing improvements in all of these areas. We continue to strengthen our industry-leading governance standards and we have made excellent progress in minimizing our environmental footprint through investments in operational excellence and in workforce training and development. We are a dedicated and leading investor in the Atyrau region where we are headquartered and where many of our employees and their families live and work. Additionally, we value our partnership with the Atyrau Oblast Akimat that is focused on improving the community in which we operate.

Tengizchevroil is proud of the progress we have made over the past 20 years. Looking ahead, we will strive to remain one of the leading Kazakhstani companies in CR as we work and grow for the benefit of Kazakhstan and its people. This report continues a formal dialogue about Corporate Responsibility between Tengizchevroil and Kazakhstan. We pledge to progress that dialogue through future reports, our corporate Web site and most of all, our actions in the years to come

Best regards, Tim Miller, General Director

Anuar Jakiyev, Deputy General Director

A Message from Our Leadership

5


Tengizchevroil Overview

KTL plant

Second Generation Plant

1.6 km.

4 km.

History

The Field

Т

he Tengiz field in western Kazakhstan was discovered in 1979. In April 1993, Tengizchevroil LLP (TCO) was formed between the Republic of Kazakhstan and Chevron Corporation. Current partners are: Chevron, 50 percent; KazMunaiGas, 20 percent; ExxonMobil, 25 percent; and LukArco, 5 percent.

Plant

6

Corporate Responsibility Report 2011-2012

T

he 2,500-square-kilometer (1,600-squaremile) project license area includes the Tengiz field and a smaller, but sizable, Korolev field. Total recoverable oil at Tengiz and Korolev fields is from 750 million to 1.1 billion tonnes (6 to 9 billion barrels). Estimated oil in place in Tengiz field is 3 billion tonnes (26 billion barrels). At a world class size of 180 million tonnes (1.5 billion barrels), Korolev is one-sixth the size of Tengiz. Tengiz field is the world’s deepest developed super giant oil field with the top of the reservoir at about 4,000 meters (13,000 feet). Tengiz reservoir is 19 kilometers (12 miles) wide by 21 kilometers (13 miles) long, the oil column measures an incredible one mile thick. The reservoir area is so large that one would have to run nearly two marathons to cover the entire distance around it.


Striving for Excellence The TCO Way The TCO Way sums up who we are, what we do, what be believe, and our vision for the future. It is a unifying framework for our goals, values, strategies, and initiatives. Our values define a culture that can sustain superior business performance. At the heart of The TCO Way is our mission and vision.

Values: Integrity, Trust, Diversity, Ingenuity, Partnership, High Performance and Protecting People and the Environment .

Strategic Intents: Be the Leader in Safety and Environmental Performance

Mission:

Invest in Our Workforce to Achieve Our Mission and Vision

Our mission is to create superior value for the Republic of Kazakhstan and Atyrau Oblast, our employees and shareholders.

Be the Most Respected Company in Kazakhstan

Vision: To be the safest, most efficient and profitable oil and gas enterprise in the world.

Achieve Superior Operational Performance.

OE is Me: Timur Kurenkov, Planning Analyst I can remember how invincible I thought I was when I was younger. When riding my bicycle, I would put myself in extremely unsafe situations to prove that I was able to overcome danger. One day I decided that I would race a friend on this two-lane asphalt road with big incline angles, rough turns and concrete walls on both sides. We rode at very high speeds. I ‘beat’ him by getting up to 106 kilometers per hour. While at that speed, I lost control of my bike and hit the concrete wall. My injuries were extensive yet I did not seek medical care; my mom helped me. It was in seeing how my injuries and continued unsafe behavior was affecting my mom that I realized I had to become focused on acting safely.I am impressed by the safety culture here at TCO. Now, safety is not something I practice while only at the office, I apply it at home. I even encourage my friends to have a safety mindset. TCO BehaviorBased Safety (BBS) and Incident and Injury Free (IIF) programs are the basis of my everyday activities

Tengizchevroil Overview

7


Operational Excellence

E

xcellence starts with Operational Excellence (OE). The business of extracting and delivering energy has a direct and positive influence on the lives of people as well as the development of communities and nations. Tengizchevroil takes seriously its responsibility to produce and deliver energy products in a safe and environmentally responsible way. TCO has continuously improved safety and environmental performance over our history. We have done so through significant monetary investment, technology development and implementation and through our dedication to operational excellence.

and environmental efforts and to continuously improve the reliability and efficiency of our operations. Driven by leadership, it provides a system for adopting best practices and standards, to help ensure that our company attains world-class performance and delivers sustained value. Using OEMS, we effectively integrate OE objectives, plans, processes and behaviors into our daily operations to protect people and the environment today and in the future. OEMS is critical for helping TCO to continuously improve our safety record, environmental performance, operational reliability and ability to respond to incidents.

Tengizchevroil strives for Operational Excellence in all areas of our business. The TCO Way helps us define the spirit in which we work and our Operational Excellence Management System (OEMS) guides us as to how exactly we will maintain world-class standards. OEMS is a standard companywide approach designed to systematically manage everything from safety, health and the environment, to reliability and efficiency.

Supporting our workforce to learn new safety-related processes and behaviors is also critical for TCO to continuously improve our safety culture. Processes and programs such as TCO’s Behavior Based Safety program and Job Hazard Analysis process have been instrumental in establishing a work environment where employees are continuously planning and discussing safe work with their colleagues and safely returning home after each workday.

OEMS enables TCO to steward safety, health

8

Corporate Responsibility Report 2011-2012


Т

Incident Rate per 200,000 person-hours

Days Away From Work Rate (DAFW)

Incident rate per million miles

Working Safe

engizchevroil continues to have industry-leading safety results. In 2012, more than 18,000 people worked for a total of 49 million hours with seven injuries which required a day away from work. While this statistic is world-class performance, TCO strives for zero workplace injuries and is continuously working to improve in this area.

TCO Motor Vehicle Crash Rate (MVCR)

Recordable MVC Rate (catastrophic + serious)

Total Recordable Incidents Rate (TRIR)

TCO Incident Rate

TCO successfully completed the first turnaround of its Second Generation Plant (SGP) located at the Tengiz field, in September 2012. TCO mobilized more than 6,000 people, who worked 2.6 million total person hours during the six-week turnaround and exceeded all industry benchmarks for safety performance.

Tengizchevroil Overview

9


TCO Elements of Operational Excellence

1. Security of Personnel and Assets Provide a physical and cyber security environment in which business operations may be successfully conducted

9. Incident Investigation Investigate and identify root causes of incidents to reduce or eliminate systemic causes and to prevent future incidents

2. Facilities Design and Construction Design and construct facilities to prevent injury, illness and incidents and to operate reliably and efficiently and in an environmentally sound manner

10. Community and Stakeholder Engagement Reach out to the community and the workforce to engage in open dialogue to build trust and long-term positive relationships

3. Safe Operations Operate and maintain facilities to prevent injuries, illness and incidents 4. Management of Change Manage both permanent and temporary changes to prevent incidents 5. Reliability and Efficiency Reliability: Operate and maintain wells and facilities to ensure asset integrity and prevent incidents Efficiency: Maximize efficiency of operations and conserve natural resources 6. Third-Party Services Systematically improve third-party service performance through conformance to Operational Excellence 7. Environmental Stewardship Strive to continuously improve environmental performance and reduce impacts from our operations 8. Product Stewardship Manage potential health, environmental, safety (HES) and integrity risks of our products throughout a product’s life cycle

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Corporate Responsibility Report 2011-2012

11. Emergency Management Prevention is the first priority, but be prepared to respond immediately and effectively to all emergencies involving Chevron wholly owned or operated assets. For company products or interests such as common carriers, chartered vessels and facilities operated by others, be prepared to monitor the response and, if warranted, take appropriate actions 12. Compliance Assurance Verify conformance with OE requirements in applicable company policy and government laws and regulations. Train the workforce regarding their OE-related responsibilities 13. Legislative and Regulatory Advocacy Work ethically and constructively to influence proposed laws and regulations, and debate on emerging issues

24.2 million tonnes

of crude produced in 2012

169% of produced sulfur volumes sold in 2012

$14.2 billion

direct payments to the Republic of Kazakhstan in 2012


Performance Economic Impact

TCO Awards

TCO has made a significant direct financial impact on the Republic of Kazakhstan, contributing approximately $74.25 billion to Kazakhstan entities, including purchases of Kazakh goods and services, tariffs and fees paid to the state-owned companies, profit distributions to Kazakhstani shareholder, taxes and royalties paid to the Republic and Kazakhstani employee’s salaries. As our production grows, direct payments to the Republic of Kazakhstan do also. Payments totaled $14.4 billion in 2011 and $14.2 billion in 2012.

Production and Sales

2.54

1.93

2012

0.94

24.2

25.8

25.9 22.5 14

13.3

13.6

13.7

12.8

13.1

12.5

Foreign Investors’ Council Best Foreign Investor Grand Prize Award

17.3

Tengiz Plant SGP

10.5

Ar-Namys Award for Corporate Responsibility in the annual national competition on CSR in the energy and oil and gas industries

Oil Production at TCO (million tonnes per year)

9.59

Laureate of the National competition on safety and labor protection Senim in the nomination “The Safest Company of the Year”

8.46

Winner of the National sectoral contest Korgan in “the Company of the Year in Oil and Gas Industry” nomination

6.95

Paryz Grand Prize for Corporate Social Responsibility

Tengizchevroil produced and sold 25.8 million tonnes of crude oil in 2011 and 24.2 million tonnes of crude oil in 2012. TCO sold 169 percent of produced sulfur volumes and sold 3.5 million tonnes of sulfur, in 2012. Sulfur block inventory at Tengiz was reduced by more than 1.46 million tonnes, resulting in a total of 2.65 million tonnes in inventory at year-end 2012, compared to more than 9 million tonnes five years ago. Utilization of sulfur processing equipment enabled TCO to process sulfur into marketable products, which resulted in increased sales of sulfur.

4.97

2011

Altyn Zhurek Company of the Year Award Ar-Namys Award for Sustainable Social Position in the annual national competition on CSR in the energy and oil and gas industries Excellence in Flaring Reduction Award within Global Gas Flaring Reduction initiative Winner of the National sectoral contest Korgan in “the Company of the Year in Oil and Gas Industry” nomination American Chamber of Commerce Award for Most Innovative Education/Training Program

Tengizchevroil Overview

11


Tengizchevroil and the Environment

$2.5

billion invested on projects to minimize environmental impact since 2000

12

Corporate Responsibility Report 2011-2012


49

34

73

69

93

115

155

215

253

286

337

323

Cumulative Investments for Environmental Activities since 2000 (million USD)

304

Continued Environmental Improvement

O

ur results demonstrate our commitment to continuous improvement in environmental protection. Since 2000, TCO has invested $2.5 billion on projects to minimize environmental impact related to Tengiz operations. This investment resulted in significant improvement to TCO’s environmental protection performance. TCO spent 135 percent of planned expenditures on environmental projects in 2012. Work progressed on several important projects, including installation of Exapilot software to assist with gas flaring reduction, Accumulated Materials Elimination program, new wastewater treatment facilities and effluent water treatment plant upgrades. TCO plans to spend another $272 million on additional projects over our business plan period of 2013 to 2015 to continue improving environmental performance. As part of our overall environmental management plan, TCO initiated a series of major capital projects that ultimately helped to eliminate continuous flaring and to reduce overall flared volumes by 92 percent. TCO continues to invest in numerous projects and programs to improve existing operations by reducing associated emissions or increasing energy efficiency. Through this investment we have been able to improve reliability as well as significantly reduce emissions, flaring and spills.

Tengizchevroil and the Environment

13


Continued Emissions Improvement Flaring Reduction

F

laring reduction has become an important global topic over the last few decades as the world moves to lower air emissions. Kazakhstan and TCO partner companies Chevron and ExxonMobil are members of the Global Gas Flaring Reduction Initiative (GGFR), a program launched by the World Bank at the Johannesburg Summit for Sustainable Development in 2002.

92% 68% reduction of flared gas volumes since 2000

14

Corporate Responsibility Report 2011-2012

reduction in air emissions per tonne of oil produced since 2000


Recognition for Excellence in Flaring Reduction Tengizchevroil was awarded the prestigious Excellence in Flaring Reduction Award at the 10th Anniversary Global Gas Flaring Reduction Partnership Conference in London, October 2012.

utilization and increased production can be achieved simultaneously,” said Bekbolat Amangeldin, deputy project manager of the TCO Gas Utilization Project. “Today, the only flaring remaining in TCO’s operations is intermittent flaring related to maintenance and repairs or necessary for safety.”

When TCO assumed control of the Tengiz Field in 1993, the field’s ongoing operations entailed the routine flaring of natural gas, as did operations in many other oil and gas fields around the world. Routine flaring allows oil production to occur in situations where there is no available alternative to utilize the natural gas produced in association with oil. To reduce flaring, TCO had to make changes to existing operations and major facilities with minimal production disruption; create and implement technological and engineering solutions; and devise solutions compatible with the vast scope and scale of its facilities.

The success of TCO’s efforts to extinguish its flares resulted from the company’s commitment of major resources and the hard work and ingenuity of its personnel. Over a decade, TCO executed multiple major capital projects to reduce flaring, culminating with the successful execution of its four-year, $ 258 million Gas Utilization Project. The flaring reduction projects reflect TCO’s commitment to world-class environmental performance and are part of the operation’s overall environmental investment of more than $ 2.5 billion since the year 2000. “What started as an environmental imperative has evolved into an opportunity,” said Mike Jennings, TCO’s

By the end of 2009, TCO had eliminated the practice of routine flaring from its operations. “TCO demonstrated that flare reduction, gas

1.86

Gas Flaring Reduction (million tonnes)

general manager for Operational Excellence and Health, Environment and Safety. “Gas that would otherwise be flared is now captured and commercialized to meet the demand for affordable energy.” Tengizchevroil personnel leveraged technology to overcome the challenges presented by the massive scope and scale of TCO’s operations and the Tengiz Field’s unique resource characteristics. In eliminating routine flaring, TCO applied its core values of integrity, trust, diversity, ingenuity, partnership, high performance and protecting people and the environment to implement solutions that will benefit Kazakhstan and the global environment for generations to come

Air Emissions Volumes

Emissions volumes kilogram (kg) per tonne of oil

Emissions volumes (1000 tonnes)

0.15

0.11

0.1

0.29

0.32

0.34

0.39

0.42

0.51

0.59

0.53

1.35

kilogram (kg) per tonne of oil

Tengizchevroil and the Environment

15


Sulfur Management

T

engiz crude oil contains one of the highest concentrations of hydrogen sulfide (H2S) in the world. As a result, managing the large amounts of sulfur

Sulfur Sales and Inventory

Sulfur inventory (million tonnes)

Sulfur sales and production (million tonnes)

Sulfur sales Sulfur production Sulfur inventory

16

Corporate Responsibility Report 2011-2012

generated during oil and gas processing is a key operational issue for TCO. TCO and the Interdepartmental Coordination Council (ICC) have been working together to develop normative and technical documentation in the area of long-term sulfur storage. In particular, in 2006 TCO created the Interdepartmental Coordination Council (ICC) to study issues related to long term sulfur storage and identify methods to improve its management with support of the RoK Ministry of Energy and Mineral Resources (currently Ministry of Oil and Gas) and the Ministry of Environmental Protection. “The study showed that sulfur pads in Tengiz do not have significant impact on the nearest community and groundwater, air or soil,” said Rzabek Artygaliev, TCO’s general manager for Policy, Government and Public Affairs. The results were published and presented at a public hearing in 2007.

TCO has reduced the volume of sulfur stored on open-air pads by more than two-thirds from their peak quantities. TCO processes sulfur into a number of marketable products. As a result, TCO has reduced its sulfur inventory to about 2.3 million tonnes, down from a peak volume of 9.2 million tonnes. By 2015, TCO expects to have reduced its sulfur area footprint to minimum level. Currently, TCO, in consultation with government stakeholders, is conducting a sulfur test pad research program to identify additional alternatives of environmentally sound storage methods. The results will be shared with stakeholders at the end of 2016.


TCO Environmental Monitoring Facilities Schematic Map

Environmental Monitoring System

T

o ensure that our operations continue to have as little environmental effect as possible, Tengizchevroil operates a system of continuous environmental monitoring in the territory of our operations. This system gathers, systemizes and analyses information related to the sources and factors of impact, and the environmental condition as a whole. All components of the natural environment – air, water and soils are monitored in order to ensure that TCO’s activity does not cause harm to the environment, nor to the health of our workforce or the population of the nearest communities (95 kilometers away). Our integrated environmental monitoring program is carried out by TCO and licensed contractors. TCO’s Industrial Control Program is reviewed and approved by several local and state agencies such as the Ministry of Environmental Protection and the Atyrau Sanitary Epidemiological Station.

Tengizchevroil and the Environment

17


Air

Soil

There are 12 automated stationary environmental air monitoring stations within (9) and outside (3) the Sanitary Protection Zone around Tengiz as well as fixed monitoring stations in one of the closest rotational villages, Zhana Karaton (a 95 kilometer distance from Tengiz), and the closest industrial rotational village (20 kilometers away from our operations). These air monitoring stations have not detected any violations of the air quality standards established by the government.

TCO draws samples from 95 points across wind paths within (85) and outside (10) the Tengiz Sanitary Protection Zone in order to ensure that local soils remain uncontaminated. Samples are taken from two depths.

In addition, a mobile laboratory is used daily to monitor the area near the plant’s emissions stacks. Readings are taken upwind from the plants at a distance of 16 kilometers to identify background values for the substances being monitored. Samples are also taken downwind from the Tengiz plants at distances of 1, 2, 4, 8, 10 and 16 kilometers, and at the border of the Sanitary Protection Zone.

Wildlife and Biodiversity

All air measurement data is done in accordance with the government endorsed and approved annual program on environmental monitoring. All readings are relayed to the Tengiz central control room, where operators can act immediately if there are ever any abnormal levels.

18

Corporate Responsibility Report 2011-2012

The Tengiz operating area is rich with a wide variation of flora and fauna. There are 266 bird species known to reside in the TCO operations area and adjacent territories, including several rare and endangered species listed in the Kazakhstani Red Book. There is also a wide variety of mammals, reptiles and amphibians living in and around the Tengiz area.


Water Conservation at Tengiz

Т

CO recognizes the value of fresh water as a fundamental social, environmental and economic resource. Our commitment to minimizing our use of fresh water through resource conservation is especially important in the arid region where Tengiz is located. Tengizchevroil currently receives fresh water delivered through a 500 kilometer pipeline from the Kygach River which also provides fresh water for agriculture and households in the Zhylyoi region. At the Tengiz facilities, this water is used for a variety of residential and industrial purposes from drinking, showers and laundry to irrigation and plant needs. Building on several water-minimization projects, TCO is constructing an integrated water management system in Tengiz. The integrated water management system is intended to minimize TCO’s water use, provide better quality technical water and conserve fresh water. The new system includes wastewater treatment and water recycling facilities. These new facilities will modernize TCO’s water management systems, originally built in the late 1980s. The wastewater treatment facility will treat an average of 6,000 cubic meters (1.6 million gallons) per day of wastewater generated by TCO’s employee and contractor living facilities. The water recycling facility will yield 3,596 cubic meters (0.95 millions of gallons) per day of recycled water for use at the Tengiz plant. “The water treatment and recycling facilities are examples of the sustained progress to protect and conserve natural resources,” said Nick Thomas, the treatment facility’s project manager. “TCO has made these changes to address community concerns and because they benefit our business, the local economy and the environment.”

19


Waste Management

Т

engizchevroil is a leader throughout Kazakhstan in the re-use, recycle and treatment of wastes. In 2011 and 2012, we applied new technologies and built new facilities that meet international standards for waste management - a concrete crushing unit, plastics baling press, and medical waste sterilizer. TCO donates wood and concrete generated at the Tengiz production facilities to the community, allowing for re-use of these materials. TCO is also implementing a program that will significantly increase reuse and recycling, further reducing the quantity of waste sent for disposal. In 2012, TCO’s materials management program demonstrated the increasing capacity of local Kazakh recyclers, achieving positive results in the thermal treatment of oily sludge and soils; bioremediation pilot of drilling cuttings in Kulsary; and recycling of used tires and plastic. Specifically, 5952 tonnes of oily sludge and soil, 2737 tonnes of drilling cuttings, and 80 tonnes of plastic wastes were treated or recycled by third parties.

Remediation

T

CO’s ongoing program for the remediation of disturbed or contaminated sites that were inherited at the start of the joint venture facilitates the return of natural vegetation to these areas. TCO remediated over 210 hectares of land in 2011 and 2012 combined.

Emergency Response Preparedness

P

art of corporate responsibility is maintaining the capability to respond quickly and effectively to operational emergencies should they occur. We regularly train our emergency response teams so they are ready to act quickly to mitigate the impacts of incidents. These teams are comprised of more than 500 employees who are trained in various aspects of emergency response and are available at any time to respond to any incident. Team members represent a range of skill sets associated with spill and other incident response. They are trained on the incident command system and participate in regular exercises to maintain their skills.

5952

tonnes of oily sludge and soil treated

Remediated

over

210

hectares of land in 2011 and 2012 combined

20

Corporate Responsibility Report 2011-2012


Response plans are updated to capture lessons from these exercises. In 2011 and 2012, several drills were held across the company, covering both operational and natural incidents. While the Tengiz oilfield is onshore; TCO does have a program to support the transshipment of Tengiz crude from Aktau to Baku. The first priority is always prevention. Tankers used to transport TCO’s crude follow International Maritime Organization (IMO) regulatory standards. Additionally, Tengizchevroil has representatives on-site in contractor facilities during

loading and unloading in order to ensure safety. TCO contracts with two spill response contractors dedicated to Tier 2 spill response - National Response Company (NRC) in Aktau and Briggs Marine in Baku. NRC has the capability to respond to a range of land–based, coastal and near-shore oil spill scenarios to include coverage of the Kazakh-

stan portion of the Caspian territorial and international waters. Land response provided by NRC includes transport (road, rail and pipeline) routes in western Kazakhstan. More than 80 percent of NRC personnel are Kazakhstani citizens. Response capability in Azerbaijan has the ability to respond to a range of oil spill scenarios to include coverage of the Azerbaijan portion of the Caspian territorial and international waters. Additionally, our partner companies maintain active memberships in international oil spill cooperatives and have access to expert

external consultants and contractors, including the oil spill cooperative Oil Spill Response, Ltd (OSRL). This organization specializes in incident management, wildlife management, oil spill and air dispersion modeling, toxicology, chemistry, fire fighting, communications, shipping and salvage.

Integrated Impact Assessments for New Projects

T

CO’s Environmental Social Health Impact Assessment (ESHIA) process is designed to identify and address potentially significant environmental, social and health impacts of new projects in a logical and consistent manner. Tengizchevroil has adopted uniform standards that, in some cases, may exceed regulatory requirements. Although compliance with government regulations

achieves our goals of protecting human health and safety and the environment, standardizing our approach beyond legal requirements in some instances will enhance TCO’s ability to achieve OE objectives and adhere to The TCO Way.

Tengizchevroil and the Environment

21


Contribution to Kazakhstan’s economy

$billion 3.4 60%

spent on Kazakhstani Goods & Services in 2011-2012

22

Corporate Responsibility Report 2011-2012

of TCO 2012 total in-country spend with Kazakhstani companies


TCO’s strategy in increasing our use of Kazakhstani goods and services centers on four elements: creating opportunity, growing manufacturing and production capabilities, transferring skills and maximizing local employment. This focus has enabled us to increase our Kazakhstani goods and services spending tremendously. In 2012, 60 percent of our total incountry spend was spent with Kazakhstani companies. Tengizchevroil actively works with the Republic of Kazakhstan, KazMunaiGas (KMG) and industry unions such as the Union of Machine Builders of Kazakhstan (UMBK) to identify and capture opportunities for manufacturers in Kazakhstan. Further, TCO proactively identifies qualified suppliers to include in tenders and helps develop qualified suppliers where none exist. TCO uses loans and educational forums to support this effort. We also work hand-inhand with companies to help them adopt international standards.

1354

1187

1329

1074

787

689

1329

1605 415

287

151

116

85

50

22

87

27

1221

О

ne of Tengizchevroil’s key priorities is to build the local capacity and capabilities of Kazakhstani businesses. TCO views our dedication to continuing to grow the use of Kazakhstani goods and services as supporting Kazakhstan’s sustainable development and as good for business. In 2011 and 2012, we spent $3.4 billion with Kazakhstani companies on goods and services, with an emphasis on finding and enabling opportunities for local businesses.

1797

Kazakhstani Goods and Services (KG&S) (million USD per year)

564

Kazakhstani Goods & Services

Kazakhstani Content TCO placed a pilot order with Nitrogen Plant LLP for liquid nitrogen delivery in support of TCO’s KTL turnaround (TA) exercise. Nitrogen Plant LLP used equipment and personnel to TCO’s standards during the turnaround. Additional orders were placed with Nitrogen Plant LLP for upcoming maintenance & repair and infrastructure projects. In April 2012, TCO signed a master contract for nitrogen supply and blowdown of trunk pipelines as part of the SGP/SGI and KTL turnarounds. HILL Corporation (HILL) plant produces high quality lubricants. The plant is the first of its kind in Kazakhstan. HILL is trying to create a vertically integrated cluster of lubricants by producing a wide range of oils meeting international quality standards. TCO’s logistics group decided to test HILL’s product on certain types of vehicles used by TCO. The test results were favorable so TCO began using domestic company HILL Corporation to supply oil for use in TCO vehicles and partially replaced foreign-made oil

Contribution to Kazakhstan’s economy

23


Provided

$9

million

of interest free-loans to entrepreneurs since the beginning of the program

Local Content and Small Business Development

E

nsuring that there are world-class suppliers of goods and services in Kazakhstan is essential to Tengizchevroil’s sustainable growth. In order to help improve availability of goods and services in Kazakhstan, Tengizchevroil and Karachaganak, another leading Kazakhstani energy producer, annually co-host forums for interested companies such as the 2012 Western Kazakhstan Investment forum on the creation of new industries in Western Kazakhstan. Representatives of local and international equipment manufacturers, service companies, heads of international and Kazakh oil companies and state bodies discussed the mechanisms for improving the level of professionalism and skills and continued development of Kazakhstan’s goods and services suppliers to the energy business. A variety of workshops were offered to help

24

Corporate Responsibility Report 2011-2012

businesses learn the standards, processes and best practices in working with large companies such as TCO. Local companies also met with international suppliers to create potential joint ventures. Joint ventures between Western and Kazakhstani companies have proved successful over the life of Tengizchevroil in helping Kazakhstani companies develop products and services that comply with international standards. Another example of building local capabilities and creating employment is our loan program for small and medium businesses. Under this program, we provide interest-free loans to entrepreneurs which manufacture goods, or provide services for the oil and gas industry. Since the beginning of the program, TCO has invested almost $9 million in these loans, which have created about 1,400 jobs in Kazakhstan. TCO assists the businesses we support through these loans with business planning.


Future Growth Project / Wellhead Pressure Management Project

K

azakhstani Content is a top priority of the Future Growth Project / Wellhead Pressure Management Project (FGP/ WPMP), TCO’s next planned expansion of Tengiz production for the benefit of Kazakhstan and Partners. FGP/WPMP is significant to Kazakhstan in terms of job generation and investment in goods and services. A dedicated team of Kazakhstani Content (KC) specialists has been embedded in the FGP/WPMP project from the beginning, to identify and develop viable, sustainable opportunities to maximize the use of Kazakhstani employment, goods and services. The first Tengiz expansion project, the Sour Gas Injection-Second Generation Project, set a new standard of more than $2 billion in Kazakhstani Content. Currently, FGP/WPMP has pre-qualified over 400 Kazakhstani companies. Helping Kazakhstani companies meet the standards that enable them to effectively compete for work on TCO projects also makes those

companies more likely to be able to obtain work from other companies. The execution basis for the FGP/WPMP facility is a modularized concept with preassemblies and modules to be built in Kazakhstan and overseas yards. The project plans to aggressively increase Kazakhstan’s fabrication capacity and capability to fabricate complex modules.

FGP/WPMP is guided by a Kazakhstani Content mission statement that the project takes very seriously. The mission statement declares that all areas of the project will, “Proactively seek and deliver viable KC opportunities consistent with project safety, quality, schedule and cost objectives; building capabilities that are sustainable in Kazakhstan.”

Small and Medium Business Loan Program Yulmar Service Company and Adem Ecology are two loan recipients under TCO’s small and medium business loan program. Yulmar Service company is a joint venture with Novus Sealing of the United Kingdom. Yulmar is using TCO’s $272,000 loan to construct a warehouse to manufacture and repair gaskets and seals. 15 people are employed at the facility. Adem Ecology was granted a $500,000 loan for the purchase of waste sorting and management equipment for the recycling of waste in Atyrau Oblast. The project currently employs 34 people and minimizes waste sent to Atyrau landfills

Contribution to Kazakhstan’s economy

25


Kazakhstan Maritime Academy

Т

ransportation of Tengizchevroil’s crude oil across the Caspian Sea to world markets started in 1996, three years after the establishment of the TCO joint-venture. TCO has remained focused on safe and reliable transportation of crude and products from Tengiz field, including across the Caspian Sea, since its establishment. TCO contributed $25 million dollars and is the founding sponsor of the first Kazakhstan Maritime Academy (KMA). The academy will play an important role both in Kazakhstan and internationally by educating and training cadets on safe, reliable and environmentally sound transportation practices. Quality

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Corporate Responsibility Report 2011-2012

maritime education and training reduces accidents at sea and promotes ship safety, environmental protection and the overall economics of shipping operations. The Kazakhstan Maritime Academy will produce highly-skilled, internationally accepted Kazakhstani maritime deck and engine officers to serve the Kazakhstani merchant fleet carrying Kazakh equity crude and products to international markets. The graduates will have the skills necessary to become leaders in the transportation field in the Republic of Kazakhstan and abroad to meet the challenges of the present and future on behalf of the country.


invested for establishment of first Kazakhstan Maritime Academy

$ 25 million

The Kazakhstan Maritime Academy was established under the auspices of the KazakhBritish Technical University (KBTU), which is best positioned to meet the objectives of the academy and to provide the maximum value to the Republic of Kazakhstan. KBTU is the leading internationally accredited technical university in Kazakhstan with effective partnerships with various international universities; proven ability to deliver general education curriculum in the English language; availability of engineering and mechanical equipment; and extensive physical infrastructure. The academy has partnered with Netherlands based leading international maritime educational conglomerate STC-Group to administer the program. STCGroup brings best practices and specialized maritime experience from projects in Netherlands, Vietnam, Korea, South Africa, Oman, Philippines, Brazil and other countries. Kazakhstan Maritime Academy’s academic program started in August 2012. The first class of cadets represents 12 out of 14

oblasts in Kazakhstan. The academy is a four-year academic program which is fully delivered in the English language. After graduation, the cadets will receive a Bachelor of Science degree from KBTU as well as an internationally accredited Certificate of Competency which will allow graduates to sail internationally. The academy’s program is demanding, comprehensive and stimulating. It is carefully designed to ensure that graduates are professionally competent, trained for leadership and responsibility, and are well-rounded intellectually. In addition to the rigorous academic program, the academy features extensive training on the most advanced integrated deck and engineering simulation equipment manufactured by Kongsberg Maritime of Norway and installed at the academy. To learn the value of self-reliance and initiative as well as gain firsthand experience in the maritime environment, the cadets will spend a minimum of 12 months of structured practical sea training on KazMorTransFlot’s vessels in the Caspian Sea, Chevron

so as to maximize long-term benefit for the country, support the increasing offshore oil and gas developments and to generate employment opportunities for Kazakhstani citizens outside of the traditional oil and gas sector. The Kazakhstan Maritime Academy will provide a boost to Kazakhstan’s longterm international competiveness as graduates create a pool of competitive and competent Kazakhstani mariners able to work on Kazakh and foreign vessels anywhere in the world.” Kazakhstan Maritime Academy provides support to the Ministry of Transport and Communications in its effort to gain the International Maritime Organization’s (IMO’s) membership on the White List. This certification demonstrates that a country is in compliance with the Convention on Standards of Training, Certification and Watchkeeping for Seafarers. Membership on the White List will allow all Kazakhstani mariners to sail outside of the territorial waters of the Republic of Kazakhstan.

Shipping’s and other international ship owners’ vessels trading in international waters. Lyazzat Tatubaeva, Kazakhstan Maritime Academy’s Project Manager, said, “The academy contributes to the government’s objectives to develop the Caspian Sea region

Contribution to Kazakhstan’s economy

27


KMA Cadet Interviews delivered fully in English and is very intensive, but our teachers do everything possible to organize our time efficiently. It is also great that we have classes with competent Dutch professionals who deliver all of our specialized maritime related subjects and share their wealth of professional sailing experience. Also, our time is full of different student activities, which are very exciting. I just love it all. What do you plan to do after you graduate from KMA?

Interview with Georgiy Surovtzev, firstyear cadet of the Kazakhstan Maritime Academy (KMA), graduate of the School #4, Aktau Why did you decide to enroll in KMA? I first learned about KMA during a KBTU recruitment presentation at my school. Honestly, my first reaction was – “any other university, definitely not this one,” but once I passed the Unified National Exam I started choosing my future university in earnest. That is when I seriously began considering KMA. I know that you will not find the same opportunity and education as the Kazakhstan Maritime Academy provides, anywhere in Kazakhstan. More so, KMA is part of KBTU – the leading technical university of the Republic of Kazakhstan. This was a very important factor also. My decision to enroll in KMA was one that I took very seriously and one that I do not regret. Do you enjoy studying at KMA? I would like to note, that it is quite a difficult area of study at the academy. The program is

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Corporate Responsibility Report 2011-2012

Great chance of employment after graduation was the major factor impacting my decision to enter KMA. Not just any employment, but employment at KazMorTransFlot (KMTF). KMTF is based in Aktau, the only Kazakhstani international seaport, and will seek to employ KMA cadets after graduation. This is a huge plus for me as I am from Aktau. I will be able to work close to home. Ultimately, I would love to be a Chief Engineer, but I don’t want to set expectations, life is too unpredictable. Any engineering job would make me happy. What were your expectations and what is the reality of studying at KMA? I was not expecting that it would be so hard to study. I thought my student experience would be the same as what my friends experienced at other universities; but as soon as I got off the plane the reality started. The speed of everything is insane and you have to keep in line. Honestly, I like it a lot, it makes me plan my time and organize it thoroughly. KMA administration staff and teachers are very good and satisfy my needs fully. While my friends in other universities take predictable math and history courses, our second semester was spent doing two-week safety training in Rotterdam, then boarding a vessel where for the next eight weeks we learned and trained with Dutch professional crew and

teachers. We visited Canary Islands, Azores Islands, France and Netherlands. Do you know of any other program in Kazakhstan that offers the whole world as their campus? What subject do you enjoy the most? I am most interested in maritime subjects; they are all about my future job. Math and physics are great too, but they are something I studied in high school. Maritime Law and Maritime Economics are brand new to me, so very interesting. I very much look forward to training on the most advanced maritime simulators manufactured and installed at our academy by Kongsberg Maritime of Norway. It is a real privilege for such small class to have 24/7 access to the best equipment in the world. What would you advise to those who would like to enter КМА? First, potential students need to understand what they will face. Twenty six credits, all in the English language, are no joke. Second, they need to understand the responsibility that will be on their shoulders as they will represent Kazakhstan and the KMA brand internationally as practical sea training during studies and then future work will involve working with multi-cultural crew and sailing on international vessels. They need to think 100 times before making this important decision to enter Kazakhstan Maritime Academy but if they pass one of the most competitive entrance requirements and have a chance to study – it will be an opportunity of their lifetime which will set them apart from all others


Why did you decide to enroll in KMA? I considered a lot of professions before I made my choice. I thought my profession would have to be interesting, help contribute to the workforce requirement of my country and supportive of my career development. When I studied all the information on KMA, I realized that considering all other educational institutions, KMA would help me and my fellow cadets achieve our goals. Do you enjoy studying at KMA? Yes, I enjoy it very much, it exceeds my expectations. In my opinion, KMA’s Dutch and Kazakhstani teaching staff are exceeding my expectations. Interview with Arailym Bekova, firstyear cadet at the Kazakhstan Maritime Academy, graduate of the Kazakh-Turkish College of Economics, Taraz

What do you plan to do after you graduate from KMA? I want to be a qualified maritime specialist and provide benefit both to my country and to mankind. I would like a prestigious and highly paying job. What were your expectations and what is the reality of studying at KMA? The reality exceeds my expectations. I thought

it would be something like routine attendance of classes but KMA teaches so many interesting subjects and all of them are so different. It makes us very excited about our studies. What challenges have you encountered during your study at KMA? Challenges may be encountered everywhere. As for the studies at KMA, it is always challenging to organize your time so that you can learn all the material. In general, I would say that everyone who is really eager to study can successfully manage to do that. What subject do you enjoy most of all? All the subjects are unique and interesting in a way, but Maritime Law is one of my most enjoyable. What would you advise to those who would like to enter KMA? I recommend entering KMA to all those who are eager to get maximum knowledge and to achieve his/her goals. KMA meets all the criteria and, moreover, provides better opportunities than one would expect.

Contribution to Kazakhstan’s economy

29


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Community Investment Voluntary Egilik Program

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t the start of Tengizchevroil joint venture in 1993, the company created a five-year, $50 million dollar program called Atyrau Bonus Fund. TCO saw the program as a way to create value both for the company and the community. Furthermore, TCO decided to work collaboratively with the Atyrau Oblast Akimat leadership in choosing the social infrastructure projects in Atyrau Oblast to be funded with Tengizchevroil funds. In 1998, the Atyrau Bonus Fund program was concluded as planned. The objectives of the program were met and the outcomes clearly pointed to the value of, and need for, such a program.

As a result, in 1998 TCO established the Egilik (“benefit” in Kazakh) program. Egilik began with a $4 million budget, growing steadily until 2003 when the budget increased to $8 million for three years and then to $12 million for another three year period. For 2009 through 2012 the budget was $20 million per year. The increase coincided with the finalization of the latest Tengizchevroil production expansion. The majority of funds - $61 million - have been dedicated to replacing the water system in Kulsary, the nearest population center to the Tengiz field and home to many TCO employees and contractors. TCO health and social impact assessment studies of the region demonstrated that the Kulsary water quality was low and water service undependable. The water system replacement project took 4 years and allowed TCO to address objectives in a key thematic area of its Community Investment Program (CIP) – health.

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20

12

12

8

8

4

5

6

8

12

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Egilik Spending (million USD)

20

Over the life of the program, TCO has funded various social infrastructure projects for Atyrau Oblast including schools, hospitals and clinics and electricity and water systems. At the end of 2012, TCO has invested nearly $200 million through the Egilik and Atyrau Bonus programs since 1993.

Contribution to Kazakhstan’s economy

31


Community Investment Program

I

n 2011 and 2012, Tengizchevroil budgeted approximately $1 million annually for an additional voluntary Community Investment Program. TCO established an internal Community Investment Council (CIC) comprised of individuals from various departments to direct TCO’s discretionary Community

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Corporate Responsibility Report 2011-2012


Investment Program budget. The TCO CIC created a strategic framework that moves TCO’s community investment from charitable giving to proactive programs that support the socio-economic goals and needs of both TCO and Atyrau Oblast. TCO seeks to create a direct relationship between community investments and TCO’s operations, moving from local tactical investments to community investment as a core business strategy. This requires subjecting community investments to the same scrutiny as other business investments.

TCO’s CIP Strategy A social baseline study was conducted to assess the needs within the communities. Considering the results of the social baseline, the CIC created a strategic framework that linked TCO business and socio-economic objectives with community needs and priorities. TCO developed the following focus areas and vision.

The vision for community investment is to: Add value to the business and community in an ethically and socially responsible way Build human, societal and organizational capacity to sustain a thriving local economy and society without dependence on TCO

Health education and improvement

Measurement

Environmental education and improvement

TCO’s community investment monitoring, evaluation and reporting system ensures that the company maximizes development benefits for our host communities while investing in ways relevant to our business needs. Monitoring involves the systematic and consistent collection of relevant data and information at regular intervals to measure project or program progress and partner performance.

Basic human needs, specifically solutions to water challenges Cultural preservation and awareness, specifically further the Kazakh language We continue to be dedicated to adding value to the communities in which we operate. We streamlined our focus areas for investment, emphasizing a partnership approach. We apply the same vigor to planning, executing and measuring community investment that we use in other areas of our business.

Partnership Approach TCO follows a partnership model for community investments. Public-private partnerships (PPP) bring together business, local institutions, government, non-governmental organizations (NGOs) and development agencies via shared missions, desired outcomes and accountability. In these collaborative relationships, partners plan jointly, share resources and share risks and rewards. The partnerships provide opportunities to build social capital and capacity. Most importantly, PPP investment is more likely to result in sustainable solutions that improve the local socio-economic environment.

Evaluation involves the systematic, objective and transparent appraisal of a partner or specific project or program design, results and effectiveness at a given point in time. Reporting provides regular feedback on the progress, problems, successes and lessons learned from the project or program implementation.

Tengizchevroil Community Investment Focus Areas: Building capacity in people or organizations to benefit TCO and community Education, training and socio-economic development

Contribution to Kazakhstan’s economy

33


Community Investment Projects Tengizchevroil held a widespread request for proposals at the end of 2011 and 2012. As a result, TCO established collaborative relationships with a few NGOs. Winning CIP projects were exciting and diverse, covering all of our goals, from health and education to the environment. The common feature that united them is that their ultimate beneficiaries were communities in Atyrau oblast.

Eurasia Foundation of Central Asia The main objective of the TCO-Eurasia Foundation of Central Asia (EFCA) partnership was to encourage and expand community involvement in addressing social problems in Atyrau city and Zhylyoi region. In 2011, EFCA’s Community Engagement Program for residents in the Zhylyoi region, was awarded an Ar-Namys for «Best Social Innovation Project.» EFCA’s program marked an innovative approach to solving social problems in Kazakhstan. During the 20th World Petroleum Congress in Doha, Qatar, the project was selected among 35 projects from all over the world, as one of the best projects in the area of corporate social responsibility. The TCO-EFCA collaborative has generated an increase in the number of social services provided by NGOs to residents of Zhylyoi district. EFCA organized trainings for local NGO leaders and program participants. The trainings helped to increase the level of professionalism and institutional development of these non-profit organizations.

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Corporate Responsibility Report 2011-2012

District NGOs implemented 19 social grant projects, which involved 5,944 residents, between 2011 and 2012. The projects addressed a variety of themes: rehabilitation of disabled children, teenage tourism, sports for children and adults, teacher training, physical therapy, youth leadership skills development and handicrafts for unemployed women. Implementation of the projects required effective cooperation between the community, local authorities and businesses.

Partnering with Organizations to Improve Cardiovascular Health TCO collaborated with the Kazakhstan Association of Family Physicians (KAFP) to empower the Atyrau community to help reduce the incidence of the main mortality cause in Kazakhstan - cardiovascular disease. Primary care and emergency treatment were targeted as the main sources for identifying people at high risk or having the disease. The KAFP approach focused on prevention and control of arterial hypertension (AH). KAFP implemented several high impact intervention options, including specialized training for 270 health care practitioners via distance learning courses, direct clinical courses and continuous health care quality improvement. KAFP raised awareness through media (360 TV airings of health promotion cartoons in Kazakh and Russian), AH patient schools (121 AH patients trained), dietary advisories via sms reminders, and printed materials (more than 200,000 leaflets were distributed).

Partnership on Kazakh Language TCO has a long tradition of furthering the development of the state language and we continue this tradition with our partnership

with the Kabdolov Foundation through the I Know Kazakh Language program, having the components - I Speak Kazakh, I Write in Kazakh and My Native Land

Kazakhstan. The program helped Russian speaking citizens of Atyrau Oblast improve their written and verbal Kazakh language skills through a series of competitions, a roundtable and a documentary shown on local TV.

Partnering on English Language Tengizchevroil and the British Council in Kazakhstan partnered on a project aimed at improving English language skills of teachers in Zhylyoi region. To achieve the desired outcome of the project, which was to increase school graduates’ English competency, Zhylyoi English teachers were trained on a new teaching methodology and had to complete one level in the Common European Framework (CEF). Project participants included 49 Kulsary English teachers in phase 1, more than 75 Zhylyoi summer school teachers, and 50 Kulsary summer school children in phase 2.

Investing in Our Children Training the next generation to be better citizens and leaders is the focus of our next few projects. Our future lies with the next generation and we believe that these projects will help us to improve that future for everyone.


Tech Age Teens International Exchange Council’s (IREX) Tech Age Teens program operates as an extracurricular activity for youth in grades 8 through 10 throughout Atyrau’s public school system. IREX hosts its program in school computer labs and a local library. There are four objectives to Tech Age Teens: make the internet a relevant part of education, both in schools and in libraries for teachers and youth; teach teachers and youth new skills that are invaluable in a developing economy and increase their employment prospects for the future; build leadership skills; and build community needs awareness to preserve cultural heritage and engage youth in the community’s development.

Through Tech Age Teens, more than 915 students were impacted by the efforts of 105 teachers and 17 librarians who were trained to assist with program delivery. The program connected 32 schools to the internet and taught 466 teachers how to use interactive whiteboards, conduct internet searches and build computer skills. Unexpectedly, more than 50 percent of the participating schools invited IREX back to train all teachers in their schools, who had not been trained. Tech Age students learned how to get involved in their communities and engage

in issues creatively using information technology (IT) tools such as online forums, blogs and website creation. A select smaller group of students then participated in the program’s second stage, a summer workshop where they designed community projects utilizing their new IT and leadership skills. The program taught participants how to address social issues of today through use of high-technology, webbased social strategies. Community projects were developed in the areas of helping vulnerable or elderly people, improving healthy lifestyles, helping others learn IT skills and environmental projects.

Supporting Vulnerable Children Independent Generation of Kazakhstan NGO and TCO partnered on a program called On the Way to Success: Enhancing the Potential of Vulnerable Children. The program focuses on better equipping vulnerable children for independent life. The program trained 62 orphans and 16 of their caregivers in life and leadership skills in order to help prepare the kids for leaving the state institution. The program provided information about available careers as well as training in journalism.

Corporate Volunteer Program Tengizchevroil partnered with CDC Development Solutions (CDS) NGO to implement a corporate volunteer program called Yntymak. Yntymak enables TCO volunteers to address the needs of the Atyrau community by helping local NGOs develop their human, technical and organizational capacity. Through Yntymak, TCO staff connects more deeply with the community and expands their professional and leadership skills.

In the Atyrau region, there exists a skills gap between the public and private sectors. Non-profits, universities, business associations and public schools lag in professional and organizational capacities. The Yntymak team conducted a needs assessment among the Atyrau NGO community to gain an in-depth understanding of the needs of NGOs to ensure that volunteer projects are demanddriven. Among the challenges identified in the needs assessment were the lack of knowledge on computer software and hardware, internet, website design, social media, public relations strategies, human resource management, fundraising, strategic planning, and 1C accounting software. Due to these constraints NGOs are often unable to meet increasingly complex needs in the local community. TCO employees contributed 481.4 hours on skills-based projects and 408 hours on service projects though Yntymak, with a total of 23 skills-based projects and three Volunteer Marathons. Yntymak is a growing component of TCO’s Corporate Responsibility and employee engagement strategy. Based on post-assignment evaluations, CDS found that TCO employees who participated in skills-based projects through Yntymak had significant learning and professional development experiences. TCO volunteers reported developing teamwork, communication, problem solving, public speaking and cultural awareness skills

Contribution to Kazakhstan’s economy

35


Strategic Workforce Development

87% 76%

of all TCO positions are held by Kazakhstani citizens

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Corporate Responsibility Report 2011-2012

of all TCO managers and supervisors are Kazakhstani citizens


A

t TCO, our greatest asset is our employees; therefore a vital TCO strategy is continued investment in our team who work in Tengiz. From competitive compensation to world-class training programs; TCO has a long tradition of success in developing a workforce that can compete on an international level. TCO’s development programs have supported the advancement of employees to positions of increasing responsibility and skill. Tengizchevroil’s expatriate workforce is now below 13 percent, as Kazakhstani citizens hold 87 percent of TCO positions. Kazakhstani managers and supervisors hold 76 percent of TCO supervisor and manager positions. Over the last five years, 91 Kazakhstani citizens were placed in manager, supervisor and key technical position, replacing expatri-

ates. Some examples of positions filled with Kazakhstani employees are general manager of Strategic Planning, tax manager, plant superintendent, treasury manager, supply chain group category manager, comptroller and environmental supervisor. TCO’s success is rooted in the quality of our employees and contractors. We are committed to hiring employees from the communities in which we operate. We strive to provide a world-class, positive work environment and a strong benefits package that values the interests of our workforce. TCO continually improves our training programs to foster individual growth and the achievement of business goals.

Strategic Workforce Development

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$million 8.3 spent on employee training programs in 2012

> 200 TCO employees train abroad each year

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Corporate Responsibility Report 2011-2012


Freedom of Association and Right to Collective Bargaining

Т

engizchevroil has a long tradition of respecting the rights of employees to join associations and choose representative organizations for the purpose of engaging in collective bargaining. TCO’s first collective agreement was signed in 1996, and TCO has continually worked with employee representative groups to update collective agreements since that time.

In 2010, we enhanced our social package when we signed a new collective agreement with our employees. Some key aspects of our employment program are: enhanced compensation packages, a pay for performance process, international development assignments and world-class training programs. The 131 percent increase in TCO’s training budget since the year 2008, from $3.6 to $8.3 million in 2012, illustrates

the company’s emphasis on continued improvement for our workforce. TCO also encourages contractors to develop collective agreements for their employees and more than 30 TCO contractors have registered agreements with the local Labor Department.

Contractors

Т

engizchevroil maintains close relations with its contractors to ensure compliance with Republic of Kazakhstan Labor Code requirements and awareness of the importance of collective agreements. TCO expects its contractors to fully comply with Labor Code requirements and TCO regularly audits contractors to ensure compliance with the Labor Code. TCO also expects contractors to develop workforce development plans and training philosophies, maximize the use of Kazakhstani goods and services, and fulfill all environmental and safety performance requirements.

TCO management conducted meetings with 23 contracting organizations in 2012, with a focus on safety and controlling Industrial Relations issues on TCO premises.

Strategic Workforce Development

Т

CO is building a team that is able to meet the challenges of today, and in the future.

To do this, TCO has a strong training and workforce development plan in place that includes technical, computer, managerial, interpersonal, organizational and language training. TCO has spent about $46 million over the last 10 years on its training programs. TCO sends more than 200 people abroad each year for training in their specific disciplines and it provides international developmental work assignments for some talented employees.

Strategic Workforce Development

39


$ 59 $ 3.2 million million loaned since start of Housing Loan Program

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Corporate Responsibility Report 2011-2012

granted in scholarships since 1998


Investing in Employees

T

engizchevroil has a long tradition of offering one of the best employee benefits packages in Kazakhstan. The program covers housing, savings, support for employees’ families and health benefits.

Housing Loan Program TCO’s hallmark program has been the interest free mortgage loan program offered to employees. With more than 500 loans equaling more than $59 million given over the life of the program since April 2010, TCO’s housing loan program has enabled employees to improve their quality of life. Employees who might have struggled to get a loan before are given the chance to improve the living conditions of their families and avoid high interest rates sometimes associated with traditional loans. The program is one of the most popular employee benefits; many employees apply for a second loan once their first one is paid.

Employee Savings Program TCO’s savings matching program encourages and rewards employees for saving money. Employees can place up to 10 percent of their annual salary into the savings program and TCO will match three percent of their salary. The full amount will accrue at a high rate of interest over three years, at which point the employee can use the money any way they please. TCO matching increases over the life of the program.

TCO Scholarship Program TCO’s scholarship program, Zhas Urpak, provides approximately 60 higher education grants per year for students to study at universities in Kazakhstan and abroad. Four are available for gifted children from low income families in the Atyrau Region and the remaining are given to children of TCO employees. TCO has committed $3.2 million to scholarships since 1998. Applicants are selected based on academic success, computer skills and family need. Grants can be prolonged for student recipients on the condition that academic performance remains excellent. Scholarship grants were prolonged for 46 students whose academic performance remained excellent. The total sum of reimbursement and scholarship payments for students in the 2011-2012 academic year was $421.6 thousand.

Support of a Healthy Lifestyle TCO has several programs that support the health of employees and their families. Employees have the opportunity to select health care insurance packages from one of Kazakhstan’s top providers of health care services. Rotational employees at Tengiz are provided for at TCO’s world-class clinics on-site. These facilities provide annual check-ups for employees and other routine and emergency care as needed. Tengiz-based employees have access to top-quality recreational and sports facilities while they are working on-site. In Tengiz, there are also several sports competitions and events throughout the year to promote exercise as an important to part of a healthy lifestyle. Atyrau-based employees enjoy highly sub-

Strategic Workforce Development

41


sidized memberships to identified local fitness and sports centers and many participate in the annual Zhelayak Fun Run created by Tengizchevroil employees. In 2012, TCO arranged two volleyball, three mini-football and two basketball tournaments among oil and gas industry companies. The competitions involved 33 football, 14 basketball and 14 volleyball sport teams with over 730 participants in Atyrau and Tengiz.

Medical Insurance Republic of Kazakhstan insurance companies provided the majority of medical insurance coverage to all national TCO employees and their family members in 2012. This equated to 6000 insured units. TCO covered all payments of services in the standard categories for employees.

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Corporate Responsibility Report 2011-2012

Internships Tengizchevroil provides internships to about 250 university students per year. These short-term assignments provide real-world work experience for students to augment their education and give them a glimpse of what it is like to work in one of the country’s largest companies. Many of our interns have returned as employees or contractors after completing their studies.

TCO Long Service Award program Tengizchevroil implemented its “Long Service Award� program in 2012. Every TCO employee working for five years, and every five years thereafter, receives a serviceaward pin and gift and is invited to dinner hosted by TCO management.

As a result, dinners were arranged in Atyrau, Tengiz, Astana and in London where 2,140 employees received a service-award pin and gift.

TCO Pensioners TCO annually provides materials assistance and conducts meetings in Atyrau and Kulsary for retirees. In 2012, 56 retirees attended the pensioner meetings and 58 received materials assistance.


TCO Policy, Government and Public Affairs 2013 www.tengizchevroil.kz


2012-2013 Corporate Responsibility Report