IMB Center General Director announced plans for 2022

Marat Karimov, General Director of ALE “International Center for Development of Oil and Gas Machine Building” (IMB Center), in an interview with Zakon.kz spoke about the first results of the Center’s activities and its immediate plans.

- Would you please provide the purpose of IMB Center creation?

Kazakhstan, being a relatively young country, is one of those that is much dependent on imported goods, especially for its larger oil and gas projects. From the time when Kazakhstan became an independent country, there have been several initiatives on developing in-country value and most of them have been successful, in oil and gas sector, in particular, there was good progress achieved in service provision capabilities.

As part of continuing the increase of opportunities for the development of in-country capabilities of manufacturing machine building goods, with support of the RoK Government there was a decision made to create an international center for development of oil and gas machine building with involvement of three major oil and gas operators, who are developing Tengiz, Kashagan and Karachaganak fields.

The main purpose of creating our Center is to contribute to the development of production of Kazakhstan oil and gas goods by, among other things, studying the local market of existing manufacturers who has the potential to supply these goods according to the requirements of the Operators and by supporting their capacity development potential where necessary. In addition, it is objective to work closely with international manufacturers in the localization of their production in our country, as well as in attracting investment by fostering the creation of joint ventures, facilitating technology and know-how transfers.

IMB Center is a non-commercial organization and does not finance any third-party activities.

- When was the Center established?

In November 2020 an Agreement on Intent was signed between the RoK Ministry of Energy, RoK Ministry of Industry and Infrastructural Development, PSA LLC, Association of Kazakhstan Machinery Industry and the Major Operators, which outlined the main principles of creating the IMB Center.

Considering the intricacies of the foundation and other related documents, the process of development of those documents and further agreement thereof amongst the key stakeholders required certain time. As a result, IMB Center started functioning in April 2021.

The Association was introduced to the machine building industry and public at the IX Kazakhstan Machinery Forum on 22 September 2021 in Nur-Sultan city.

IMB Center began its core activities in October 2021.

- What was achieved in 2021?

In 2021, as per the Major Operators’ recommendation, IMB Center conducted the work on analysing the demands for three prioritized commodities in their respective operations as well as the market’s capabilities of manufacturing such, namely: valves, electrical and instrumentation.

Based on the demand analysis, a list of RoK manufacturers producing such goods was identified from all available sources. Within the period of October - November 2021 site surveys of some 50 local manufacturers were conducted in 10 regions and 3 cities of republican significance of the country.

The site visits were the necessary and important step for further analysis and identification of the relevant manufacturers and matching their capabilities with the Operators’ demands, as well as to gain an understanding of the main barriers that are hindering the development of local oil and gas machine building industry, all of which is a continuous process. The results of such surveys would be followed by the assessment of manufacturers’ capacities and capabilities, through conducting relevant gap analyses, subsequently arriving in the preparation of capacity development plans that would help the manufacturers to develop their manufacturing capabilities in order to ultimately meet the requirements of Operators.

In parallel, active work is ongoing with the RoK and international development institutes and associations, as well as with companies expressing interest in localization of the production of goods in-country.

- What are main barriers preventing the local manufacturers to meet the requirements of Major Operators?

They are quite known and following the visits to manufacturers it was confirmed that an effective technological cooperation between the Major Operators and local industry is possible by eliminating some main issues that are common to majority of the manufacturers. Namely, these are the absence of international certifications such as ASME, API, IEC, ATEx etc., and the lack of continuity and constant level of required quality and standard in order to achieve certification, lack of implemented and well-utilized management systems, poor implementation and compliance with HSE, lack of qualified technical personnel, and the limited knowledge of Operators’ requirements.

While majority of these issues can be resolved by manufacturers themselves, we believe that increased state financial support is required for international certifications and IMB Center is working with relevant stakeholders in this direction.

Another significant barrier to be mentioned is local manufacturers do not always enjoy preferences on exemption from payment of customs duties and import VAT in regard to imported goods for needs of major oil and gas projects, what puts the local manufacturers in disadvantageous position.

- What are your plans for 2022? Are there real projects?

As for the future activities, in 2022 IMB Center is planning to continue the activities on the three commodities mentioned above, including the practical implementation of identified localization projects and provide technical support to local manufacturers as part of capacity development efforts.

It is also planned to commence similar works on other remaining commodities, identifying synergies, carrying out the appropriate market analysis, proposing new opportunities for localization and searching for potential investment opportunities and fostering their realization.

- What products/goods are planned to be localized in the near future?

In 2021 we received from Operators and analyzed more than 35,000 line items of electrical, valves and instrumentation goods, and can confirm that the vast majority of the types of goods are similarly in demand amongst all three Operators.

Having carried out analysis of Operators’ demand data and local oil and gas machine building industry we have identified several goods which have potential to be localized in the near term, provided they meet the strict requirements set for the equipment used in the three largest oil & gas fields in country, such as high pressure and H2S level, and are competitive in other principal terms. Among them we can mention such goods as in valves, namely: safety valves, relief valves and bursting discs, ball valves, gate valves; in instrumentation, namely: tubing and fittings, level gauges, instrumentation cables, pressure instruments, temperature instruments; in electrical equipment, namely: power cables, Ex-proof enclosures, ex-proof cable glands, grounding rods and bars, cable trays.

As per IMB Center’s foundation documents. each Major Operator carry out their own procurement processes in line with their internal procedures and as such all our deliverables are of recommendation character.

- Is there a list of local manufacturers that meet the requirements of the three Operators?

Initially, a longlist of domestic producers of oil and gas machine building goods was compiled according to the three recommended commodities, which included more than 60 enterprises.

This list was compiled on the basis of databases of manufacturers provided by the RoK Ministry of Industry and Infrastructural Development, AKMI, Akimats of regions and cities of republican significanc e, as well as obtained from open sources. Further, IMB Center conducted site surveys of around 50 V/I/E manufacturers, i.e. those who expressed their interest in engaging with IMB Center’s initiatives in order for the latter to initially assess their production capabilities and to actualize the list of manufacturers. To date, after assessing their production capabilities and matching with the demand data, the Center may conclude that there are domestic companies that meet the requirements or could be able to meet in the short-term by eliminating some of the issues mentioned above.

- What criteria does the Center use to select local plants for capacity development?

IMB Center will follow the following process in selection of potential manufacturers for providing technical support in their capacity development process.

Their product range shall match the top-priority goods list identified during the Operators’ demand data analysis. An ethical due diligence exercise shall be carried out to ensure that any such manufacturer is not included into any sanctions list. Technical and financial stability of manufacturers are important and will be given due attention.

It should be noted that as far as results go, Center will be focusing on attaining quick-wins in terms of potential for localization. This means that implementation of capacity development plans will be focused on those manufacturers whose facilities and capabilities have the highest likelihood of localizing the top-priority goods and that express interest and commitment to following through with such.

- What can you tell us about investment attraction, what work is being done in this direction?

Cooperation has been established with leading RoK and international development institutes and associations, as well as with companies potentially interested in localization of goods production. By the end of 2021 we had signed a few memorandums of understanding with local and international companies such as:

Honeywell for localization of temperature transmitters, gas detectors and control cabinets;

PetrolValves for localization of manufacturing of a range of valves;

Sigma Solutions for localization of manufacturing of ex-proof electrical distribution boards, junction boxes and heat tracing systems (cables).

We will follow up these activities in 2022 and hope that with the support of key stakeholders they will reach a practical implementation.

- What is the actual end deliverable of the Center following all activities mentioned before?

The end result is a comprehensive recommendation made to the Operators that demand for particular toppriority goods may be accommodated by capable local manufacturers and/or facilitated JVs that have either implemented capacity development plans and/or are deemed qualified to be able to deliver against the requirements of the Operators based on the technical specifications for any such particular goods.

As mentioned before, Center’s deliverables to Operators are of recommendatory nature and the latter shall conduct their procurement activities with their respective internal procurement procedures.