Dear Friends,

Tengizchevroil (TCO) remains a leader in Kazakhstan’s oil and gas industry. In 2016, TCO successfully achieved production milestones and excelled in  the following key areas:

  • No fatalities, and overall safety performance was, once again, significantly better than the global oil and gas industry average.
  • Produced 27.56 million tonnes of oil, setting a new record. TCO Plant facilities had high production efficiency.
  • SGI/SGP and KTL facilities demonstrated world class reliability of 99 percent.
  • Sold 1.350 million metric tonnes of LPG, 7.21 billion cubic meters of dry gas and 2.33 million tonnes of sulfur. 
  • Total payments to Kazakhstan exceeded $4.7 billion.
  • Expenditure of $1.9 billion on Kazakhstani goods and services, including $730 million for the Future Growth Project-Wellhead Pressure Management Project (FGP-WPMP). 
  • Had the largest ever planned Turnaround that was completed ahead of schedule within the budget and with zero Days Away From Work.
  • TCO’s bond was recognized as the “European Oil and Gas Deal of the Year” by Project Finance International (PFI).

TCO is an acknowledged leader in gas utilization and flaring reduction. Since 2000, flaring has been decreased by 84 percent and gas utilization has increased by 98 percent. 

In July 2016, TCO Partners announced the Final Investment Decision on FGP-WPMP. This was a significant milestone for TCO and the Republic of Kazakhstan. These records and achievements are made possible by TCO’s highly skilled, professional and dedicated workforce. We will continue to invest in training and provide our workforce with experience-building development opportunities.

2017 will see a ramp-up of activities for FGP-WPMP. It is important for us to make FGP-WPMP a successful and safely operating project.      

In 2017, we will strive to achieve zero incidents by focusing on personal and process safety. We strongly believe that TCO employees and contractors are capable of achieving zero personal safety incidents even though this will be challenging with the anticipated increase in major capital project activities.

Ted Etchison, General Director

 


Anuarbek Jakiyev, Deputy General Director

Safety & Health

Tengizchevroil continues to achieve industry-leading safety results in standard industrial safety measurements such as Days Away From Work and Total Recordable Incidents. In 2016, TCO employees and contractors worked an astounding 55 million man-hours without a single Days Away From Work incident. This is the first time in TCO’s history that we have reached this milestone. While this is truly world-class performance, TCO strives for zero workplace injuries and is continuously working to improve in this area.

 

Environmental Protection

TCO’s investments of more than $3 billion on projects to minimize environmental impact since 2000 have been essential to the continuous improvement in environmental protection that has been achieved at Tengiz. These investments have enabled TCO to reduce total gas flaring volumes by 84 percent and increase gas utilization rates at Tengiz to over 98 percent. Since 2000, gas utilization and other programs have reduced total emissions generated per tonne of oil by 71 percent. During that same time, TCO has increased annual crude oil production volume by two-and-a-half times.

Investments in environmental protection and improvements in plant reliability have reduced the number of technical malfunctions at the KTL/SGP/SGI plants by 21 percent, and reduced the volume of sour and acid gas flaring during technical malfunctions by 96 percent. 

TCO is world class in waste management. In 2016, 69% of wastes generated in Tengiz were sent for reuse or transferred to specialized contractor companies for recycling. Moreover, the plastic bottle recycling program implemented in TCO headquarters in 2016 resulted in more than 600 kg of plastic bottles collected for recycling in the first 5 months of program implementation. 

In 2016 TCO Environmental Group initiated a new state of the art laboratory in the Industrial Base Maintenance & Operations Area to collect and analyze environmental monitoring samples within the Industrial Control Program. Works were completed to improve the laboratory infrastructure, install and commission world-class laboratory equipment. Such a high-class laboratory will allow TCO to obtain the most reliable environmental data, particularly on the quality of ambient air, ground water and soil. 

In September 2016 TCO’s Water Recycling Facility (WRF) was put in operation and has already been providing high quality technical water for production. Deep treatment of utility effluents at WRF improves water quality to the level sufficient to use it for the needs of oil processing units.

Production & Product Sales

Crude production in 2016 was 27.56 million metric tonnes (220 million barrels). 

TCO sold 1.35 million metric tonnes of LPG; 7.21 billion cubic meters of natural gas; and 2.33 million metric tonnes of sulfur, which is 95 percent of the total amount produced for the same period.

Future Growth Project-Wellhead Pressure Management Project

TCO’s Future Growth Project-Wellhead Pressure Management Project (FGP-WPMP) is the next major expansion of the Tengiz field. It is a landmark project that will help to increase Tengiz production by 12 million tonnes of oil per year and will maintain full production rates at the existing Tengiz facilities. The Project will be built of modules fabricated in Kazakhstan, South Korea and Italy and transported to Tengiz for final assembly.

In July 2016 Tengizchevroil Partners approved the Final Investment Decision for FGP-WPMP. This was a significant milestone achieved by TCO marking a long term partnership with Kazakhstan to deliver stable and reliable Tengiz production to benefit the future generations. 

FGP-WPMP completed more than half of detailed engineering and is currently engaged in site infrastructure and facilities construction in Tengiz. A new cargo offloading facility is under construction at Prorva to receive modules and pipe racks from marine vessels and barges before transportation to site at Tengiz. In October 2016 the first steel was cut at the ERSAI fabrication yard that marked the beginning of the Kazakhstani fabrication component for FGP-WPMP.  

The Project will generate significant economic benefits for Kazakhstan including the creation of approximately 20,000 jobs at peak construction and fabrication. 

FGP-WPMP is a state-of-the-art project that will create a legacy of trained skilled workforce, new facilities, technology transfer through a number of partnerships with international companies, and upgraded infrastructure in the region.

Financial Benefit to Kazakhstan

Since its founding, TCO has distributed $116 billion to the Republic of Kazakhstan including purchases of Kazakhstani goods and services, profit distributions to KazMunaiGas, taxes and royalties paid to the government, tariffs and fees paid to state-owned companies, and employee salaries. In 2016, direct payments to the Republic of Kazakhstan totaled $4.7 billion.

Corporate Social Responsibility

Since 1993, TCO has invested more than $1.3 billion to fund social projects and programs in Atyrau Oblast for the community and employees. TCO’s 2016 Egilik (“benefit” in Kazakh) Voluntary Social Infrastructure Program budgeted $25 million for implementation of socially important projects (e.g schools, kindergartens, Community Houses, sports complexes and etc.). Under this program, 5 of 18 projects were completed successfully. Construction of the remaining 13 projects will continue in 2017.  Through this program, and in partnership with local and international organizations, TCO funded 6 projects to improve the education, healthcare and development of entrepreneurship in Atyrau Oblast. 

In 2017, TCO has budgeted another $25 million for Egilik and over $1 million for the implementation of 7 projects within Social Investments Program; the majority of the funds will be spent in Atyrau Oblast.

 

Kazakhstani content

TCO continues to increase its expenditure on Kazakhstani goods and services every year. In 2016, TCO spent $1.9 billion on goods and services by domestic producers compared to $415 million in 2002. Since 1993, TCO has invested more than $22 billion in Kazakhstani goods and services. The company will continue to identify methods to increase its purchases of quality goods that meet the extremely challenging operating conditions in Tengiz. TCO’s investments in Kazakhstani Content have primarily focused on purchasing services. This is and will continue to be the area of the most impactful sustainable local content growth.

A key aspect of TCO’s Kazakhstani Content development strategy is working with current and potential suppliers so that they understand the international quality,  safety and cost standards they must meet to do business with the oil and gas industry. TCO believes that to achieve its Kazakhstani Content objectives, it must generate long-term opportunities for the suppliers of goods and services. As such, TCO will continue to support the sustainable development of Kazakhstani suppliers, encouraging appropriate investments in infrastructure, Kazakhstani workforce training and the creation of jobs.

During 2016, TCO identified new Kazakhstani manufacturers and visited several regions in Kazakhstan to gain a better understanding of manufacturing capabilities of local companies.  

Local content is an integral part of the FGP-WPMP. The Project’s KC target is 32 percent of total project spend. Since 2010, the FGP-WPMP has spent more than $1.6 billion on Kazakhstani Content. To date, more than 1,700 Kazakhstani companies have been pre-screened, and more than 700 Kazakhstani companies have been pre-qualified by the Project to provide services to FGP-WPMP. More opportunities are being tendered during 2017 and 2018.

The Project is creating a legacy of new capabilities in engineering, high-tech equipment servicing, project management, construction and fabrication; and joint ventures between Kazakhstani and international companies for engineering, module fabrication and drilling.

Workforce Development

TCO’s strong training and development programs have a long tradition of helping advance our Kazakhstani employees to positions of increasing responsibility. Kazakhstani citizens now hold 86 percent of TCO positions and Kazakhstani managers and supervisors hold 74 percent of TCO supervisor and manager positions. 

Because attracting and retaining a world-class workforce to manage TCO’s large and complex business is critical to the company’s ongoing success, we strive to be one of the best places to work in Kazakhstan. Providing a competitive, pay-for-performance based compensation package remains a priority. 

TCO will continue to identify and prepare successors for TCO senior management positions. Expatriate assignments for our Kazakhstani employees are an important method by which we support employees in gaining international experience that will enable them to achieve their goals. Currently, TCO has over 50 Kazakhstani employees working outside of Kazakhstan.

 

Outlook for 2016

Be the Leader in Safety and Environmental performance

The safety of our workforce and protection of the environment are always priorities for TCO.  Advancing Process Safety is a critical step in preventing incidents especially those incidents with the highest consequence potential.  Zero safety and environmental incidents is a necessary and achievable goal for 2017.

TCO is also working to further reduce unplanned sour/acid gas flaring events, advance the Water Master Strategy to ensure best and efficient use of water resources, and increase waste recycling. 
 

Invest in Our Workforce to Achieve Our Mission and Vision

TCO will continue to be the best employer in Kazakhstan. We will continue to be a learning organization that promotes simplification, cost discipline and results delivery.  The execution of the Nationalization Plan will result in a shared success with our employees.

Be the Most Respected Company in Kazakhstan

To maintain the respect of our stakeholders in Kazakhstan our goals in 2017 are to continue our industry leadership  in contributions to the economy,  support the development of local services and manufacturing capabilities, execute impactful social investment programs, such as Egilik, on time and on budget, and continue work on implementing the development plan for Kazakhstani Content. 

Achieve Superior Operational Performance

Our 2017 goal of safely and reliably exceeding our Production Plan is only possible through superior operational performance – safe, reliable, efficient, and environmentally sound. Operational performance is also measured by high productivity such as executing major projects on schedule and within budget and reducing costs through sustained cost discipline.

Future Growth Project – Wellhead Pressure Management Project

FGP-WPMP will ramp up its activities in all work fronts delivering the results safely and injury and incident free. 2017 goals include delivering engineering and procurement, supporting ongoing work for infrastructure, gathering system, power, 3GP and 3GI and moving forward activities at Cargo Transportation Route. The project continues to look for more opportunities of local content development creating a legacy of new capabilities in engineering, high-tech equipment servicing, project management, construction and fabrication.