Every year, subsoil users in Kazakhstan spend about $10 billion on the purchase of goods, works, and services (GWS). However, according to available data, about 50% of these funds go abroad, as foreign companies prefer to procure GWS from overseas suppliers. Moreover, customers find ways to circumvent local content requirements through shell companies, which is possible due to the imperfections in Kazakhstan's legislation. As a result, the actual indicators of local content in Kazakhstan are often significantly lower than the official data, notes Exclusive.kz.
At a meeting on February 12 in the Committee on Ecology and Natural Resource Management, reports from oil companies such as "SNP-Aktobemunaigas," "Buzachi Operating," "Maten Petroleum," and "KoZhaN" regarding the increase of local content in their procurements were reviewed. All these companies have shareholders from China.
Chinese companies account for about 15% of the total oil production in Kazakhstan. The leader among them is "SNP-Aktobemunaigas," which develops the Zhanazhol field with an annual production of 5-6 million tons of oil, not including natural gas extraction.
Vice Minister of Energy Erlan Akbarov reported that by 2025, all oil companies in Kazakhstan plan to purchase goods, works, and services worth 4.6 trillion tenge (approximately $9.3 billion), of which more than 3 trillion tenge ($6.1 billion) will be directed to Kazakh suppliers, accounting for 65% of the total volume. Four companies spent a total of 231 billion tenge, with the share of local content in these purchases amounting to 173 billion tenge, or 74.8%.
Procurement through shell companies
As noted by Akbarov, "Maten Petroleum" allocated about 9 billion tenge for the purchase of goods with local content. In particular, 99.6% of gasoline and diesel fuel was produced in Kazakhstan, 73% of well pumps, 56.1% of personal protective equipment, about 52% of casing pipes, and 50.1% of chemical products were also of Kazakh origin.
According to the Ministry of Energy, the potential volume for import substitution and additional localization of goods is estimated at 1.2 billion tenge.
"SNP-Aktobemunaigas" allocated 113.6 billion tenge for Kazakh GWS, which is almost 73% of all its procurements. At the same time, the share of local content in goods was 20-25%, in services – 43-51%, and in works – 88-93%.
The Ministry believes that due to the localization of goods, the total amount of procurements could increase by another 29.5 billion tenge. The greatest localization reserves are found in the procurement of electrical equipment, valves, filters, drilling and compressor equipment, as well as measuring instruments and bearings. However, local producers, according to ministry representatives, are insufficiently involved in the procurement activities of "SNP-Aktobemunaigas."
Thus, Chinese companies mainly use Kazakh suppliers for the performance of works and provision of services, while goods continue to be sourced from abroad. However, this data may be unreliable: Chinese companies often procure GWS through shell firms registered in Kazakhstan but actually controlled by Chinese entities. This was reported by deputy Edil Zhanbyrshin, citing information from market participants.
It is important to note that similar schemes to evade the procurement of Kazakh GWS are used not only by Chinese companies but also by other foreign companies working on the Tengiz, Kashagan, and Karachaganak projects.
Oil and gas expert and director of the Energy Monitor Public Foundation Nurlan Zhumagulov emphasizes the need to change existing rules through legislative amendments. He noted that the Code "On Subsoil and Subsoil Use" lacks a clear definition of the status of a Kazakh producer.
In particular, there is no unambiguous definition of what constitutes a Kazakh producer. Any foreign company can register a limited liability partnership and hire 95% of citizens of Kazakhstan, which is sufficient for it to be recognized as Kazakh, even though the shareholders may be foreigners and the profits are taken abroad.
Data exists, trust does not
Experts believe that foreign suppliers should create joint ventures with Kazakh partners, share experience, and localize production. However, in practice, this is either absent or presented in minimal volumes. Localization projects often appear as formal reports rather than genuine initiatives.
This approach is characteristic not only of Chinese companies, but unlike participants in the Tengiz, Kashagan, and Karachaganak projects, Chinese companies are notably closed.
Asylbek Dzhakiev, chairman of the Oil and Gas Council of Kazakhstan PetroCouncil, notes that "SNP-Aktobemunaigas" is the most closed company, unresponsive to calls to organize meetings with Kazakh suppliers to discuss their needs.
"Today they provided information. But whether it corresponds to reality or not, no one knows," he added, representing the interests of 160 oil service supplier companies.
Dzhakiev also pointed out that unlike TCO, NCOC, and KPO, the operator of the Zhanazhol field does not publish procurement plans in the public domain. As a result, the procurement procedures and the list of goods and services remain unclear. The last meeting of the company with the business community took place back in 2018, that is, eight years ago.
Furthermore, it turned out that some Chinese oil companies do not even have their own websites. Deputy Zhanbyrshin expressed bewilderment about this during discussions with representatives of Chinese companies.
"China is a leader in information technology. But the websites of Chinese companies do not work – this is nonsense. President Kassym-Jomart Tokayev cites China as an example in the development of artificial intelligence and digitalization. Yet our Chinese partners and investors have non-functioning websites. Is this done intentionally? I propose to send a letter to the Chinese embassy stating that the websites of our Chinese partners and investors do not work. Let the Communist Party of China take appropriate measures," he stated.
He also inquired of the general director of "Maten Petroleum" Liu Jincheng why the company’s website is not functioning. In response, he explained that "Maten Petroleum" is a small company producing about 300,000 tons of oil per year.
"This does not matter. Even small individual entrepreneurs today have social media pages. You are an oil company; you should have a website and transparent procurement procedures. You have billion-dollar procurements. You are obliged to publish procurement plans on your website. Otherwise, how will we know about your actions?" emphasized the member of parliament, demanding that oil companies create websites and post their procurement plans within two weeks.
