Tengizchevroil's Commitment to Kazakhstani Content

One of Tengizchevroil's key priorities is to build the local capacity and capabilities of Kazakhstani businesses. TCO views our dedication to continuing to grow use of local goods and services as supporting Kazakhstan's sustainable development as well as good business. In the last four years alone (2007 - 2011), we have spent over $5 billion on Kazakhstani goods and services, with an emphasis on finding and enabling opportunities for local businesses.

TCO's strategy in increasing our use of Kazakhstani goods and services centers around four elements: creating opportunity, growing manufacturing and production capabilities, transferring skills and maximizing local employment. Using this philosophy, Tengizchevroil has been able to increase our Kazakhstani goods and services spending from $27 mln. in 1993 to $1,350 bln in 2011. In 2010, 68 percent of our total spend for the year was spent with Kazakhstani companies.

Tengizchevroil 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-in-hand with companies to help them adopt international standards. Tengizchevroil and our partners worked for two years with KazMorTransFlot to design and construct the first double-hulled tankers to traverse the Caspian Sea. The Kazakhstani company is now safely and reliably moving Tengiz crude.

Our most aggressive effort to date has been part of our expansion project. About U.S. $2 billion has been spent on Kazakhstani goods and services with more than 320 local companies on more than 4,000 equipment and supply orders. The Second Generation Plant is an excellent example of the success in using Kazakhstani suppliers. The plants 32 air coolers and 13 pressure vessels were produced by Beylkamid. Forty percent of SGP's one-kilometer steel pipe rack was produced by Imstalkon in Karaganda, Almaty and Taraz. Additionally, Shanyrak Village, a $112 million project, was built by a Kazakh consortium of Munaigazkurylys, Consolidated Development Corporation and Intergazstroi.

Local Content and Small Business Development

Ensuring that there are world-class suppliers of goods and services in Kazakhstan is essential to Tengizchevroil's sustainable growth. As TCO continues to grow our business in Kazakhstan, we are eager to expand our relationships and investments with local companies. In order to help improve availability of goods and services in Kazakhstan, Tengizchevroil frequently co-hosts supplier forums with other large Kazakhstani crude oil producers.

At the 2008 forum, representatives of local and international suppliers and state bodies discussed the continued development of Kazakhstan's goods and services suppliers to the energy business. A variety of workshops were offered to help businesses learn the standards, processes and best practices in working with large companies. 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 local companies develop products and services that comply with international standards.

Another example of building local capabilities and creating employment is our small business loan program. Under this program, we provide interest-free loans to entrepreneurs to create businesses. TCO assists the businesses we support through these loans with business planning. The program targets opportunities TCO can support through our business needs for products or services. Over the life of the program, more than $7 million has been loaned, 174 projects have been funded and more than 1,400 people have been employed.

There are many local and regional examples of companies who can attribute their success, in part, to Tengizchevroil's loan program. Raushan Farm received a TCO loan to create a greenhouse where they could grow fruit and vegetables year-round. Raushan Farms is now a core supplier of food for workers at Tengiz and are known as a quality supplier in the region.

Akberen used their TCO loan to purchase modern printing equipment. Akberen is currently producing everything from Tengizchevroil business cards to banners and brochures.

Adem Ecology - wastes disposal and recycling services. In early 2010 Adem ecology LLP received a loan from TCO to purchase innovative household waste recycling equipment package which for the Atyrau oblast was a new badly needed waste management system which would help minimize amounts of municipal garbage waiting to be hauled out and dumped to the landfill and maximize output of standard assortment of recycled materials.

When projects under SMBD programs are recommended for TCO funding specialists from various TCO departments are involved in their review and approval processes to determine primarily their relevance for TCO needs and that of oil and gas sector as a whole.