MANGYSTAU. Creating the oil cluster
Today every fifth ton of Kazakhstani oil is produced in Mangystau. It makes the region one of the largest donors of national budget, and also allows to diversify its economy by attracting the investors to the related industries. Alik Aidarbayev, Akim of Mangystau region, told us about the problems and prospects of regional development.
Mr. Aidarbayev, what are the current social and economic indicators of Mangystau region?
To start with I’d like to notice that all our work on social and economic development of the region is organized in accordance with the instructions of the President, mentioned in the Message "Kazakhstan in a new global reality: Growth. Reforms. Development.”, in The National Plan “100 concrete steps on implementation of five institutional reforms”, as well as in compliance with the strategic state and industrial programs. This year we proceed with implementation of a new Program on the development of Mangystau region, which is scheduled until 2020.
If we talk about specific indicators, for the eight months of this year the industrial enterprises of the region produced goods with the total value of 1, 208 bln. KZT, while the index of actual volume (IAV) of production was 96.1%. Such a decline is stipulated by reduction of mining industry output, which accounted for 86.8% of the total volume of industrial production. The main reason is the decline in oil production to 12.1 mln. tons, or by 2.8%, as compared with the same period of the last year, due to suspended drilling program. However, the production of natural gas increased by 14.6% - to 1872.7 mln. m3.
Production volumes of manufacturing industry increased by 21.4% - to 81 mln. KZT( industry share is 6.7%). In particular, the finished metal products output grew up in 7.5 times, chemical products - by 10.2%, rubber and plastic products - by 18.6%.
In the period from January to August, 461 thous. m2 were commissioned in the construction sector, that is 11% more than in the same period of the last year.
The amount of investments to the fixed capital totalled 237.5 bln. KZT, reducing by 21.4%. The decrease is primarily due to the reduced investments to the mining industry, in particular - the expenditures for the vehicle and equipment purchase, exploration and production. However, under the second five-year plan of SPIID, the implementation of 28 investment projects was scheduled in the region, included in the Map of industrialization, with the total value of more than $163.2 bln. KZT, and with creation of more than 3 thous. jobs. 10 of them, valued at 88.6 bln.KZT, shall be launched in the current year, resulting in providing steady employment for 628 people. Since the beginning of the year, 4 projects have already been completed: "The construction of warehouses for Azersun Production and Logistics Centre LLP, intended for food products storage”, “The construction of pipe threading plant with gaslight connection of premium class for Kazakhstan Pipe Traders (Tenaris) LLP”, “Modernization of mineral fertilizers production with the increased estimated capacity for the finished products output of KazAzot LLP(1st stage)”, as well as “The expansion of Aktau International Commercial Northward Sea Port (completion) Aktau Sea North Terminal LLP”.
Stable situation is observed with the entrepreneurship. As of September 1, there are 48.3 thous. acting small and medium businesses (SME), showing 0.5% increase, compared to the last year.
If we talk about the employment, 17, 837 jobs were created across the region for eight months of the current year, taking into account the implementation of the Program “Employment road map - 2020 ". For the second quarter of this year, the level of total unemployment remained at 5.1%, while the share of youth unemployment grew up from 3.8% to 5.1%.
As for the social sphere, the problems, related to the triple-shift school education and elimination of damaged schools are fully resolved. At the same time, coverage of 3-6 y.o children by preschool education has increased, as compared to the previous academic year, showing a growth from 72.5% to 80%. Currently, the work on building network of health care facilities in Aktau is in progress, as well as the construction of the maternity and childcare center with 150 places.
What measures are taken by Akimat for development and diversification of the regional economy?
Taking into account the competitive advantages, we identified promising directions and reserves of regional economy growth: the further development of oil and gas production and service, transit capacity (transport and logistics), construction industry and tourism (Kenderli resort).
In particular, the number of hi-tech export oriented manufactures grows in the SEZ Aktau Seaport: 4 new projects will be completed this year. In order to increase the investment attractiveness of the SEZ, the engineer infrastructure is arranged in industrial sub-zones within its territory.
By the concept of Kazakhstani tourism development, it is planned to build the Kenderli resort by 2020. We are now searching for the investors for this purpose. In addition, within the implementation of the project “Regional development in Kazakhstan”, in collaboration with the EU experts, a tourism development strategy of Mangystau region for 2016-2020 years is being developed, providing for involvement of small and medium businesses into the tourism sphere. Implementation of the special programme of the domestic tourism development is started with use of concessional funding. DAMU Fund became the partner of Akimat in this project. The amount of 900 mln. KZT was allocated to the regional entrepreneurs for the development of tourism destinations and tourist routes, together with the Fund. Subsidies for such projects are issued through the second-tier banks.
As for the transport infrastructural direction, the construction of the Borzhakty-Ersay railroad is completed by Kazakhstan temir zholy company within the framework of the Program "Nurly zhol". It is expected that up to 8 million tons of cargo will be transported annually via this railway line.
The construction of the KTZh ferry terminal at the Kuryk port was started last April. The works of the first stage are in progress: construction of start-up facilities, land-utilization, ground arrangement, 3km railroad laying, building assembly and construction of electric power lines. Excavation pits and equipment for the installation of storage tanks are prepared. During the facility construction process, 500 jobs will be created, and 249 jobs will be available during operational period. Completion date: December of the next year.
The project of Aktau-Beyneu-Atyrau road reconstruction is funded by the national budget and with use of loans of the Asian Development Bank. The works on four sections of Shetpe-Beyneu route, with total length of 200 km., have already been completed within its framework. Another two sections (100 km) will be commissioned before the end of this year. Reconstruction of Shetpe-Zhetybai-Aktau road is continued and should be completed in 2017. For the period of construction of these two projects 1,310 persons are employed.
As for the expansion of Aktau International Sea Port to the north, the dredging works have already been completed, dry bulk terminals (grain terminal, intra-site engineering networks, office and operational buildings, as well as 3 piers) have been already constructed by now. As a result, the port capacity will increase to 2.5 mln. tons of dry cargo per year and 173 new jobs will be created.
The oil and gas sector remains the driver of the regional economy, what is your viewpoint on the prospects of this industry?
Indeed, the oil and gas sector dominates in the economy of Mangystau region: it accounts for about half of the gross regional product and more than 80% of total industrial production. The companies in other industries are mostly focused on this sector, meeting its needs for goods, services and works, scientific and design researches, professional training. Our region has the second highest industrial production share in Kazakhstan (10.4% in 2015), which is mainly due to the mining industry of the region (share in national volume is 18.3%). Many large and medium-sized enterprises are working in this industry. The oil output plan for the current year is 18.5 mln. tons, while, as I have already mentioned, we have reached 12.1 million tons for 8 months.
As for the challenges and prospects, of course, now our extractive enterprises are under the pressure of the low oil prices in the world. In order to support the oil and gas industry in 2015, the Government has taken measures to reduce the rate of export custom duty from $80 to $60 per ton. From January 1 of this year, the current ECD rate is reduced to $40 by the order of the Minister of national economy, and from March 1 the floating customs duty was introduces, with reference to the global market price. According to the floating scale, when the cost of crude oil is below $25 per barrel, the rate will be equal to zero, and at a price above $25 - the rate will be defined according to the corresponding table.
Currently, the oil and gas companies are trying to increase the oil recovery factor (ORF), which is 30% in our country, whereas in other countries it reaches almost 50% due to use of polymer flooding technology. For example, KazNipiMunayGas JSC and CPTDC institutions made the laboratory studies of a new technology, which will increase ORF on the existing enterprises by 12%, which is comparable with a discovery of new accumulations. Measures are taken to expand the resource base by means of geological exploration. NC KazMunayGas JSC has 16 sites for geological exploration in our region, including 9 prospecting sites with total reserves of 3, 406 mln. tons of oil equivalent (5 of which are situated in the offshore).
In order to improve the region's competitiveness, a national cluster for oil and gas production and refining, petrochemical industry and the related machine building and services, is created with the governmental support within the framework of the SPIID. According to the programme, the cluster will cover the territory of Atyrau, West Kazakhstan and Mangystau regions.
What is being done by the region leaders for improvement of business environment?
According to basic indicators of small and medium business development, we have the positive dynamics in this area: as of September 1 of the current year, the number of employed in the SME increased by 105.1% and amounted to 103.9 thous. people, as compared with the same period of the last year. As a result, the proportion of the population working for the SME increased by 1.8 percentage points up to 37.2%.
From its part, the Akimat of Mangystau region uses all possibilities to ensure a financial support for private businesses. We are in process of an active implementation of the integrated programs "Business road map - 2020" and "Employment road map - 2020», as well as the regional financing program for small and medium businesses in tourism.
The Regional Coordinating Council on "Business road map 2020" approved the subsidization of the interest rate, loan guarantees and grant financing for 113 projects, totalling 3.9 bln.KZT.during eight months of its functioning. In the current year, as a result of the integrated program implementation 1, 364 jobs were retained and additionally 198 new jobs were created. At the same time, at least 10% of employed persons will be sent from the employment centres of the region.
A corresponding infrastructure is provided for the business development. These are 7 business support centres at Atameken National Chamber of Entrepreneurs, operating in all towns and districts of the region, the Business Support Centers at the Damu Entrepreneurship Fund JSC in Aktau and Zhanaozen, as well as a business incubator and Technopark industrial zone in Zhanaozen. This year the Mangystau Business Support Center LLP and Atameken microfinance organization LLP have become operational in the region. The latter was established for lending of rural entrepreneurs. Since the beginning of the year, according to all programs on microlending of small and medium businesses, 103 microloans totalling 323.2 mln. KZT was provided with creation of 190 new jobs, as well as in the framework of implementation of the second direction of “Employment road map - 2020” program 83 microloans totalling 247.5 mln. KZT were provided by Mangystau branch of Fund for financial support of agriculture JSC with creation of 142 new jobs.
What are the results of the work of the Mangystau Economic Council?
This body was created at the beginning of this year for consultations and coordination of activities of the regional governmental bodies and entrepreneurs in crisis. The goal of the MEC is examination of issues and making recommendations on economic policy, determination of strategy, tactics and mechanisms to ensure sustainable economic development, strengthening of the social-economic and political stability, as well as the effective implementation of public-private partnership projects.
Since the moment of the Council establishment the training seminars were conducted for its members to enable each of them to realize their purposes within the overall strategy and to identify the projects that will help achieving them. Today, the information about current and future projects has been collected, the Map of priority directions of the field development in 2016-2020 years has been designed, as well as relevant indicators have been identified.
We have held a number of working groups meetings with the involvement of the private sector on the issues of tourism industry, construction of ferry complex in Kuryk village, construction of desalination plant and the establishment of power generating stations.
Economic realities require from us setting accurate goals and dynamic actions. We are ready for a meaningful dialogue for seeking opportunities to overcome the crisis and projects of further growth that will propel us to the next qualitative development level.
Aidarbayev Alik Serikovich
Graduated from Kazakh Polytechnic Institute named after V. Lenin. He has been working in oil and gas industry since 1985 year. Alik Serikovich has gone through all stages of professional development in oil and gas production, he worked as a Senior Geologist, Technologist, Foreman Driller, Deputy Shop Foreman on oil and gas production in Zhetybayneft FO of Mangyshlakneft association. Over the years he held senior positions in the Yuzhkazneftegaz production association. He served as CEO of Turgai-Petroleum JSC and Mangystaumunaigaz JSC. From April 2011 Mr. Aidarbayev worked as Chief Operations Officer on exploration and production of NC KazMunayGas JSC. In 2011-2013 years he held the position of CEO of Exploration Production KazMunaiGas JSC.
Akim of Mangystau region since January,2013.