WATER is a symbol for the origin, progression, and cycle of life. Everything around us goes dead without water. Like water, positive economic impact revitalizes the environment and fosters local community well-being and economic progress. By consistently enhancing the ways in which we directly or indirectly contribute to the general well-being of the communities in which we operate, we hope to be good neighbors. We establish mutually beneficial, cooperative, and trustworthy connections with the government, our shareholders, our business associates, the local communities in which we operate, and each other.

Economic risks that affect the Adzhip Karachaganak B.V. procurement process include a lack of market competition, inflation, fluctuating exchange rates, rising costs for raw materials, and complicated transportation problems. Adzhip Karachaganak B.V. applies a variety of compensation mechanisms covering potential economic fluctuations in contract terms and conditions, as well as other measures described further, in order to maximize mitigation of these risks. It also develops technical specifications and tender requirements in a transparent and objective manner to ensure market competition.

Supply Сhain

Kazakhstan stands to gain more from the development of the Karachaganak Field than only revenue and tax revenue from the production of oil and gas. Additionally, solid, long-lasting partnerships are being established here, which could influence and further economic development. Working with regional vendors and contractors is crucial to the region’s and Kazakhstan’s overall economic development. Nearly 84% of the 388 contractors and suppliers that Adzhip Karachaganak B.V. granted contracts and contract revisions to in 2022 were local businesses. Adzhip Karachaganak B.V. signed more than 500 contracts and contract amendments for services worth more than US$ 0.8 billion as well as around 270 contracts and contract amendments for the supply of goods worth more than US$ 0.3 billion in 2022.

Adzhip Karachaganak B.V. is dedicated to operating in an ethical manner and in accordance with all relevant rules and regulations, as well as the established Code of Conduct policy. Adzhip Karachaganak B.V.’s standard terms and conditions include a number of provisions that cover ethics and business practices, anti-corruption, and conflict of interest. These fundamental principles are incorporated into and evaluated at every stage of the contract and procurement process until the contract is closed. Additionally, new guidelines for Adzhip Karachaganak B.V. and contractors’ industrial relations were put into effect in 2022 to reinforce contractors’ social obligations to care for their employees and guarantee a stable work environment for their committed workers. See “Industrial relations” in this report for further information.

The standard terms and conditions of contracts with Adzhip Karachaganak B.V. are regularly updated to take into account the most recent RoQ legislation as well as Adzhip Karachaganak B.V. requirements. Consequently, Adzhip Karachaganak B.V. updated Schedule D, “Contract HSE Requirements,” in 2022 to reflect the new RoQ Environmental Code standards. See the report “Environmental suppliers’ assessment” for more information. The Adzhip Karachaganak B.V. Joint Operating Committee’s Tender Procedures, which govern the purchase of products, works, and services for the Adzhip Karachaganak B.V. Project, are followed by KPO when carrying out its contracts and procurement activities.

As part of the digitization project, Adzhip Karachaganak B.V. seeks to improve electronic document exchange and processing, including tender submissions and review, in compliance with the most recent tender procedure. The development of local content is another major objective of the tender procedures. This includes the production of goods in the Republic of Qazaqstan through early tenders, trial orders, contracts in exchange for investments, conditional bid reduction, and Qazaq-only tenders. Adzhip Karachaganak B.V. has had to deal with complicated logistics issues and related schedule and cost threats. Adzhip Karachaganak B.V. has no control over the geopolitical risk, but it is making every effort to implement all available safeguards and substitute solutions to guarantee a continuous supply of materials and commodities.

Local Сontent Development

Adzhip Karachaganak B.V. has been actively working to increase the share of local content in the Adzhip Karachaganak B.V. project since the start of the field development. By involving Kazakhstani manufacturers and service providers, Adzhip Karachaganak B.V. hopes to decrease imports and increase the volume of local goods, services, and works in relation to the total volume of goods, works, and services procured under the Karachaganak project.

Adzhip Karachaganak B.V. has been creating and carrying out a regular Local Content Development Program for the Karachaganak project since 2001. The program’s goals for 2022–2023 align with the Adzhip Karachaganak B.V. Local Content Development policy, as well as state initiatives for the advancement of mechanical engineering, the Republic of Kazakhstan’s industrialization, and digitization. The program specifies the key performance indicators for tracking and evaluating progress in addition to the objective areas for local content development.

Long-term initiatives

Adzhip Karachaganak B.V. collaborates closely on supply chains incorporating Kazakhstani products producers with the RoQ ministries, industrial partners, and associations. As part of the Action Plan for the RoQ Oil and Gas Machine Building development for 2019–2025, the International Centre for Development of Oil and Gas Machine Building (IMBC) was founded in 2020. Its primary goal is to procure goods made in Kazakhstan for the machine-building industry by major oil and gas projects in Kazakhstan.

The IMBC got started in 2021. In addition to closely collaborating with the Ministry of Industry and Infrastructure Development, the Ministry of Energy, the PSA LLP Authority, and petroleum associations involved in the development of the national oil and gas machinery building, IMBC carries out its operations on behalf of the three operators, Adzhip Karachaganak B.V., TCO, and NCOC.

As part of the activities organized by the Center, the Association Board met in February 2022. The Roadmap for Local Content Development, which was created by the RoQ Minister of Energy and distributed to Operators after the conference, aims to increase the volume of goods that Operators purchase from three categories: electrical equipment, valves, and instruments. Adzhip Karachaganak B.V. and the RoQ Ministry of Energy convened weekly meetings from May to September 2022 to address the following procurement-related concerns as part of the Roadmap’s implementation.