The oil and gas services sector

Overview

Kazakhstan is home to the single largest oil field outside of the Middle East and to date oil exports already account for 60% of the country's export revenues, 35% of government revenues and 17.5% of total gross domestic product. But in stark contrast to the industry's huge economic contribution there remains a serious issue of underinvestment in the services and infrastructures that support its operation. This shortfall of investment is acknowledged by the government which is keen to see production and efficiency levels increase in the industry but feels its funding responsibilities lie within the greater macro-economic investment projects such as transport, education and health infrastructures. Accordingly, private foreign investment in oil and gas services is welcomed by the government in Kazakhstan.

Foreign businesses and investors are especially welcomed by the Kazakh government when there are clear benefits to the economy and local people as a whole. In Kazakhstan there exists a chronic shortage of local skills, and companies that can provide engineering and training programmes fare well under the current regime. Further investment in technologies and processes are needed and encouraged in the country, and whilst the government is likely to protect strategic assets such as pipelines for security reasons, it is more than willing to work with foreign businesses and investors on a wide range of projects.

Internationally, there exists concern over government nationalisation of oil and mineral assets that has drawn comparisons with our neighbours to the north. The ongoing difficulties faced by some foreign investors in Russia along with high profile asset battles, including BP's current difficulties, have highlighted potential disadvantages and difficulties of investing in foreign countries, but as an active investor and industry participant in Kazakhstan and Russia I would see these comparisons as inappropriate and premature. Whilst the Government in Kazakhstan will protect strategic assets in the country for security reasons, it also places high value on the country's partnership with foreign businesses and investors. To date, these partnerships have brought into the country the much needed investment and local training that have fuelled the country's success as an independent sovereignty and established its international reputation for business and investment.

current case study

MunaiGaz-Engineering Group

Ms Ashkenazi is currently Chairman of the Board of the MunaiGaz-Engineering Group, Kazakhstan.

Munai-Gaz is a leading engineering, procurement and construction contractor and it operates in the fields of compressor stations for major gas pipelines and tunnelling operations for utility networks, gas turbine and diesel plants as well as equipment supply and maintenance for the oil and gas industries.

To date, ManaiGaz has operated across Kazakhstan, Russia, Ukraine, Belarus, Turkey, Turkmenistan, Azerbaijan, Iran and Bulgaria.

'I saw an excellent opportunity to bring my management skills to the Kazakh market and participated in the tender process for a compressor station project and was subsequently chosen to operate the company. Since then, the company has grown considerably to become the leading Kazakh engineering, procurement and construction contractor with over 300 employees. Although we currently employ a significant number of Ukrainian engineers, it is our intention to have them, over time, train a significant number of local people which I believe will be hugely beneficial for my country in the future as it continues to develop its plentiful oil and gas reserves.'

Gaukhar Ashkenazi