Local Content Policies in the Oil and Gas Sector

local content in its procurement of GWS in the oil and gas sector since 2009. In 2009 and throughout 2010, KMG took several measures to increase the share of KC in procurement of GWS, covering:

 

Provision of information for Kazakhstan suppliers of GWS on KMG’s procurement plans and provision of catalogs of the goods scheduled for purchase. Signing cooperation memoranda and contracts for the supply of GWS with local suppliers. In 2009 memoranda for the total amount of 44 billion Kazhaki tenge (KZT) were signed with local suppliers in more than 15 different areas in Kazakhstan. Launching of the NC KazMunayGas JSC (joint stock company) Promotion Program of the Oil and Gas Machine Building Development in the Republic of Kazakhstan for 20102012. Creation of the Coordination Council for the oil and gas machine-building sector including specialists from the NC “KazMunayGas” JSC, and major Kazakh machine-building companies.

In 2011 KMG consolidated its local content support efforts into a holistic program called the Program of the NC KazMunaiGaz JSC for the Development of Kazakhstan’s Content for 2011–2015. The program focused on the following key objectives:    

To increase the volume of purchases of locally produced goods To assist local commodity producers in producing new commodities that are currently imported To increase overall KC in large oil and gas projects To build service and machinery-building assets.

KMG has also set the following quantitative targets to be achieved through the program by 2015:     

Increase production of oil equipment by 23 percent from the 2010 level Increase the share of local content in commodities purchases of the KMG Group to 50 percent Increase the share of local content in work purchases of the KMG Group to 90 percent Increase the share of local content in purchases of operators of large oil and gas projects Set up new joint production, service, and machinery-building assets of the KMG Group.

KMG has already started working toward achieving the above goals. In fact, long-term agreements with a total value of KZT 53.6 billion are planned for 201115 between KMG’s affiliates and subsidiaries on the one hand and domestic commodity producers on the other. Table 4.9 shows the breakdown of the planned agreements value (in million KZT). Table 4.9 Kazakhstan: Breakdown of the Planned KMG Agreements by Value (million KZT) Name of KMG subsidiaries and affiliates KazMunaiGaz EP JSC KazTransOil JSC KazTransGaz Group Total

2011

2012

2013

2014

2015

Total

8,019 1,357 3,981 13,357

8,243 1,357 3,937 13,537

8,499

1,598 1,598

7,779 1,356 3,393 12,528

32,540 4,070 17,026 53,636

4,117 12,616

Source: Based on data from KMG 2011b. In addition, KMG has set specific targets for share of local content in procurement of GWS. The group’s objective for the 2011 share of local content was set at 55 percent. Indeed, in the first half of 2011, the KMG Group purchases of locally produced GWS reached 48 percent. More specifically, the local content share of the volume of goods purchased amounted to 40 percent, while the share of KC in purchased work comprised 66 percent and 57 percent of the volume of purchased services. Table 4.10 shows the actual figures for 2010 and the targets for 2011.

118

Turn static files into dynamic content formats.

Create a flipbook

Local Content Policies in the Oil and Gas Sector

Published on Apr 24, 2013

World Bank Publications

A number of countries have recently discovered and are developing oil and gas reserves. Policy makers in such countries are anxious to obtain the greatest benefits for their economies from the extraction of these exhaustible resources by designing appropriate policies to achieve desired goals. One important theme of such policies is the so-called local content created by the sector—the extent to which the output of the extractive industry sector generates further benefits to the economy beyond the direct contribution of its value-added, through its links to other sectors. This paper provides a detailed description of the policy context, objectives, implementation tools, and metrics used in a select group of petroleum-producing countries, including Angola, Brazil, Indonesia, Kazakhstan, Malaysia, and Trinidad and Tobago. The information is further analyzed in the paper on Local Content in the Oil and Gas Sector, World Bank Studies, Washington D.C., 2013.