It has been a year of achievement for the North Caspian project
and its Operator, NCOC, capped by a visit on December 7 from the
President of the Republic of Kazakhstan to mark the long-awaited start
of commercial production from the Kashagan field. This has been our
main objective over several preceding years of intensive work and I
am pleased to say it was accomplished with safety for our people, the
environment and the community. You will find more information about
this in the report you are now reading.
Last year for the first time we issued a Sustainability Report in
compliance with maturing global best practice as a "continuous
improvement step” in our overall commitment to sustainability. This
year, we continue the reporting as a regular feature of our responsibility
to communicate transparently and openly to the local community and
the people of Kazakhstan about our performance in developing their
In presenting last year’s report to the public, some asked why we need a Sustainability Report. As we continue to
report consistently on an annual basis, I believe it will become clear that its value lies in summarizing and presenting
the most important data in a way that can be compared from year to year, allowing the public to monitor long-term
trends in our performance, using indicators that are important in understanding the sustainability of our project’s
benefits to Kazakhstan and its people.
We join an increasing number of companies in Kazakhstan reporting performance in this way, and we hope it leads
to a better understanding of the contribution our industry makes in meeting the needs of the present generation
without compromising the ability of future generations to meet their own needs – the balancing of short- and longterm
interests and integration of environmental and social considerations into decision-making that is the heart of our
concept of sustainability.
I look forward to continuing the dialog with you, our stakeholders, regarding this report and our performance in
NCOC Managing Director
1 - This report complies with the recently-updated “Oil and Gas Industry Guidance on Voluntary Sustainability Reporting” (3rd edition, 2015), developed jointly by IPIECA (the global oil and gas
industry association for social and environmental issues), IOGP (the International Association of Oil and Gas Producers) and API (the American Petroleum Institute).
The North Caspian project is the first major offshore oil
and gas development in Kazakhstan. It covers five fields:
Kashagan, Kalamkas-Sea, Kairan, Aktoty, and Kashagan
For more detailed description of project challenges,
see www.ncoc.kz - a
The giant Kashagan field ranks as one of the largest oil
discoveries of the past four decades, with approximately
9-13 billion barrels (1-2 billion tonnes) of recoverable oil.
The Kashagan reservoir lays 80 km offshore the city of
Atyrau in 3-4 meters of water, and more than 4 km deep
The fluid now being produced from Kashagan is a mix
of hydrocarbons: light, gaseous components such as
methane, ethane, carbon dioxide, and hydrogen sulfide,
and heavier petroleum components. Kashagan as a
reservoir is characterized by high pressure (almost 800
bar), and a high concentration of hydrogen sulfide (H2S),
making the gas "sour”. A positive feature is that gases
at that pressure, when re-injected, can actually enhance
oil recovery. So the light, gaseous components will be
separated from the heavier oil offshore on D-Island and
most of it re-injected under high pressure back into the
reservoir, into the same rock formation from which it was
produced. The remainder of the gas will be sent to the
Bolashak onshore processing facility where hydrogen
sulfide is removed from the “sour” gas. The processed, or
“sweetened,” gas will be used for onshore and offshore
power generation and some will be marketed as
The combined safety, engineering and logistics
challenges in a harsh offshore environment make
Kashagan Phase 1 one of the largest and most complex
industrial projects currently being developed anywhere in
Given its scale and technical complexity, the North
Caspian project will be developed in phases. Kashagan
Phase 1 began commercial production in 2016. The
estimated cost of Phase 1 is about US$55 billion. Future
phases of development are currently in various stages of
planning, as described below.
In November 2016, NCOC received approval from the
RoK Government to start early engineering and design
work toward a future expansion of Phase 1 production
at Kashagan. The project, called CC01 (“compression
center number one”), will increase production by 80
thousand barrels per day by installing additional raw gas
compression and injection capacity offshore, growing
Phase 1 production capacity at that time to a target
level of 450 thousand barrels per day. The Government’s
approval allows NCOC to progress early engineering
and design work in 2017, and to develop plans for
further engineering and design work in 2018.
Furthermore, NCOC is studying the potential codevelopment
of its Kalamkas-Sea field and CMOC’s
nearby Khazar field. Together these two fields have
recoverable reserves of 67 million tonnes of oil and 9
b.c.m. of gas. We hope that the cost savings that can be
achieved by the joint development of these fields will
make their development economically viable, and if so
possibly also unlock the development of other fields in
Development of other fields is still in the assessment
A project to replace two 28-inch pipelines approximately
95 km long, from D-Island to the onshore processing
facility at Bolashak, commenced in spring 2015 and was
completed ahead of schedule in August 2016.
On 28 September, 2016, NCOC reopened the first
wells on A Island, restarting the program of testing and
commissioning production facilities.
The RoK Ministry of Energy announced that the first
batch of oil for export from the Kashagan field was
dispatched on 14 October, 2016.
All drilling work for the first phase was completed in
2016. A total of 52 exploration, appraisal and production
wells have been drilled since the start of the project.
In addition, topsides work is ongoing on the islands
adjacent to D Island (EPC-2 and 4). On December
17, EPC-3 commissioning was completed ahead of
At the end of 2016, production was ramping up to
a capacity of 180,000 barrels per day, with steady
operation demonstrated at 160,000 barrels per day.
Once associated (sour) gas reinjection is started up
and optimized, Kashagan Phase 1 is expected to reach
production capacity of 370,000 barrels per day by the
end of 2017.
Current potential routes for oil export are:
In 2016, North Caspian project shareholders agreed on a commercial
framework to sell gas that is not re-injected or used in the facilities.
Sales gas is shipped through a dedicated pipeline to Makat and then
via KazTransGas infrastructure. Sulfur will be shipped by rail. Each
shareholder is independently responsible for transporting and marketing
its own share of production.
The North Caspian project is developed under the North Caspian Sea
Production Sharing Agreement, signed by the Republic of Kazakhstan
and an international consortium of major oil and gas companies in 1997.
Today, that consortium includes seven of the world’s largest and most
experienced energy companies: KMG, Eni, ExxonMobil, Shell, Total,
CNPC and Inpex. Each shareholder is independently responsible for
transporting and marketing its own share of production, and for
reporting and sharing that production with the government according
to the NCSPSA.
The project is managed by an Operator, acting on behalf of the
shareholders. Prior to 2015, the North Caspian project was operated
under a model in which the Operator delegated certain development
and production activities to four “agent” companies. In late 2014 the
shareholders agreed to further integrate and consolidate management
with the creation of unified Operator North Caspian Operating
Company N.V. (NCOC)2. In addition to efficiency, the transition
better positions the project for asset transfers, and for future phase
developments within the NCSPSA area. The top executive officer of
NCOC is the Managing Director.
To ensure company systems and processes meet the highest
international standards, NCOC holds the following certifications:
The external verification for these awards requires NCOC to regularly
demonstrate not only compliance, but also continuous improvement in
its management systems. Certifications were renewed effective
11 January, 2016.
2 - Here and elsewhere in this document the abbreviation NCOC refers only to North Caspian Operating Company N.V.
The term Operator may refer to NCOC, or to any of the previous Operators under the NCSPSA, as appropriate in
3 - One million standard cubic meters of gas is taken as provisionally equivalent to 0.0013 tonnes of crude oil.
4 - API RP 754 is American Petroleum Institute Recommended Practice 754, which classifies process safety indicators for the petrochemical and refining industry into four tiers. Tier 1 is considered suitable for nationwide public reporting. See http://www.api.org/oil-and-natural-gas/health-and-safety/process-safety/process-safety-standards/rp-754
5 - The Global Warming Potential multipliers used to calculate CO2 equivalence are 21 for CH4 and 310 for N2 O, using 100-year time horizons, based on RoK Ministry of Environmental Protection Order № 280-e(p) of 5 Nov 2010 “Об утверждении отдельных методик по расчету выбросов парниковых газов.” Emissions are calculated at the facility level based on approved methodologies and requirements established by the RoK Environmental Code and applicable regulations, and consistent with the 2006 IPCC Guidelines for National Greenhouse Gas Inventories.
6 - Calculated from indirect electricity consumption using a demand-side emission factor of 0.995 tCO2-eq/MWh for Kazakhstan grid (combined margin) in 2015, per “Методика расчёта коэффициента выбросов для электроэнергетических систем,” Kazakh Scientific Research Institute of Ecology and Climate of RoK Ministry of Environment (2012), based on the EBRD methodology in the Appendix (Lahmeyer International, 2012), available from the KazEnergy GHG standards website.
7 - 1 megawatt-hour (MWh) = 3.6 gigajoules (GJ). Method of calculation was modified in 2016 to conform to IPIECA 2015 Guidance by including all primary energy sources based on fuel use; 2015 numbers have been updated accordingly.
8 - Standard cubic meter at 20°С and pressure 1 atm. The format for reporting amounts flared is established in RoK Government Decree № 1104 of 16 October 2014
9 - Employees of NCOC N.V. only. “Management” corresponds to NCSPSA categories 1 and 2, “technical and engineering” to NCSPSA categories 3 and 4, and “worker and support” to NCSPSA category 5. Figures for 2015 in this table have been updated from the 2015 Sustainability Report for consistency
10 - Local goods, works and services are defined per the Unified Methodology on local content calculations, defined in the 2010 RoK Law “On Subsurface and Subsurface Use.” See Link to Subsoil Act definitions of local content used by NCOC.
Narrative reports on NCOC performance are divided
into six different aspects of sustainability, as shown
graphically below. This manifests our concept of
sustainability as the integration of economic, social
and environmental concerns. Each of the aspects has
narrative descriptions, putting results in context with
explanation, and occasionally providing a case study to
illustrate progress toward goals. The topics covered are
determined by “common” reporting requirements of the
IPIECA guidelines (3rd ed., 2015) and our analysis of issue
materiality. See page 50 (Reporting Process) for more
It is a guiding principle that every worker must return
home to family and friends uninjured, fit and healthy.
To this end, NCOC has a number of policies, plans and
programs (these were described in more detail in the
2015 Sustainability Report):
See NCOC’s General Business Policy on Health, Safety,
Security & Environment - d
• “Lead2Safety”. A framework for our activities to
maintain and improve health and safety culture and
behaviors in NCOC and among our contractors.
• Golden Rules. Twelve Health and Safety “Golden
Rules” apply to anyone working for NCOC, either
employee or contractor. Along with the obligation
to follow the Golden Rules, every employee also
has the right to stop any activity they deem to be
unsafe. Underpinning this authority is the belief that
no task is so important, or so urgent, that is has to be
carried out in an unsafe manner. This is supported by
the “GRuVIS Golden Rule Visible Implementation
System”, where compliance with the Golden Rules is
checked through inspections.
• Lessons Learned – Root Cause analysis. All workrelated
incidents are thoroughly investigated and
the root causes identified and shared throughout
the project and with NCOC shareholders to prevent
re-occurrence of similar incidents. Sharing lessons
learned is an important element toward improving
safety at the different sites.
• “SAFE-R,” Shaping an Accident Free Environment
– Reporting. Any worker can report “interventions” –
actions that were taken following positive or negative
observations about safety – using a card reporting
• Certification and Verification. NCOC is certified
to OHSAS 18001 (Occupational Health & Safety
Management Systems). The external verification
requires NCOC to regularly demonstrate not only
compliance, but also continuous improvement in its
management systems. Certification was renewed
effective 11 January, 2016.
A Health Risk Assessment (HRA) is completed
by Industrial Hygienists to identify the significant
workplace health hazards (physical, chemical biological,
psychosocial, etc.), and to establish measures to mitigate
or control these hazards, such as personal protective
equipment like masks and gloves. Almost 14,000 NCOC
staff and contractors who work directly at production
facilities took “Go Sour” training in 2016 to provide
a thorough grounding in the occupational hazards
and safety measures associated with work around
sour gas. NCOC has a seamless Medical Emergency
Response strategy to cover the management of
medical emergencies not only in the field, but also
in collaboration with the local Oblast Hospital to
sustainably raise medical standards for the whole
community. NCOC works with medical insurers to
provide a robust Fitness to work/medical surveillance
system for staff which also includes reporting of
occupational illnesses. Smoking is discouraged, and
alcohol and drug abuse is prohibited in the workplace.
We encourage personnel to get involved in sports
Although the Lost Time Injury Rate (LTIR) was slightly
improved over 2015, Total Recordables (TRIR) was
higher, mostly due incidents resulting from icy
conditions forming at sites in the fourth quarter. Various
measures were made to to reduce slips, trips and falls,
including increased attention to hazards, personnel
awareness, and modifications to facilities.
Two “near-miss” incidents in 2016 did not result in
injuries to personnel, but were nonetheless thoroughly
investigated following established company procedures.
Root causes were identified, corrective actions to
prevent re-occurrence developed, and lessons learned
shared across the company.
The first involved a side boom arm coming into
contact with an overhead electric power line during
pipeline replacement activities. Lessons learned
focused on improving risk assessment and appropriate
communication at the site, including signage around
power lines. The second incident involved the roll-over
of a contracted vacuum truck. Root-cause analysis
showed several contributing elements, and lessons
learned focused on fatigue management, driver
competence, and work with subcontractors. This
resulted in improvement actions that were implemented
across the organization to prevent re-occurrence.
Process safety events are defined in industry standard API RP 754.
These include loss of primary containment for any material, including
non-toxic and non-flammable (e.g., steam, compressed air) if the
event results in certain safety consequences or impacts to employees,
contractors or residents. Tier 1 includes greater consequence events,
and Tier 2 lesser consequence events.
In 2016, NCOC reported 0 Tier 1 and 1 Tier 2 process safety
events. This represents a remarkable success for NCOC’s intense
Operational Risk and Assurance effort in 2016 to safely restart
Kashagan production (see inset). The lone Tier 2 event relates to
human/procedural error (valve closing) rather than a facility fault,
resulting in a low-consequence material spill within the facility but one
that prompted improvement in documentation of tasks, shift handover,
and periodic inspections to prevent re-occurrence.
Production could not restart in 2016 until
the Operational Risk and Assurance (ORA)
process had thoroughly checked that
all necessary technical measures were
completed and all required risk controls
were in place in each facility, and throughout
the entire facility, to assure process safety
and asset integrity. The OPA process was
augmented by a number of external reviews
by NCOC shareholder companies, and by
leak and pressure testing carried out prior to
For a facility the size and complexity of the
Kashagan Phase 1 project, this was a huge
undertaking. The hazards at the facility first
must be clearly identified, and mitigating
measures identified to lower associated
risks to as low as reasonably practicable.
The “barriers” used to prevent incidents –
technical/hardware or people/procedural
– must be identified and supported by
appropriate leadership and assurance
measures. And a pre-startup safety checklist
rigorously pursued until every element in the
process chain has demonstrated its “fitness”.
Also during 2016 a detailed dashboard of
Process Safety performance indicators was
developed that allows us to proactively track
the effectiveness of the risk controls.
NCOC onshore operations are located in an area
identified by the WRI Aqueduct Water Risk Atlas
(2014) as medium to high risk exposure for oil and gas
The total volume of fresh water consumed in NCOC
operations in 2016 was 1126 thousand cubic meters.
The total volume of fresh water withdrawn in 2016
was 1014 thousand cubic meters. This represents a
significant increase over last year due to the restart
of production in the fourth quarter of 2016. NCOC
obtains most of its water on a contractual basis from the
Astrakhan-Mangyshlak pipeline, which is sourced from
the Volga river basin; Other sources are municipal and
bottled water. Water is used at the Bolashak onshore
processing plant for producing steam for processes
and in the camps for household use. Offshore facilities
also need fresh water: 112 thousand cubic meters was
produced from desalination units offshore. This replaced
fresh water that would otherwise be sourced from
The water we use is discharged to lined evaporation
ponds (see pg. 22) and does not come in contact with
groundwater or soil. It evaporates and is not returned to
the local watershed. Thus, multiple re-use of the water
volumes we do withdraw is an important contributor
to the sustainability of our operations. In 2016 NCOC
treated and recycled more than 80 thousand cubic
meters of water from household use onshore for
greenbelt irrigation and for dust suppression purposes.
We also recycle water for domestic use offshore. Up
to 17% of the water used in onshore processing may
be recycled, and in 2016 we completed some plant
modifications to better segregate various process water
streams that may in future allow us to recycle additional
volumes of our process water.
NCOC plans in 2017 to report its water intensity (fresh
water consumption normalized per unit of production)
as a guide to its performance in conserving fresh water.
Total direct Greenhouse Gas (GHG) emissions from
NCOC operations in 2016 totaled 1395 thousand
metric tons CO2-equivalent, including 1384 thousand
tonnes of carbon dioxide (CO2), 6.2 thousand CO2-
equivalent tonnes of methane (CH4), and 4.7 thousand
CO2-equivalent tonnes of nitrous oxide (N2O). This total
includes mobile and stationary sources.
This is a significant increase over 2015, due to restart of
production in the fourth quarter of 2016.
NCOC production facilities are self-sufficient in
electricity, heat and steam. Indirect emissions arise from
purchased power for support facilities such as Bautino
base and Atyrau Training Center. Total indirect GHG
emissions from NCOC operations in 2016 totaled 10.3
thousand metric tons CO2-equivalent, all carbon dioxide.
NCOC plans in 2017 to report its GHG intensity (GHG
emissions normalized per unit of production) as a guide
to its performance in reducing GHGs.
There are various approaches to estimating Other
Indirect (“Scope 3”) emissions. NCOC will report
volumes of produced oil and gas to enable stakeholders
to estimate these emissions from the NCOC value chain
using their preferred methodology.
NCOC is committed to developing a world-class project
that is designed and operated in a manner protective of
the unique, sensitive environment of the North Caspian
Sea. We conduct our operations responsibly and in full
compliance with the laws of the Republic of Kazakhstan,
and in line with accepted international regulations,
standards, and best practices.
NCOC has a policy of zero discharge into the Caspian Sea;
NCOC has a “No Routine Flaring” policy;
Our approach is one of risk management. Conceptually,
that means identifying and understanding the risks
of any action and its potential impacts; taking steps
to minimize that risk or mitigate its impacts down to
acceptable levels; monitoring performance and the
effectiveness of mitigation measures, and continually
re-checking the risks and improving the measures to
See NCOC’s General Business Policy on Health, Safety, Security & Environment - d
NCOC regularly marks Caspian Day (12
August) as a way to honor this unique inland
sea and those who study and protect its flora
On August 10, NCOC environmental engineer
Sergey Ukhov briefed local environmental
NGOs in Atyrau on NCOC’s programs for
sampling the physical and chemical properties
of sea water and bottom sediments, hydrogeological
surveys, and other long-term
environmental baseline monitoring programs
that NCOC has carried out annually since the
start of the project. (This follows a tradition
from Caspian Day in 2015, when NCOC
presented a new book entitled “Environmental
Monitoring of the North-East Caspian Sea during
Development of Oil Fields” e summarizing results
of environmental monitoring.
And on August 7-13, NCOC jointly with
Eco Mangistau (NGO) organized the Third
Environmental Summer School in Aktau.
Thirty-four students from Mangystau and
Atyrau Oblasts – potential future ecologists
(pictured) – took master classes and handson
lessons from Russian and Kazakhstani
specialists on topics such as diving, sample
collection, Caspian seal population surveys,
and much more. (see photo)
NCOC updated the Environmental Impact Assessment (EIA)
covering its Phase 1 project in 2016, in accordance with official
requirements, and obtained a positive conclusion from the
government’s environmental review panel. The studies developed for
the North Caspian project engaged Kazakhstan environmental expert
consultants, and have been presented to the local communities for
An essential technique of environmental protection is to understand
initial conditions prior to project activity (the “baseline”), and then
to monitor these conditions on an on-going basis as the project
progresses to completion. NCOC has conducted hundreds such
studies in all areas of our activity, with involvement of external experts
and institutions. Specific studies are mentioned in appropriate sections
NCOC shares the conclusions of its environmental monitoring in many
forms: peer-reviewed academic publications, reports, public hearings,
EIAs, presentations at public and industry forums, the NCOC website,
and media articles.
NCOC provides the environmental monitoring data it collects directly to
the government agencies responsible for environmental protection, per
terms of the North Caspian PSA. These agencies ensure that the public
is appropriately informed. For example, the Department of Ecological
Monitoring of RGP Kazgidromet (RoK Ministry of Energy) publishes
monthly, quarterly and annual reports on the state of the environment
that include an appendix of analyzed data from NCOC industrial air
quality monitoring stations at Bolashak and surrounding areas.
Link to Kazgidromet 2016 Report - f
These interactive GIS (Geographic Information System) maps of
landscapes, ecosystems, protected areas and habitats collate the
data from many years of continuous environmental monitoring, and
help define the most environmentally important areas around our
operations for planning of oil spill response planning, biodiversity
preservation, future development, and more. The maps are regularly
NCOC’s environmental protection activities are guided by an
Environmental Protection Plan that is approved annually by state
environmental regulatory agencies. The type of projects included in
the annual EPP include: environmental surveys and monitoring of air,
water, soil, and biodiversity; solid and liquid waste management; oil
spill response; green spaces; and environmental education. Reports on
implementation of the EPP are submitted to the government quarterly.
The Caspian Sea as an ecosystem has a high percentage of rare and
endemic species found nowhere else. Protection and preservation of
this area’s unique biodiversity is a top sustainability objective.
In 2016 extensive data was collected during four marine environmental
surveys (one at each season of the year) and two onshore surveys.
These covered wildlife and plant life, bottom organisms, soil and
air quality, in order to better understand species distribution and
population dynamics of Caspian biota. Over 100 such environmental
and wildlife surveys have been conducted since the start of the project.
NCOC has developed special Biodiversity Action Plans for at all
stages of engineering and construction in both onshore and offshore
environments. Some programs are described in more detail below for
key indicator species.
The population of the Caspian Seal has been declining over the
previous century, due to various natural and anthropogenic/technical
(i.e. man-made) reasons. These include diseases, reproductive
difficulties, changes in the food chain, and changes in ice formations
as well as hunting, fouling in nets, and ship strikes. In 2008 the
IUCN changed the status of the Caspian Seal from ‘vulnerable’ to
‘endangered’ and placed it on the Red List of Threatened Species.
The surveys have shown that the birth rate
and location of breeding sites vary greatly
from year to year, mostly due to changes in ice
conditions and sea level, with no obvious trend
over the study period.
See NCOC Biodiversity brochure and
CISS studies for more detailed data on seal
population, distribution of pups, recorded seal
Observer reports indicate that icebreakers
rarely if ever strike seals. To put this in
perspective, CISS studies estimate that fishing
by-catch and poaching result in the death
of 1000s to 10,000s of seals each year, while
licensed hunters harvest an additional 10s to
1000s of seals.
Some conclusions are restricted by lack of
survey access to Russian sector of the Caspian.
However, whilst this may limit the scope of
scientific surveys, it does not hamper our
ability to monitor seals in Kazakhstan waters
and mitigate impacts from our shipping. In
case of need, NCOC has potential access to
satellite data, and is in touch with Russian
researchers to compare and contrast results.
The 2016 seal survey began on January 23 with two
days of instruction at Bautino Base for vessels’ captains
and crews on mitigation measures based on scientific
recommendations and global best practice in protection
of marine mammals. For the next five to six weeks,
seal observers accompanied the five icebreakers
coursing between Bautino Base and the Kashagan
field, mapping the haul-out sites along the navigation
routes, counting and classifying seals, and observing
their behavior during the breeding season. Observer
teams, accompanied by inspectors from the Atyrau
Oblast Department of Ecology and the Oblast Territorial
Inspectorate of Wildlife and Hunting, surveyed survey
seal concentrations by helicopter near the icebreaker
NCOC has fielded independent international and
national seal experts to monitor and study seals
every year since 2005, resulting in safer routes for
the icebreakers, contributing to preserving the seal
population in the North Caspian, and learning more
about them as a species. These experts are now mostly
experienced Kazakhstanis, with oversight by scientific
institutes in Kazakhstan and Russia.
NCOC’s Kazakhstani ecologists and wildlife specialists
attended a conference in Astrakhan, Russia in
November 2016 devoted to research and conservation
of the Caspian seal, and another in Krasnodar, Russia in
June devoted to sturgeon conservation.
All species of Caspian Sea sturgeon are now classified as ‘endangered’
by the IUCN. The native population has been impacted by overfishing
and illegal fishing, as well as damming of rivers, agricultural run-off and
In addition to studies and voluntary financial contributions in
previous years for a variety of upgrade projects, NCOC is making a
sizable contribution to fish hatcheries on the Ural River as part of its
compensation obligations to add over 700 thousand sturgeon fingerlings
to the population in coming years. On July 20, the State Ural-Atyrau
Sturgeon Hatchery in Kurilkino village released about 235 thousand
fingerlings into the Ural river, the first annual release quantity as part of
Jointly with the Association for the Conservation of Biodiversity of
Kazakhstan (ACBK), NCOC is continuing a program, launched in 2014,
to tag and monitor a small population of saiga (saiga tatarica, dwarf
antelope). Three animals were caught and affixed with telemetric collars
this year during the October 2-13 expedition in Atyrau and Mangystau
Oblasts, which allows specialists to follow their daily activities in real
time using GPS tracking. Saiga were included in the IUCN Red List of
Threatened Species in 1996 and declared critically endangered in 2002.
Enthusiasts like ACBK have in recent years rallied to help the animal,
supporting initiatives such as the 2000-hectare protected area in Issatay
District that shelters a herd of about 100 animals.
NCOC started its annual fall-migration bird survey on September 12
with two days of monitoring on the artificial islands EPC 2 and EPC 4,
followed by a helicopter survey of the Caspian coastal area run during
four days between September 15 and October 24. The surveyors
group included NCOC and contractor ecologists and ornithologists,
and inspectors from the Atyrau Oblast Department of Ecology and the
Oblast Territorial Inspectorate of Wildlife and Hunting.
The group counted over a million birds – a record high over the past
ten years of surveys – including some of the most beautiful species
such as Flamingo (55,000), Mute Swan (133,000), Great White and
Dalmatian Pelican (6,000) and Red-crested Pochard (150,000).
Some of the largest flyways in the Eastern hemisphere pass through the
North Caspian region. Coastal shallow water habitats and wetlands in
the Ural River delta island systems are breeding and moulting grounds
and long-term stopovers for the migrating birds. The Ak Zhaiyk State
Nature Reserve in this area was designated a Wetland of International
Importance under the UN Ramsar Convention in April 2009 and, as
a result of a public-private initiative with NCOC shareholder Eni, a
UNESCO Man & Biosphere Reserve in 2012.
The fall migration survey is one of four seasonal waterfowl and shore
bird surveys that NCOC conducts every year: over-wintering, summer
nesting, and fall-spring migrations.
NCOC discharges all treated wastewater from
industrial processes and domestic sewage through
filtration screens into lined evaporation ponds,
with no discharge into surface waters, including
the Caspian Sea.
The total quantity of hydrocarbons discharged with
treated sewage and process water into evaporation
ponds in 2016 was 0.23 tonnes.
NCOC uses lined evaporation ponds as the safest
available method for managing treated process water,
and is continuing to assess the possibility of subsurface
injection, if suitable geological formations can be found.
Wastewater from industrial processes at the Bolashak
plant arises mainly from:
• H2S conversion into elementary sulfur. This water may
contain sulfur and other residual components. It is
treated in a sour gas stripping column to remove
(by up to 400 times) most of the volatile components
(e.g. H2S, mercaptans).
• Produced water, i.e., water that has been separated
from produced oil. This water may contain residual
hydrocarbons. It is treated with demulsifiers,
hydrocyclone separation, flotation and skimmers that
reduce oil content by ~40 times.
In 2016, NCOC obtained all permits for discharge
of treated process water to evaporation ponds in
accordance with RoK environmental requirements.
In 2016, NCOC air emissions from all operations were 56%
of permitted volumes, and totaled:
637 metric tons of volatile organic compounds (VOCs)
56,408 metric tons of oxides of sulfur (SOX),
1430 metric tons of oxides of nitrogen (NOX excluding N2O), and
Compared to 2015, emissions were up in 2016 due increased gas flaring
and power production after the restart of production in the fourth quarter.
Twenty air quality monitoring stations in Atyrau oblast
operate 24/7 to measure the atmospheric levels of
various compounds and collect weather data.
Four stations are located on the perimeter of the setback
area (“sanitary protection zone”) for the Bolashak plant;
7 more are located in surrounding areas, including
Dossor and Makat; and 9 are in Atyrau city proper.
The government meteorological agency (Kazgidromet)
monitors this air quality data and publishes monthly and
annual summaries (including NCOC’s data for CO, SO2,
H2S, NO and NO2) on its website. The 2016 summary
report may be found here
Kazgidromet 2016 Report (in Russian) - f
Flaring is a normal part of start-up and
commissioning activities. As a plant reaches
steady-state production, flaring occurs less
If you see a flare, it means safety
systems are operating as designed,
to handle temporary changes in flow
Volumes of gas flared are calculated and
reported to RoK.
SOX and NOX (reported in 6.4, above) are
possible combustion products from the
flaring of sour gas. If H2S were to arise, it is
almost always from a leak.
With the restart of production in the fourth quarter of 2016, local
residents and media have inquired about the air quality and safety
aspects of emissions from the Bolashak plant, in particular gas flaring.
The primary guarantor of the plant’s safety is the 7 km buffer (Sanitary
Protection Zone or SPZ) around Bolashak, sufficient to protect nearby
residents from any long-term health effects from air emissions and
providing a conservatively high margin of safety even for unplanned
events. Confidence in this conclusion rests upon careful design, studies
and computer models, government review and approvals, and finally,
recent operating experience that confirms the models.
The Environmental Impact Assessment for the project was updated
in 2016. It received a favorable conclusion from the government’s
environmental expertise review, and shows that air emissions should
remain within permitted concentrations at and beyond the perimeter
of the 7-km Sanitary Protection Zone around the Bolashak plant,
regardless of wind and weather assumptions.
Link to 2013 Kazakh National Medical University
study on Bolashak plant air emissions g
Similarly, a 2013 screening study by the Kazakh National Medical
University concluded that emissions from Bolashak plant do not pose
a health risk to nearby residents, nor those in Atyrau city, as the risk
of long-term negative effects is significantly lower than established
Furthermore, NCOC studied a scenario that is impossible in reality, but
used as a theoretical “worst case”: an H2S leak from full-bore rupture
of a sour gas pipeline. The computer model shows that people just
outside the 7-km radius may detect a smell for a time but will experience
no long-term health effects at such low levels. The smell will dissipate
NCOC also studied SO2 emissions from intense sour gas flaring at
maximum rate. We found SO2 does not exceed allowed design levels
beyond the 7-km perimeter.
Flaring occurred at Bolashak to deal with flow problems during start-up
on September 11 – October 20, 2013. Even under these extraordinary
circumstances, air monitoring at 7-km SPZ boundaries and nearby
villages (see Section 6.4) shows average H2S and SO2 emissions remained
far below allowed levels. The data has been published by KazGidroMet.
During the 2016 re-start and associated sour gas flaring, the average
H2S and SO2 levels likewise remained far below allowed levels. In fact,
ongoing monitoring shows consistently that higher-level short-term H2S
peaks remain far more likely in Atyrau from other routine sources not
associated with NCOC flaring than those measured near Bolashak.
Hydrogen sulfide – H2S – is the air
emission compound that concerns many.
It is flammable, and highly toxic. It may be
generated anywhere that sulfur-containing
organic materials decompose in the absence
of oxygen, so is emitted naturally in marsh
gases and volcanoes (sometimes in large
quantities). It is produced also at tanneries
and pulp/paper mills, and during sour crude
oil processing and transportation.
H2S has a characteristic odor (some say
like “rotten eggs”) that can be smelled at
concentrations thousands of times less than
levels at which physical effects begin to take
place (watery eyes and nose). Even these
effects go away after a few breaths of fresh
air; H2S does not accumulate and is rapidly
passed out of the body. At ten times higher
concentration, however, the sense of smell
may be deadened and eye damage can
occur; ten times more than that are very
dangerous levels. For safety reasons, NCOC
specialists who work in immediate proximity
to wellheads, flash gas compressors and
other equipment receive special training
and personal detectors; they put on masks
and breathing apparatus where such
high concentrations are possible as an
The risk drops off quickly the further
from these locations; so do the potential
concentrations. “Maximum Permissible
Concentration” set by the Kazakhstan
government is a conservative standard,
similar to the World Health Organization’s
guidelines for short-term H2S ambient air
exposure for the public at which about half
the population may detect the smell (i.e.,
about 6 parts per billion). These levels, tens
of thousands of times less than immediately
harmful levels, are so small that electronic
instruments sometimes have trouble
accurately detecting them. False “peaks” are
common, as are short-term peaks from, for
example, a passing train.
In 2016, there were 0 hydrocarbon spills greater than 1 barrel reaching the
environment from NCOC operations (total volume: 0 barrels of oil-equivalent
By far the best defense against oil spills is to prevent them from occurring
in the first place.
Link to 2010 Oil Spill Response brochure (English). - h
Oil spills are prevented by identifying spill risks at all project phases, from design,
to construction and operation, and ensuring that the highest safety standards are
continuously applied to mitigate those risks. Approaches include:
• Addressing the human factor. Clear procedures and work practices are established,
and monitoring and maintenance rules enforced through frequent training.
• Include early-warning and protective containment measures at the design stage, such
as the impermeable geotextile membranes and runoff collection systems used on
artificial islands offshore to prevent any hydrocarbons from reaching the Caspian Sea
• Continuous reassessment of spill risks at all locations by trained specialists, and
mitigation measures if risks are found. For example, OSR specialists are engaged when
NCOC monitors its offshore wellheads on a yearly basis using divers.
We employ a wide range of innovative technologies,
such as remote aerial observation with the use of GPSGIS
handheld units and other remote sensing methods
to monitor, map and detect oil spills as well as define
oil film thickness in both open water and ice conditions.
Computer-generated models of oil spill trajectories help
responders understand where an oil spill might spread,
depending on weather and sea conditions, and are a
fundamental part of oil spill response planning.
In combination with environmental sensitivity mapping
(see pg. 18), this helps set priorities in response planning
in order to preserve important habitat and minimize
impact on the environment. In September 2016, NCOC
conducted a ten-day survey of reed beds and special
training on their protection in the event of an oil spill.
NCOC is conducting research on spill response
techniques and tools with potential application to the
• NCOC has conducted joint research with the
Kazakhstan Institute of Oil and Gas on use of
• NCOC is currently conducting research on the
operational capabilities and related conditions for use
of in-situ burning.
• NCOC is participating in joint work to support RoK
Authorities in formalizing the related procedures and
regulatory framework needed to use these oil spill
response methods in case of incident.
OSPRI, the “Oil Spill Preparedness Regional Initiative (Caspian
Sea – Black Sea – Central Eurasia)”, was established in 2003 by a
group of oil companies to promote sustainable oil spill response
capability in this region. These companies are BP, Chevron,
ENI, ExxonMobil, INPEX, Shell and Total – the latter five are
major investors in the North Caspian project. NCOC’s Crisis and
Emergency Response Manager, Gani Zharikessov (pictured), is a
deputy chair of OSPRI.
OSPRI provides the means of alignment and focus for the
involved companies to share their knowledge and resources,
giving consistent support to governments in developing oil spill
preparedness in the region. OSPRI is not an oil spill response
organization or company with resources on standby, and has no
vested interests in particular services or approaches.
The business plan is grouped into five core themes of support
IPIECA (www.ipieca.org) is the umbrella organization under
which OSPRI functions. IPIECA has a joint programme with the
International Maritime Organization (IMO) –
a specialized UN agency – called the Global Initiative (GI), which
promotes improved oil spill contingency planning around the
world. OSPRI is fully integrated and coordinated with the GI and
represents the main mechanism to achieve the GI’s objectives in
OSPRI also works with a wide range of other international
organizations, including International Financial Institutions, donor
agencies, UN agencies (e.g. UNEP and UNDP), the IOPC Fund,
International Tanker Owners Pollution Federation (ITOPF),
Oil Spill Response Limited and other commercial oil spill service
providers, the European Union, and the Organization for
Security and Cooperation in Europe (OSCE).
OSPRI’s regional focus assists its members to integrate and
address risks associated with their production and transportation.
This recognizes that an incident which may be geographically
distance from a business unit’s production or oil handling
operations may cause widespread and serious disruption, for
example if export routes are disrupted.
OSPRI’s 2016 report is available here. - i
NCOC maintains a comprehensive Oil Spill Response Plan that is regularly drilled,
including joint exercises with responsible government agencies. The Oil Spill Response
plan has detailed sections for incidents along the pipeline, with environmental
sensitivities identified and specific response guidelines established for each pipeline.
NCOC has a dedicated Oil Spill Response group, staffed by about a hundred fullytrained,
full-time responders, maintenance personnel, and vessel crew for a dozen
shallow draft vessels and several oil recovery barges. Tens of kilometers of oil boom,
absorbent material, floating and collapsible tanks, containers, and other equipment
have been specially procured for operating in the unique environment of the North
Caspian Sea, and are warehoused at marine support bases in Bautino and Damba (the
latter operated for NCOC under contract to KMG Systems and Services).
In 2016, NCOC conducted more than a hundred major and minor exercises at all
locations, involving training for nearly nine hundred NCOC staff and contractors.
Total quantity of waste classified as hazardous by the RoK and disposed from NCOC
operations in 2016 was 12,090 tonnes. This number includes some wastes classified as
green under Basel Convention rules, such as office equipment, wood and food waste,
spent air filters, etc.
Total quantity of waste classified as non-hazardous by the RoK and disposed from NCOC
operations in 2016 was 11,115 tonnes.
In line with our “Zero Discharge” policy in the Caspian, all waste materials from
offshore facilities are brought to shore for treatment and recycling or disposal, including
cuttings (mixed soil, rock and lubricant fluids brought to the surface as a by-product of
drilling). The solid waste is disposed by a specialized and licensed company, selected by
competitive tender, with demonstrated capability to process and dispose of the project’s
solid waste in line with our sustainability requirements.
NCOC implements comprehensive environmental monitoring programs to collect
offshore data and analyze the chemical composition of seawater and bottom sediments,
and to study fish, benthos and plankton populations. Since 1994 the project has
conducted about forty offshore monitoring surveys in roughly 900 different locations.
Data collected during the twice-annual surveys covers weather conditions, water quality
(salinity, nutrients, metals, etc.), bottom sediments quality (metals, total hydrocarbons,
etc.), and biological data (micro-organisms, phytoplankton, zooplankton, fish). Starting in
2013, we added air quality, birds, and additional Caspian seal studies.
NCOC conducts onshore monitoring surveys to analyze soil and groundwater quality
in Atyrau and Mangystau regions. In 2016 the project conducted ten such surveys with
thousands of laboratory-analyzed samples. The Caspian onshore area has a long history
of oil production, so the scope of onshore surveys takes into account historic activities
and data as well as current activities of nearby oil and gas developments. The soil
surveys since 2005 show a general improvement in terms of heavy metals and organics.
Groundwater surveys from 2005 to 2010 show it to be unfit for industrial or other use,
mostly due to high salinity.
Decommissioning is governed by the North Caspian Sea PSA, including detailed
planning and funding at the appropriate time. Decommissioning is planned and
executed in the same manner as any other engineering project, with each program
needing an environmental impact assessment to determine the preferred option to
apply to a particular facility.
Processing sour gas and managing sulfur safely and
effectively is of crucial importance to the Project.
The project design calls for up to 80% of the sulfur to
be returned to the reservoir via the sour gas re-injection
systems. The remaining 20% will remain as elemental
sulfur, generated as a by-product at the Bolashak
onshore process facility.
An average of around 1.1 million tonnes per year of
elemental sulfur will be produced during the life of the
project (3,800 tonnes of sulfur per day).
Sulfur is a commodity with market value and growing
demand, and the project’s shareholders intend to sell
all that is produced. International market opportunities
are in China and the western Mediterranean as a raw
material for agricultural fertilizers. NCOC has also
worked with Kazakhstan and foreign institutes to study
prospective applications for sulfur in construction and
road-building, and as a fertilizer component for the
highly saline soils found in Kazakhstan.
Sulfur will be exported to these markets by rail through
a dedicated loading facility at Eskene West. Up to
4 million tonnes of sulfur may be stored on a temporary
basis. At the end of 2016 about 125,000 tonnes of sulfur
were in storage, pending completion, commissioning
and start-up of the rail loading facility in 2017.
NCOC is exploring economic
development options for future
Phases that, in combination with
reinjection, would reduce by up
to 90% the volumes of additional
associated sour gas to be processed.
This could almost completely
eliminate production of additional
sulfur as a by-product from these
Pure elemental sulfur is odorless and non-toxic, and
non-reactive with water or air. However, it does need to
be handled properly to reduce generation of airborne
The sulfur byproduct produced by the Project is in liquid
form. For its temporary storage, the sulfur is poured into
large (100m x 300m) solid blocks at a rate of about
7 mm per day. Once a block reaches a certain height it
is covered with a weighted polymer sheet. This prevents
the sulfur from coming in contact with wind or water.
When the time comes to transport, the blocks are remelted
and the liquid sulfur formed into tiny solid pellets
(pastilles). Blocks are not crushed, which is one measure
for preventing loose sulfur or sulfur dust.
The storage area is lined and provided with drainage to
prevent seepage into groundwater, and fully equipped
with fire- and gas-detectors along its perimeter.
A special facility cleans the rail cars within 24 hours and,
after filling with sulfur pastilles, covers them prior to
NCOC production facilities are self-sufficient in
electricity, heat and steam. Indirect emissions arise from
purchased power for support facilities such as Bautino
base and Atyrau Training Center. Energy use in NCOC
operations in 2016 totaled 14.0 million gigajoules (GJ),
of which 0.11 million GJ was imported (purchased).
NCOC plans in 2017 to report its energy use intensity
(energy use normalized per unit of production) as a
guide to its performance in energy conservation.
In 2016 NCOC began a broad-ranging energy audit
of its facilities, and will report further on measures
undertaken to increase energy efficiency in future
Though NCOC’s energy needs for production facilities
will be fully met using a small portion of the gas
processed, we continue to look for niche applications
(e.g., remote, off-grid locations or support facilities) in
which alternative or renewable energy sources make
sense both economically and technically.
The Kashagan Phase 1 project was designed from the
beginning to avoid routine flaring, i.e., burning of excess
natural gas when an oil and gas project has no other
economic way to dispose of it “routinely,” in the course
of producing oil. All of the gas produced in Kashagan
Phase 1 will be re-injected, used as fuel or sold, once
steady-state production is reached. Flaring is however
needed in the course of operations as the safest and
most effective way to deal with gas that for temporary
technical reasons could not be processed, such as
commissioning operations, small amounts of valve
leakage into flare collectors, or one-time discharges
to flare due to operational upsets. The volumes of gas
flared in such cases is calculated and reported.
The quantity of hydrocarbon gas flared from NCOC
operations in 2016 was 29% of permitted volumes, and
totaled 129 million Sm3 (standard cubic meters). Flaring
increased in 2016 due to restart of production in the
fourth quarter. The frequency of flaring will decrease
after new production capacity has been brought on-line
and stabilized, and we look for further opportunities to
improve process stability.
As Kazakhstan’s largest direct foreign investment project, the North Caspian project has a
powerful multiplier effect on the economy, creating employment opportunities for Kazakh
people and opportunities for local companies. At the peak of construction in 2010, the
Kashagan Phase 1 project employed more than 42,000 workers, including contractors,
making it one of the largest employers in the country. NCOC remains a major employer in
Atyrau and Mangystau Oblasts today.
Mangystau and Atyrau oblasts also benefit from social and infrastructure related projects
funded by NCOC. These have totaled more than a half-billion US dollars since the start of
the Kashagan Phase 1 project.
These and other economic and social benefits will be described in more detail in the
Several NCOC employees in 2016 received
government awards in recognition of service
to Kazakhstan. NCOC’s Social Infrastructure
Projects Manager Ruslan Aubekerov is
deserving of special note. He was awarded the
State Order of Kurmet at an official ceremony
held in Akorda Presidential Palace in Astana
on December 13, following nomination by
Mangystau Oblast Akim Alik Aidarbayev
“in appreciation of his significant contribution
to the social and economic development of
the region”. The award is given by the RoK
Government to those exhibiting merit in the
fields of economics, science, culture, social
issues and education.
Link to 2012 “Good Neighbor” brochure (English). - j
Link to 2014 NCOC Local Content brochure (English). - k
Under the North Caspian Sea PSA, NCOC allocates a budget each
year for the development of social infrastructure projects. In 2016,
this budget amounted to US$50 million. The funds, for construction of
schools, kindergartens, hospitals, sport facilities, as well as utilities such
as roads, electric power water supply lines, and other infrastructure
designed to benefit the community, are split equally between Atyrau
and Mangystau oblasts, where North Caspian project activities are
Between 1998 and 2016, 168 social infrastructure projects have been
completed. Cumulative spend on social infrastructure projects has thus
reached US$525 million. Projects receiving investment in 2016 and
expected to be completed in 2017 include the following commitments
(including applicable taxes):
Social infrastructure projects are generally proposed by the Oblast
Akimats (governments). Proposals are analyzed by NCOC and the
PSA Authority to ensure they comply with PSA requirements and the
Operator’s sustainable development strategy, and are developed into
projects in close collaboration with the Oblast Akimats. Once approved,
NCOC is responsible for all stages of design and engineering, contract
tender, and execution up to handover.
Through its Sponsorship and Donations grant program, NCOC
responds directly to the needs and requests of local communities.
US$1.5 million is split equally each year between Atyrau and Mangystau
oblasts for community sponsorships and donations. The Sponsorships
and Donation grant program focuses on five main areas of support for
local communities: healthcare, education, sports, culture and charity.
To be aligned with NCOC’s sustainable development strategic goals,
projects must contain elements of self-involvement and demonstrate
sustainability for local communities. They should not support political or
religious organizations, create conditions for unfair market competition,
or undermine the ecological sustainability of local communities and/or
natural ecosystems. The initiative for projects generally comes from the
local communities, but may also be initiated by NCOC.
In 2016, 71 projects were undertaken (35 in Atyrau Oblast, 36 in
Mangistau oblast). A total of $16 million has been spent since 1998.
In addition, up to US$300 thousand has been budgeted each year since
2006 for a summer camp for 200 underprivileged and orphan children
of Atyrau and Mangystau Oblasts. In 2016, NCOC covered travel, camp,
and cultural-educational development expenses to send these children
to the Baldauren center in Burabai.
NCOC supports the nationwide Mektepke
zhol (“Road to School”) initiative each August
by donating backpacks, stationery and
other supplies to deserving families in our
community. In 2016 NCOC representatives
handed out supplies to four hundred small
scholars in Atyrau, Aktau, Tupkaragan, and
Makat. The smiles were priceless.
In 1993, an offshore oil and gas service industry was
practically non-existent here. Almost none of the
needed infrastructure, equipment, vessels and drilling
rigs needed for a large-scale offshore project like
Kashagan could be found locally.
Substantial investments over time into local suppliers,
workforce, and infrastructure have resulted in the
establishment and growth of entirely new industry
in Kazakhstan. At the peak of construction in 2010,
the Kashagan Phase 1 project employed more than
42,000 workers, including contractors, making it one
of the largest employers in the country. In 2016 the
North Caspian project spent US$757 million for local
goods, works and services, equivalent to 28% of total
expenditures, for a year-end total of more than US$13.3
billion spent on local goods, works and services since
200411. These and other facts speak to the depth of
NCOC’s commitment to the use of local content.
NCOC gives preference to local suppliers provided they meet quality,
safety standards and offer materials and services competitive in price,
quality and availability to those provided by international suppliers.
Link to NCOC Local Content Policy - l
Local content strategies are implemented at the earliest possible stage to
allow for capacity development of local companies. During engineering
and design stages of the project, opportunities for local suppliers were
maximized by including, whenever possible, standards and specifications
used locally (e.g., GOST standards). An analysis of the future needs of
the project is also carried out with an eye to leveraging local content
development opportunities, and consolidated in the project’s long-term
Furthermore, NCOC has developed a systematic approach – a long-term
Local Content Development Program – to help identify the business
opportunities for local companies, and to develop their ability to meet
NCOC’s prequalification criteria in supplying them.
On September 25 2012, NCOC, and three
other oil and gas operators (KazMunayGas,
TCO and KPO) signed the “Aktau Declaration”
on joint actions for promoting development of
a local oilfield service industry in Kazakhstan.
Link to description of 2012 Aktau Declaration - m
One of the topics being worked is
harmonization of NCOC’s vendor database
with a new web-based vendor database, called
“ALASH”, that was launched by the Ministry
of Energy in 2016. Once fully harmonized
with all Operators’ databases and technical
requirements, ALASH could become a
“single point of contact” for local vendors
to advertise services and raise their visibility
with all major industry players at once. It also
will provide a unique forum for exchanging
industry news, informing about new standards
and regulations, joint venture and financing
opportunities, and other helpful services. In
the meantime, NCOC continues to use its
existing vendor database as the transition
The signatory companies agreed to work
together to analyze future purchase plans and
identify products or commodities that might
have market demand sufficient to support
localized manufacture in Kazakhstan.
Top-10 potential commodities identified as a
priorities for local capacity development for
2017-2018 are the following:
Development of local vendors is a priority. The objective is to help local
companies improve their technical and managerial capabilities so that
they qualify as potential suppliers to the project, and longer-term could
bid on other opportunities in national and international markets.
About three thousand Kazakhstan companies are registered in the NCOC
Vendor Qualification Database.
Link to 2014 NCOC Local Content brochure (English) - k
Link to NCOC Contractor Success Stories (downloadable video) - n
Link to NCOC Procurement Process - o
Link to NCOC Supplier Qualification - p
More than a thousand local companies have participated in workshops
and forums organized by NCOC, ranging from general awareness
seminars to introduce the project and its contracting requirements,
to more specialized seminars on tender writing and pre-qualification
From 2006 to 2016, the Operator assisted over two hundred local
companies to obtain international standards certifications for their
management, goods and services, thus significantly increasing their
competitiveness for contracts with NCOC. The Operator has also
provided assistance and financial support to local companies to
obtain international certifications for their goods and services from
the American Society of Mechanical Engineers (ASME) and American
Petroleum Institute (API).
From 2006 to 2016, NCOC conducted more than two hundred technical
qualification audits and site visits of local companies, assessing their
ability to meet demanding specifications and international codes and
standards for goods and services put out for bid by the North Caspian
From 2006 to 2016 the Operator provided more than two thousand
employees of local companies with specialized professional training in
the most in-demand craft skills. This training allows local companies
identified by NCOC’s Local Content Department to improve their skill
base and meet requirements imposed by international standards, codes
and heavy industry norms in common use today. Some 25 courses were
conducted in Atyrau, Almaty and Ust-Kamenogorsk this year, on topics
such as Working in Confined Spaces, Industrial Welding Safety, Electronic
As a result of purposeful activities by the Operator, nearly 70 joint
ventures were formed and contracted to provide goods and services
to the project in Kashagan Phase 1. Formation of joint ventures, joining
Kazakhstan capacity and skills with Western experience and financing, is
way to efficiently increase local content.
In 2016, thirty-five local companies
successfully completed the training program
organized by NCOC and received certificates
of conformity to international standards in
quality management and health, safety and
environment (ISO 9001, OHSAS 18001 and ISO
50001). Award ceremonies were held on April
22 and December 6. This brings to more than
200 the number of companies certified under
this program since 2006, thus increasing local
capacity to meet international standards and
to compete for NCOC contracts in goods,
works and services.
NCOC has defined several categories
of medium- to high-value goods
and services that are central to us in
terms of business criticality, and could
be areas for ‘early tendering.’ These
NCOC gives preference to local
suppliers provided they meet
quality, safety standards and offer
materials and services competitive
in price, quality and availability to
those provided by international
suppliers. But how does one define
“local suppliers”? And what is the
best way to identify and responsibly
develop them? NCOC’s objectives
To meet these objectives NCOC has
been trying something new, called
“early tenders”. The mechanism is
working well for us today, and will
lead to even greater Kazakhstan
content in future.
The idea is to find locally-based
suppliers in key categories who
will commit to invest and work
closely with NCOC with clearlydefined
scope and under long-term
contract to gradually increase their
Kazakhstan content in a “staircase”
At each “step” of the staircase, the
supplier’s business plan moves
from simply warehousing imported
goods, to assembly, testing and
certification in-country, then
basic manufacturing, and finally
advanced manufacturing and
sourcing domestic raw materials.
Each “step” is a step-up in value
added within Kazakhstan. Each
“step” also requires the supplier’s
One of the first NCOC contracts
awarded to a domestic
manufacturer has been with
Novus Sealing Caspian LLP, a joint
venture between local partners and
Flexitallic Group, a major global
gasket producer. They manufacture
in Kazakhstan more than 200 line
items of different types and
complexity. Novus Sealing
Caspian is fairly advanced along
the ‘stairstep;’ the next step is to
move to advanced manufacturing
techniques. With help of their
partner, the company is introducing
a new water-jet cutting technology
to increase the range of gaskets
produced locally and reduce lead
time for manufacturing.
commitment to progressively invest,
based on a credible business plan,
accompanied by close local content
monitoring by NCOC.
We see practical advantage to
NCOC in building local capacity –
This contract was awarded to
a local joint venture (between
Atyrau Neftemash and Farina
Group of Companies) for a work
scope including approximately two
thousand line items of flanges,
spacers, caps and plugs. It starts
with importing forged blanks and
doing some basic finish machining
here in Atyrau, but the supplier
has obligated to undertake internal
investments and train Kazakh
nationals on advanced computercontrolled
machining to upgrade
and begin producing forgings in
Atyrau within the next 18 months.
the lead time for sourcing materials
will be shorter, and if there are
problems we don’t have to send
overseas for help in fixing it.
Here are three examples of “early
tendering” in action:
The scope of this contract includes
about 150 line items of filters of
different types for use in heating,
ventilation and air-conditioning
systems. Initially Altezza LLP simply
imported and warehoused all
filters needed. But within the first
18 months of the contract, the
supplier began manufacturing
the filters here, which brought
“local content certification” (ST
KZ) to over 70% - and opened
other business opportunities for
Altezza LLP in supplying the local
market. All locally-produced filters
have now been approved for use
within NCOC following testing and
As a means to achieve its own medium- and long-term
nationalization goals, the Operator has developed a
special, targeted program for identifying and recruiting
Kazakhstan citizens, and providing them with training
for advancement in a long-term career with NCOC (see
inset). More than a thousand Kazakhstan citizens have
been recruited or trained by the Operator since the
program began in 2002.
The Atyrau Training Center, a purpose-built facility
that is home to NCOC’s training programs, has 14
classrooms, mechanical and demonstration workshops,
a library, auditorium, Operator Training Simulator room,
and exhibition center.
Since 1998 more than 15,000 Kazakhstan citizens have
received training, either from NCOC or as employees of
local companies being helped by NCOC.
Over two decades, the Operator has spent in total
about US$250 million on job skills and professional
training to build local capacity for the North Caspian
Article XXVII of the NCSPSA specifies the overall targets in terms
of manning levels of Kazakhstan citizens employed in carrying out
Petroleum Operations. In 2016, the Kashagan Phase 1 project has
already significantly exceeded these targets:
69% of managerial staff;
96% of technical and engineering employees, administrative staff, and
100% of workers and supporting personnel.
Strong growth was noted in Kazakhstani managerial staff in 2016.
Overall, 86% of the three thousand employees of operating company
NCOC are Kazakhstan citizens, and 90% of the more than 15,000
people working on the North Caspian project are Kazakhstan citizens
at the end of 2016.
Link to NCOC General Business Principles - q
Link to NCOC Code of Conduct - r
NCOC’s General Business Principles apply to all our business affairs
and describe the behavior expected of every staff member of NCOC,
including direct-hire Kazakhstan citizens, secondees, and contract staff.
Further, all NCOC staff are required to adhere to a Code of Conduct,
which instructs them on how to apply the General Business Principles
in line with our core values. It provides practical instructions on how
to comply with laws and regulations and how to relate to customers,
communities and colleagues. Staff communications and monitoring
programs are designed and implemented to assure compliance.
Contractors and suppliers are contractually obligated to comply with
our General Business Principles and Code of Conduct in all aspects of
their work with us. All those seeking to do business with NCOC undergo
third-party “due diligence” background checks before contracts are
signed. After further risk screening, some companies may be asked to
institute mandatory training or special contractual conditions to ensure
that their business practices align fully with our expectations.
• Language courses, from beginner to
• Continuing Education: sponsored pursuit of
a degree or other professional improvement
for employees, with a commitment to
continue a career at NCOC for at least 3
years after completion of study.
• Internship: a summer unpaid-work
opportunity for Kazakhstan undergraduates,
performing substantive project-related
work under guidance of an NCOC mentor,
allowing them to learn more about NCOC
and NCOC to learn more about them as
• Young Professionals Training: mentored
development and career planning for newhire
college graduates at NCOC.
• Leadership Development: training core
behaviors expected of future leaders in
NCOC, including skills as mentors of others.
NCOC provides certain types of training as a
• A competitive university scholarship
program for non-employee nationals
majoring in petroleum-related subjects, run
by Kazenergy (2559 scholarships since 1998).
• Courses to introduce RoK regulators to
certain aspects of oil and gas operations
that will help them perform their official
duties, such as logistics planning, economic
analysis, petroleum accounting, contract
• New technology transfer, e.g., provision
and purchasing of technical literature,
professional publications, scientific
instruments, materials and other equipment
requested by RoK. The Drill-Sim 5000 (see
photo) is an example.
No one at NCOC may instruct staff to take actions
that violate the law or contradict our Principles. If an
employee observes such an action or instruction, he or
she may refer the situation in confidence to a supervisor
and/or the NCOC Ethics & Compliance officer for
further investigation and possible action.
NCOC staff, vendors, suppliers, contractors or anyone
else can raise concerns or report possible noncompliance
with our values and principles - even
anonymously – to the NCOC Ethics & Compliance
officer. Details are kept confidential. The Ethics &
Compliance officer looks into allegations, and if
confirmed the company’s management takes actions
appropriate to the circumstances. NCOC does not
tolerate retaliation of any kind against those who report
an issue concerning our General Business Principles, the
Code of Conduct or Anti-Bribery & Corruption Manual,
or compliance with applicable law.
NCOC requires that its staff avoid conflicts of interest
between their private activities and their part in the
conduct of NCOC business.
NCOC reflects all business transactions in our accounts
in an accurate and timely manner, in accordance with
established procedures and agreements.
Contractors and suppliers are obligated by their
contracts with NCOC to adhere to our General Business
Principles in all aspects of their work with us.
As above, concerns or suspected non-compliance
may be reported in confidence to the NCOC Ethics &
NCOC’s internal Anti-Bribery & Corruption Manual
contains policies and procedures to ensure that any
interaction with government officials is directly related
to a stated business purpose or regulatory requirement,
and that it is in strict compliance with the laws of
Kazakhstan and consistent with any international
statutes that may apply12.
In our General Business Principles, NCOC has pledged
to contribute in an ethical and constructive way to
enhancing the laws and regulations of Kazakhstan on
health, safety, security and environmental protection.
NCOC is an active member of KazEnergy, a not-forprofit
association of companies in minerals development
industries in Kazakhstan. NCOC is also a member
of the Oil and Gas Committee of the “Atameken”
National Chamber of Entrepreneurs. We often engage
in discussions of priority public policy issues affecting
our industry in the framework of these organizations.
NCOC is also a member of the American Chamber of
Commerce in Kazakhstan, and has participated in its
advocacy activities to improve the foreign investment
NCOC does not make political contributions of any kind.
11 Local goods, works and services are defined per Unified Methodology (2010) on local content calculations outlined in the RoK Law “On Subsoil and Subsoil Use.”
See Link to Subsoil Act definitions of local content used by NCOC. Prior to 2010 NCOC used local content calculation methods in the NCSPSA
12 The US Foreign Corrupt Practices Act (FCPA) and the UK Anti-Bribery Act are two foreign laws that could apply to companies or citizens of
those countries, even if their activities take place in Kazakhstan.
NCOC is headquartered in Atyrau, Kazakhstan, close to the North Caspian
project’s resources and its facilities in Atyrau and Mangystau Oblasts.
We aim to be an employer of choice and a respected member of these
communities. We care about the communities where we operate because
we are a part of them. We want to proactively address any concerns raised
about our operations, recognizing that public respect and confidence
are earned through performance, open communications and community
Voluntary sustainability reporting plays an important part in this.
NCOC encourages employees to take active part in the betterment of their
In Aktau on December 8, 2016, NCOC was
awarded one of 16 “Priznaniye” awards from
the Eco-Mangystau NGO, in the Ecological
Initiatives category, noting our “contribution
to environmental protection and support
of NGOs in realizing their sustainable
development projects”, as well as for NCOC’s
leading role in social partnership and
collaboration in the Oblast
• On Saturday, April 16, nearly a hundred NCOC staff
planted elm and ash saplings in Atyrau as part of
a nation-wide greening initiative. Atyrau City Akim
Nurlybek Ozhayev visited the NCOC location to thank
the volunteers. Atyrau citizens planted 13,000 saplings
in total that day.
• NCOC and local environmental NGOs organized a
litter clean-up day on Saturday, May 14 along the
popular walking paths on the banks of the Ural river
in Atyrau. Nearly a hundred enthusiastic volunteers
pitched in, including students and NCOC staff; NCOC
also provided tools, water and personal protective
equipment, and instructed on safe approaches to the
NCOC and its employees also take part in holidays and
other events important in the life of the community,
such as Nauryz (Kazakh New Year) and Victory
Day. The company annually organizes community
engagement events with the participation of children
from low-income families and disabled children. We
provide grants for community initiatives through our
Sponsorship and Donations program; see above.
We engage on a regular basis throughout the year with the public to
share information or discuss their concerns and questions about the
North Caspian project, in meetings ranging from small gatherings to
large public hearings. In 2016, these activities including the following:
The replacement pipelines are made of a twolayer
composite steel, consisting of a cladding
layer, in contact with the sour oil and gas,
made of a corrosion-resistant alloy (CRA): and
a backing layer, made of specially formulated
carbon steel to provide the strength and
toughness required to maintain mechanical
• Representatives of local environmental NGOs toured onshore facilities
and construction sites on April 19. After a safety induction and project
briefing, the group toured the Bolashak Onshore Processing Facility
with NCOC site managers, visited the Eskene West Fire Station, and
had opportunity to inspect first-hand the 12-meter pipe joints of the
replacement pipeline, internally clad with corrosion-resistant alloy and
weighing 10 tonnes apiece (see photo).
• A public hearing on the Environmental Impact Assessment (EIA) of the
Amendment to the Kashagan Experimental Program Development
Scheme (KEPDS) took place in Atyrau on June 10. The event was
attended by Atyrau Oblast Akimat officials, students and community
members, NGOs, journalists, scientific experts and academics.
Managing Director Bruno Jardin, in opening the meeting, noted that
KEPDS contains “corrections to the overall project that modify its scope
and certain technical parameters, but do not alter the fundamental
design solutions approved in 2013”.
• On December 14, NCOC held a roundtable in Atyrau with NGOs to
obtain comments on its 2015 Sustainability Report. Also in attendance
were representatives from the Atyrau Regional Departments of
Ecology and Natural Resources Management, Regional Forestry and
Fauna Inspection, Industrial Security Department of RoK Committee of
Emergency Situations and Regional Sanitary Inspection.
NCOC has a broad-ranging communications program
to reach out to stakeholders on topics of interest. We
actively work with local media outlets and regularly
update the NCOC website (here). As restart approached
in 2016 we intensified engagement with the local
communities around Bolashak and met regularly with
the village Akims to ensure regular contact in the event
of complaints or questions. To help local businesses
learn about economic opportunities associated with the
NCOC aims to be an employer of choice in
NCOC goes well beyond legal requirements in providing
compensation and benefits that are competitive and
worthy of the skilled and motivated workforce we seek
to attract. NCOC carefully calibrates the competitiveness
of its salary and benefits package with market surveys.
NCOC plans employee satisfaction surveys in 2017
to measure employee engagement and opinions
about Company compensation and benefits, work
environment, management, career growth and other
NCOC does not tolerate unlawful discrimination in
employment. Our Code of Conduct for employees
specifies that employment decisions are based only on
relevant qualifications, merit, performance and other
NCOC does not tolerate any form of harassment, nor
any action, conduct or behavior which is humiliating,
intimidating or hostile. Managers have a responsibility
to protect their staff from harassment, and to create
a climate where individuals who have concerns about
harassment in their work area may discuss the issues in
NCOC is committed to providing an open working
environment in which respect for each other is
fundamental, continuous improvement is a shared goal,
North Caspian project we reach out in a variety of ways,
from general awareness seminars about the project and
participation in industry conferences, to highly targeted
vendor audits and specialized training sessions. See the
section on Local Content for more information. Anyone
in the community can raise concerns or report possible
non-compliance with our values and principles - even
anonymously - to the NCOC Ethics and Compliance
and the concerns of individuals are taken seriously and
dealt with positively, without prejudice to them or their
career. NCOC aims to have formal representation of
women in the Senior Leadership Team.
NCOC has clear policies and procedures for dealing
with workforce grievances, which apply equally to its
contractors and sub-contractors. Grievance procedures
serve to bring employee problems to management’s
attention and ensure open, proper and timely review
and resolution before frustrations can evolve into
conflict. Employees may express their grievances freely
and openly without fear of dismissal and intimidation.
NCOC must accept, register, and review any written
grievance submitted by an employee. Employees have
the right to appeal any decision. If not resolved within
NCOC, the grievance may be referred to appropriate
RoK officials. By law, neither NCOC nor its contractors
may compel employees to join or not join a legal labor
action, and must reserve for the employee any prior job
position and benefits.
NCOC has policies and procedures in place for
monitoring timeliness of salary payment, living
conditions and canteen facilities provided by our
contractors and sub-contractors.
NCOC has been working for many years to promote respect for human
rights within our organization. Our approach consists of several core
Suppliers are also contractually obligated to comply with our General
Business Principles and Code of Conduct in all aspects of their work with us.
NCOC has programs and measures in place to provide security and
safeguards as appropriate to protect its people, operations, facilities,
business information, and other assets. NCOC sites have implemented
security programs based on a proven, structured risk assessment
methodology. NCOC complies with relevant laws and regulations affecting
security in areas where we operate, and we support a coordinated and
cooperative approach to infrastructure security with the competent local
and national security agencies.
NCOC requires its security contractors to abide by the Voluntary Principles
on Security and Human Rights
Voluntary Principles on Security and Human Rights - t
Started in 2015, the Women’s Network
holds lecture and networking sessions
with the aim of connecting motivated and
talented professional women (and men!)
to exchange information about careers,
expand contacts with co-workers, and share
advice on maintaining a healthy work and
The Women’s Network launched a pilot
Mentoring project in 2016, in which a dozen
young women professionals have found
senior colleagues willing to spend time to
share professional knowledge on a one-toone
basis. The project was well received,
and will continue in 2017.
NCOC reports sustainability performance in a full and
transparent manner to its stakeholders in compliance
with its General Business Principles, and subject to
relevant terms of the North Caspian Sea PSA.
This report is guided by global best practice;
Foundational is the 3rd edition (2015) of “Oil and Gas
Industry Guidance on Voluntary Sustainability Reporting”
(“the 2015 Guidance”). Our intent is that, through strict
adherence to its indicators and processes, this report
will be relevant, transparent, consistent/systematic,
complete, and accurate in the sense defined by the
The data is fully consistent with reports on
environmental and socio-economic performance of the
North Caspian project made to NCOC shareholders,
and to the Republic of Kazakhstan in its oversight and
For more than a decade, the Operator has had robust
management and other systems in place for collecting
and analyzing environmental, safety, production and
financial activity, and reporting it to the shareholders
of the North Caspian project, as well as to the PSA
Authority and RoK government agencies at various
levels for oversight and regulatory compliance
submissions. This report uses the same data sources and
reports provided to them. If there is a difference (e.g., in
units or definitions) between reporting requirements of
the 2015 Guidance and those of Republic of Kazakhstan,
we are governed by the latter and attach a footnote.
A Materiality analysis was conducted, in accordance
with the IPIECA 2015 Guidance.
The base set of reporting indicators are those in the
pilot 2015 NCOC Sustainability Report, based on
“common” reporting requirements of the IPIECA 2015
Guidance. Stakeholder engagements, issues monitoring
and media inquiries were also used to identify potential
material issues specific to this project.
The frequency with which stakeholders raise certain
issues and the volume of response material in our
databases, media coverage, and considerations of
timeliness are criteria which have all influenced the
prioritization of issues and inclusion herein. The
structure of the report has been evolved from the 2015
Guidance’s illustration of the interconnecting social,
economic and environmental dimensions of sustainable
development, reproduced as a figure in this report on
For more than a decade, NCOC’s data gathering and
reporting systems have been subjected to a variety of
audits and “cold eyes” reviews by shareholders, and
inspections or reviews by the relevant governmental
Reported inventory of direct GHG emissions for 2015
were verified in compliance with RoK legislation by
EnEco Solutions (Uralsk, Kazakhstan).
NCOC holds the following certifications:
The external verification for these awards requires NCOC
to regularly demonstrate not only compliance, but also
continuous improvement in its management systems.
2. ABOUT THE NORTH CASPIAN PROJECT
6. ENVIRONMENTAL STEWARDSHIP
10. SOCIAL PROGRESS
11. REPORTING PROCESS