The Kazakhstan government has set a course to eliminate discrimination when dealing with domestic manufacturers. However, the lion’s share of investment into the republic’s oil projects continues to flow to foreign producers. Kazakhstan’s oil industry today is compared to a locomotive that should haul all the other sectors of economy, including the consumer manufacturers. And the growth of the oil sector over the past several years allows hope for such a development. So, by 2015, Kazakhstan expects to increase its oil production to 150 million tonnes. This should give serious prospects that the orders for oil and gas equipment, goods and services would fall as a “golden rain,” Alas, the reality is quite different.

“Kazakhstan could receive approximately USD 15 to USD 20 billion if the Kazakh manufacturers could participate in the Republic’s oil and gas projects,” a member of Majilis (Lower Chamber of Parliament), a member of the Academy of Science, Kenzhegali Sagadiev, said. He said for foreign companies operating in Kazakhstan, reporting on increased Kazakhstan content is a mere formality. In reality, the oil tycoons prefer to place all their orders for oil and gas equipment with their “own fellow countrymen,” also major companies. During the first years of independence, this was not limited to just hardware.Everything, from work clothing to food and even cotton wool came from overseas.

As the heads of the Kazakhstan factories have lamented to journalists on several occasions, it is very difficult for a Kazakh commodity producer to get an order from a foreign oil company.However, over the last three years, the situation has started to improve for the Kazakhstan manufacturers. The number of orders placed with them has been increasing. For example, according to the press-service of Kazakhstan’s national company KazMunaiGas, during the first quarter of the current year, the local content in the purchases of the KazMunaiGas companies was 90.2 billion tenge,or 98 percent of the total 91.4 billion tenge. “Since the beginning of 2009, KazMunaiGas has signed memoranda with Kazakhstan enterprises for a total of 27 billion tenge and entered into contracts for a total of 9.4 billion tenge”, - KazMunaiGas President Kairgeldy Kabyldin said.

According to Kabyldin, in 2010 – 2011, the local content in the total volume of purchases is expected to reach 83 percent to 85 percent. Such an estimate is based, according to him, first of all, on the growing operations of the local commodity producers, including the new manufacturers of equipment and materials for the oil and gas sector. At the same time, some problems remain. According to the head of KazMunaiGas, Kazakhstan companies in such major oil and gas projects as Tengiz, Karachaganak and Kashagan are traditionally represented in the services and the building and assembly areas while the high-technology equipment is provided only by foreign companies. “In all of the three largest oil and gas projects - Karachaganak, Tengiz and North-Caspian – high-tech equipment constitutes 80 percent of the total equipment, and, naturally, the lion’s share of investments goes to its purchase,” the head of the company said.

He said that there are certain difficulties for the Kazakhstan companies to be included in the list of providers of high-tech equipment. First is the lack of competitive products. Second, the specific conditions of the Tengiz, Karachaganak and Kashagan fields (high hydrogen sulphide content, anomalously high reservoir pressure, depth of occurrence, etc.) set high requirements for the equipment. And this is why such equipment is manufactured individually and purchased on a one-time basis. But all is not so bad for the Kazakh manufacturers.

According to the KazMunaiGas president, they should be able find their niche in the oil and gas projects. “The local companies must focus on the development of more promising areas, namely: operation and maintenance of field production facilities, as well as development of coastal infrastructure to support offshore operations,” Kabyldin said. Therefore, according to the head of KazMunaiGas, Kazakhstan companies should concentrate on a step-by-step winning of the maintenance, repairs and spare parts markets. “One of the effective ways to win the high-tech equipment maintenance market is to create alliances with international companies,” Kabyldin emphasised.

The alliances can be created with well-known manufacturers from either the former USSR or from anywhere else worldwide. According to Kabyldin, for the Kazakhstan manufacturers to be able to lead in the oil projects, it is necessary to create a new service company within the structure of KazMunaiGas to form several joint ventures with international companies in various areas.