KAZENERGY Association summarized the results of the past year and defined the tasks for 2018

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Tuesday, 30 January 2018 16:28

The 22nd offsite meeting of KAZENERGY Association Council was held on January 26 in Almaty at Kazakh-British Technical University.

 

Opening the meeting, the Chairman of Association Timur KULIBAYEV noted the effective work of KAZENERGY which can serve as an example for other industry associations. The last year which was held under the auspices of the International Specialized Exhibition Expo-2017, was not an exception. KAZENERGY actively participated in formation of EXPO business program and organized the largest international events: Ministerial Conference “Ensuring sustainable energy development”, the Eighth international forum on energy for sustainable development and the 11th KAZENERGY Forum which were highly appreciated by the international community.

General Director Asset MAGAUOV presented general information on the activities of the Association. He noted that last year KAZENERGY operated in 9 key areas and achieved certain positive results in each of them. They include: taxation and tariffs, subsoil use, turnover of petroleum products and liquefied petroleum gas, electricity, ecology, local content development, technical regulation, human resources development, international activities and analytics.

 New Tax Code adopted in December 2017 created additional conditions for the growth of investments in geological exploration and production of raw hydrocarbons. This has become possible due to the implementation of the following stimulating measures: inclusion of geological exploration costs to deductions on production stage; introduction of the right to use alternative tax for subsoil use in exchange for the past costs, rental tax, mineral extraction tax (MET) and sales tax (ST); cancellation of the commercial discovery bonus; receipt of revenues from the sale of oil for export and crude gas based on the actual selling price; assignment of expenses for training at actual costs for deductions.

Magauov noted that in general, the legislators supported over 90% of key amendments proposed by the Association in the work on the new Tax Code, which indicates a high level of elaboration of legislative initiatives.

Another important legal document – the Code “On Subsoil and Subsoil Use” - aimed at improving the situation in the field of geological exploration, facilitation of access to contracts, as well as the introduction of international standards for reserves recording, was adopted in late 2017. In the process of elaborating the proposed legal regulations, about 120 in-person meetings of the Working Group of the Ministry of Energy were held with active participation of KAZENERGY. As a result, over 60% of more than 300 amendments were supported.

The issues of pricing for oil products and liquefied petroleum gas were relevant in 2017. With the support of the Ministry of Energy, the Chairman of Oil and Gas Industry Committee of the National Chamber of Entrepreneurs (NCE) and the leaders of the sectorial unit of the NCE of the Republic of Kazakhstan, changes have been made to the current legislation, as a result of which: the requirements for the introduction of Accounting control devices for oil depots have been canceled and the time limits for filling stations have been postponed.

Under the auspices of the Ministry of Energy with the active participation of the Association, the work has been carried out in the electric power industry in 2017 on the following issues: enlarging of RECs; increase of incomes of electric grid companies when taking electrical networks on balance; reduction of electricity prices from new RES facilities due to the introduction of the auction mechanism, as well as facilitation of the process of documents preparation for land sites occupied by power lines.

KAZENERGY pays special attention to “Ecology” area. Last year, the Association ensured that the subsoil users reserved the right to choose between the historical method for the quotas allocation and benchmarking method.

As for technical regulation, many efforts were made to work on the new Law “On Standardization” in 2017. Magauov believed that the main positive results a significant strengthening of the role of national standards and increasing of the protection of interests of local producers. Thus, according to KAZENERGY, important amendments were made to the Law “On ensuring the uniformity of measurements”, due to which (on the example of the North Caspian project), real savings of about 500 million dollars annually will be achieved*.

Since 2013, 20 meetings were held within the operating Scientific and Technical Council, 108 issues were introduced, including: effective directions of research and development (R & D); ensuring of the transfer of experience between subsoil users to improve the efficiency of applied technologies; support of Kazakhstan innovative developments.

The Association’s work on direction “Human resources development” is aimed at ensuring of the social stability through the appropriate regulation of social and labour relations. The key results of the last year may include: the approval of the Industry framework of qualifying oil and gas, oil refining and petrochemical fields; introduction of changes in the Industry agreement on remuneration in terms of the minimum tariff rate in the industry etc.

Traditional educational programs of KAZENERGY were continued in 2017: educational costs in amount of USD 1 mln. (at the expense of KPO, NCOC) were covered for 563 citizens of the Republic of Kazakhstan; Chevron scholarships (KZT 6,5 mln.) were allocated for 26 students of higher educational institutions and colleges of the Republic of Kazakhstan; an intellectual team contest “Student Energy Challenge” was held within the framework of KAZENERGY Forum and the prize fund in amount of EUR 18 thous. was paid to three teams – the contest winners (Shell-Kazakhstan).

The main results of the Association’s activities include three large events held within the International specialized exhibition “Astana EXPO-2017”, they are: the Ministerial conference under the auspices of the UN “Ensuring the sustainable energy development”, the Eighth international forum on energy for sustainable development and the 11th KAZENERGY Forum. The Ministerial conference and the Eighth forum had a broad range of participants (more than 2900 participants from 90 world countries, more than 350 international and local media, 20 ministries, 17 international organizations).

The 11th Kazenergy Forum which became the final event of EXPO business program was also successful. More than 2200 participants from 40 countries participated in the forum, more than 300 international and local media covered the activities.

Following the results of the forum, a resolution was accepted, and analytical materials of the Association were presented: the National Energy Report 2017 and the two-volume illustrated edition of “Oil and Gas of Independent Kazakhstan”.

In conclusion, General Director of KAZENERGY noted that the past year was very efficient. The large projects were completed, but there are a lot of plans for the future. Asset Magauov noted the preparation of the Comment to the new Code on subsoil, changes in the legislation on petroleum products market (introduction of market mechanisms), work on the problems of environmental legislation, review of “Women in oil and gas field”, report on the corporate social responsibility for 2017 and holding of the meeting of WPC Council in 2018.

Also during the meeting of the Association Council, the report of Nurlan DZHANEKENOV, Managing Director - Director of the Department of Financial and Economic Analysis, “On approval of KAZENERGY Association’s budget for 2018” was presented and unanimously approved by the participants.

It should be noted that the current meeting of the Association Council was held at Kazakh-British Technical University. In his speech, Kenzhebek IBRASHEV, rector of KBTU, noted the important role of companies in supporting the university, the students of which are potential employees of oil and gas companies. In order to ensure that the faculty and students and employing companies cooperate fruitfully in the field of training and recruitment, Ibrashev suggested creating the “Advisory Council of Kazakh-British Technical University”. “The establishment of these structures reflects the number of provisions of the Address of the President of the Republic of Kazakhstan N.A. Nazarbayev on the creation of a link between industry and education, and de facto – the existing long-term cooperation of KBTU JSC with leading companies of all sectors of the economy of the Republic of Kazakhstan. By institutionalizing these structures, KBTU JSC plans to increase the influence of employers both on the strategic development of the University and on improving the quality of graduates, by introducing the wishes and recommendations of the Council members in educational and research development plans” - the rector emphasized. This initiative was supported by all members of the Association Council.

*Note:

There are more than 30 000 measuring tools at the large production facilities (fields), which should have certificates of type approval or metrological certification (single products), as well as certificates of the measuring tools verification. In accordance with current requirements, it is necessary to perform annual verification for the majority of measuring tools. In this regard, it is required to dismantle measuring tools, to stop production with mandatory release of working environment from equipment (pipeline, vessels, etc.), which in turn increases the risks for the safety of maintenance personnel and the environment due to a decrease in reliability and integrity of production equipment, and also leads to a decrease in production.

The annual expenses of the company include (approximate amount):

- $ 2 mln. for verification of measuring tools;

- $ 5 mln. for preparatory works connected with verification (installation of scaffolding, release of equipment from working environments, etc.);

- loss of production as a result of stops for 30 days.

As a result of introducing amendments and additions to the Law “On ensuring the uniformity of measurements”, only measuring instruments controlled by the state industry authorities (measuring tools for the products (oil, petroleum products, etc.), measuring tools used in measuring emissions, etc.) will be subject to verification. Requirements on the need for verification will be established in the regulatory legal acts of the Republic of Kazakhstan.

 

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