2011 Year in Review
February 13, 2012
Dear Friends,
Last year we focused on celebrating the successes and growth we have experienced as a country and company during the first 20 years of statehood and since oil was first produced in Tengiz in April 1991. This year will be a pivotal year for Tengizchevroil as we focus on the next 20 years of partnership and growth with the Republic of Kazakhstan. Our growth over the last two decades has been tremendous and has resulted in direct financial payments of $60.1 billion to Kazakhstani entities since 1993. In 2012, we hope to embark on the next phases of growth for Tengiz, paving the way for more precedent-setting benefit for the Republic of Kazakhstan and its people over the next 20 years.
In 2011, we continued on our path of continuous improvement in all areas of the company. Our strong team performed extremely well in safety, environmental protection, production and product sales. We also received several prestigious recognitions from our key stakeholders. We are pleased to have been awarded by President Nazarbayev the Grand Prize Paryz award for corporate social responsibility. Additionally, we are proud to have been named the Safest Large Company in Kazakhstan at the Kazakhstan International Conference on Occupational Safety.
Safety & Health
Tengizchevroil continues to have industry-leading safety results in standard industrial safety measurements such as Days Away from Work. In 2011, more than 14,800 people worked for a total of 36.8 million hours for Tengizchevroil with only five injuries which required a day away from work. While this statistic is truly world-class performance, TCO strives for zero workplace injuries and in continuously working to improve in this area.
With an operation as large as Tengiz where hundreds of vehicles are continuously moving people and equipment over a vast territory, a critical aspect of our overall safety program is motor vehicle safety. TCO vehicles had only one serious collision and no injuries over the 49 million kilometers driven in Tengiz in 2011. TCO is employing satellite monitoring of vehicles and extensive training to try to drive this strong performance to zero collisions in 2012.
Environmental Protection
TCO’s investments of more than $2.34 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. In just eleven years, TCO has reduced total gas flaring volumes by 94 percent, bringing gas utilization rates at Tengiz up to a world-class 99.6 percent. Gas utilization and other program have helped reduce total emissions by 73 percent in the same timeframe. In 2011, TCO averaged just 2.28 kilograms per tonne of oil produced. TCO plans to spend another $121 million in 2012 on further environmental protection programs.
There is currently a major effort underway in Tengiz to improve the operation’s water utilization. In 2012, TCO will commission a portion of the new water treatment and recycling facilities which will greatly reduce TCO’s use of fresh water. The new system is designed to treat 6,000 cubic meters of domestic wastewater per day for use as boiler feedwater at the Tengiz plans. New pipeline will gather water from rotational camps and operations, treat it and then return the technical-grade water back for use in the plants or for new evaporation ponds. The $220 million project is being completed by several Kazakhstani companies and joint ventures.
Production & Product Sales Success
For the second straight year, TCO maintained production above 25 million tonnes of crude oil, truly realizing the benefit of the production addition achieved thanks to the expansion facilities commissioned in 2008. TCO’s keen focus on plant and operational reliability reduced the production impact from routine turnarounds at the Sour Gas Injection facilities and the KTL Plant last year. In 2012, TCO the first major turnaround is scheduled for the Second Generation Plant. The plant’s inaugural turnaround offers opportunities to further optimize the capacity and reliability of the new plant.
TCO sold 1.3 million metric tonnes of LPG, 6.9 billion cubic meters of dry gas and 3.8 million metric tonnes of sulfur in 2011. Sulfur sales represent another company record and 169 percent of the 2.3 million metric tonnes of sulfur produced for the year. TCO sales success has reduced sulfur block inventory at Tengiz to 4.1 million metric tonnes by Dec. 31, 2011, a reduction of 4.9 million tonnes, or 54 percent reduction over six years.
Financial Benefit to Kazakhstan
Since Tengizchevroil’s founding, the company has distributed $60.1 billion dollars 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’s salaries.
With $1.6 billion in 2011, TCO invested another company record in Kazakhstani Content, bringing our cumulative spend since 1993 up to $11.3 billion. TCO continues to employ multiple tools to increase Kazakhstani Content, including more than $13 million in loans to small and medium Kazakhstani businesses.
Corporate Responsibility
As of year-end 2011, TCO had invested $700 million to fund social projects and programs in the Atyrau Oblast for the benefit of communities and employees. About $185 million of that total amount has been invested in social infrastructure projects in the Atyrau region as part of TCO’s voluntary Egilik program. TCO’s budget for Egilik in 2012 is $20 million. About half of the budget is dedicated to finalizing construction of a new $60 million water system for Kulsary. The remainder of the Egilik budget is earmarked for starting on construction projects of kindergartens, a school and a park. Additionally, TCO’s Community Investment Program’s budget is more than $1 million in 2012 and will fund programs in partnership with local and international organizations which are focused on improving education and health in Atyrau Oblast.
In 2011, TCO received several recognitions for its commitment to corporate responsibility and social investment. In December, Republic of Kazakhstan President Nursultan Nazarbayev bestowed the Paryz Grand Prize for Corporate Social Responsibility upon Tengizchevroil. In October, TCO was honored at Eurasian Energy Week by KAZENERGY for a partnership with the Ar-Namys award for Corporate Responsibility for the TCO partnership with the Eurasia Foundation of Central Asia. The same program was one of the 12 selected to be highlighted by the World Petroleum Congress for their Social Responsibility Global Village in Doha, Qatar.
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 76 percent of TCO supervisor and manager positions. Over that last four years, 113 Kazakhstani citizens have replaced expatriates in key manager, supervisor and technical positions. The 566 percent increase in TCO’s training budget since the year 2000 illustrates the company’s emphasis on continued expatriate replacement.
Because attracting and retaining a world-class workforce to manage one Tengizchevroil’s large and complex business is critical to the company’s ongoing success, we have always strived to be one of the best places to work in Kazakhstan. Our benefits package was further enhanced in 2011 through the addition of health insurance choices and greater coverage for employees and their families. Additionally, in order to encourage employees to pursue a healthy lifestyle, TCO added a $1,500 per year allowance for each employee to utilize for fitness center memberships. Some of the most popular aspects of TCO’s compensation package are a pay for performance system, international development assignments and world-class training programs.
Outlook for 2012
Tengizchevroil will be focused on safely progressing several large and complex projects which have very strong business and job opportunities for Kazakhstani citizens in 2012. The first scheduled turnaround of the Second Generation Plant planned for third quarter of the year. The SGP turnaround includes general maintenance and replacement of facilities and will take several weeks and thousands of workers to complete. TCO will also continue to work to advance several major capital projects including the future growth expansion and a project focused on wellhead pressure management. Other major activity for 2012 includes the resumption of drilling activities in the Tengiz field.