PetroKazakhstan’s Image. New Corporate Look
Mr Bakhytzhan Issengaliyev, Vice President of PetroKazakhstan, answers questions from our magazine
Today, PetroKazakhstan is one of the most successful projects between Kazakhstan and China. How does your company position itself on the national and global scale in this context?
According to independent experts, today PetroKazakhstan is among the leaders of the oil and gas sector. Besides, it has every right to position itself as a company that plays a significant part in forming the country’s budget. The rate of our tax burden makes up 38%, which is the third largest figure in the country. Last year, we paid approximately $400 million in taxes to the local and national budgets. On the one hand, the company does feel this burden, but on the other hand this fact brings us satisfaction, because this is one of our contributions to the development of Kazakhstan’s economy.
As you know, since the end of 2005 we have two major shareholders – the national oil and gas companies of China and Kazakhstan. In PetroKazakhstan, I represent the interests of KazMunaiGas or, indirectly, the interests of the state. Although I have been working for the company only since the beginning of this year, I cannot fail to note how deeply our Chinese partners understand its major goals. Our key goal is to become an exemplary corporate citizen of Kazakhstan. It is no secret that previously the PetroKazakhstan brand was perceived somewhat negatively – because of its former owners. For this reason, we need to change the company’s image fundamentally. This is an economic, social and legal task and both shareholders are now acting with full mutual understanding. It is also important that our Chinese partner, although it holds more shares, aims to adhere to Kazakhstan’s interests and rules.
As for global plans, everything is still to be implemented. The global oil market is now occupied by giants whose production volumes are far higher than ours. Today, our goal is to become one of the leading oil and gas companies in Kazakhstan and we intend to reach this goal at an evolutionary pace. Each year, we invest at least $50 million in exploration of new hydrocarbon reserves. This is big money which could be used for technological modernisation, building the associated infrastructure, or social support. However, the management understands that the stable development of PetroKazakhstan in the future will be impossible without investment in exploration.
Although our goals may seem rather ambitious, I do believe that they are reasonable and well justified and that we are striving to attain them in the most rational way. We are thoroughly analysing the development of the energy market and our opportunities, and researching into new prospecting, production, transportation and processing techniques. The company’s management understands that, with such goals, we are setting higher requirements for ourselves and for those counterparts with whom PetroKazakhstan interacts in its operations.
What, in your opinion, is the basis of the new, positive image of PetroKazakhstan?
The essentials of corporate image today are the personality of the top leader, the clarity of goals set by the company and its social responsibility. These three are the criteria that determine the company’s look, its status and public perception. In these terms, everything is going well with PetroKazakhstan, I think.
Today, not only the oil and gas sector, but the whole Kazakh business community is of the opinion that Mr Bo Qiliang, the president of our company, is a very talented, professional and promising leader. For myself, I would like to mention his remarkable human qualities. These are no less important than the top manager’s professionalism.
Another important feature is the clarity of our tasks and strategy, which helps us attain our goals.
As for the third component, this is, first of all, about how the management resolves the issues of social protection, production safety and personnel development. Since CNPC and KazMunaiGas became shareholders of PetroKazakhstan we had no fatal or grave accidents on our production sites. At the same time, we still pay compensations to fifteen families of those who were injured during the time of the first owners of the company.
I think that today’s shareholders can play an important role in the success of PetroKazakhstan. KazMunaiGas, for example, is the national leader in the sector and, correspondingly, may become an example in the sphere of corporate management and development strategies. KazMunaiGas has done a lot in this area, having grown into a mature corporate structure that offers many lessons from which we can learn. We do not need to reinvent the wheel, we just need to ‘synchronise our watches’, hold joint meetings and workshops, and try to work as closely with shareholders as possible on both strategic and operating issues. KazMunaiGas’ shareholding in PetroKazakhstan is one of the key issues that will help position our company as a national one with a portion of foreign capital. Ultimately, the impression given by PetroKazakhstan’s former shareholders should improve with time.
Today, your responsibility as the company’s vice president includes relationship with the government. What issues are the most important for you in this sphere?
Now, we face a number of serious problems that are associated, among other things, with new regulations and resolutions adopted by the government. The most topical issue is the export customs duty. PetroKazakhstan is on the list of those companies that are subject to the duty because of some of our contracts. We aim to maximise our input into the country’s budget, and we think that it should be reviewed very carefully which of the two options makes our contribution to Kazakhstan’s economy maximal.
Today, PetroKazakhstan employs 3,500 people. Another 7,000 are permanently employed by our contractors. If we add members of their families, the figure will be rather high – 30,000-35,000. These are people whose lives are linked to our company directly. About 98% of our employees are locals. As long as PetroKazakhstan’s operation is efficient, they can support their families and be confident about their future. This also concerns vulnerable groups who receive our help through social projects. We help those who really need it, spending about $8 million each year. In doing so, PetroKazakhstan behaves as a serious and socially responsible company.
It should not be forgotten that the budgets of Kyzylorda and South Kazakhstan Oblasts are very sensitive to PetroKazakhstan’s business. In this connection, I would like to mention the second issue which relates to changes in taxation. We and our advisers are trying to defend our position, based on extensive arguments, and we hope that these issues will be resolved in the future.
It is clear that business and the economy are developing dynamically and that the fiscal authorities have to somewhat ‘adjust’ their position to take account of real developments and invent new rules of the game along the way. However, Kazakhstan has special laws that protect investors’ rights from new changes. Following the logic of their authors, it could be argued, for instance, that all Kazakhstanis should pay an extra income or social tax for the period from when they turned 18 years old, the reasoning being that previous methods of taxation were wrong.
The transparency of our laws and all those achievements that were initiated and fulfilled by the President of Kazakhstan have made our country recognisable, attractive and secure for business. The government must find some compensation mechanisms to maintain the balance of interests of those concerned.
We should be sure that the laws are stable and have no retroactive effect. This constitutes the image of the country that sets fair rules of the game and adheres to them. I think that many of our counterparts from the oil and gas sector will agree with me.
Please tell us more about PetroKazakhstan’s priorities in the sphere of social responsibility. What is your policy in regard to human capital?
This sphere is a top priority for PetroKazakhstan and our management pays special attention to personnel development. During the past two years, we trained and retrained over 3,000 people or, in other words, almost every one of our employees. This colossal task was fulfilled successfully. Today, PetroKazakhstan employs many ethnicities and it is a special pleasure to know that we have built a common corporate spirit, normal production relationships and a true, solid team.
Support for talented young people is another important aspect of PetroKazakhstan’s social policy. Thanks to our scholarships, young people from the villages of South Kazakhstan and Kyzylorda Oblasts now receive higher education both in Kazakhstan and abroad. We also pay special attention to sick and homeless children, pensioners and the disabled and try to give them primary assistance. We also help the Seleznyov Choreographic School and the Olympic Reserve School in Shymkent. To put it simply, we try to support those who will build the future of Kazakhstan.
Finally, our activities in the social sphere would not be comprehensive without environmental programmes. In February-March, we reached the final stage of the largest gas utilisation project. This gas was flared without control from the start of active production in the South Turgay basin. For this reason, this location was called ‘a flare valley’. We spent more than $100 million to put out these flares. In spring 2008 alone, over one hundred flares were stopped. In terms of the scale of this project, there is hardly a company in Kazakhstan that could match us. Yet, we do not stop at what we have already achieved and plan to develop environmental programmes further. One of our mottos is ‘Working to keep you on the move’. Now I am confident that if you ask people who live in the regions where we operate, there will hardly be a person who would speak badly about PetroKazakhstan and its shareholders.
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