BG Kazakhstan: Doing Business Responsibly
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BG Group's contribution to Kazakhstan has developed steadily since it first established a presence in the country some 16 years ago. Since then, it has continued to play a leading role in the development of the oil and gas industry. With a commitment to a long-term future in the country, the scope of its social involvement activities is continuing to expand.
And as the government's Sustainable Development (SD) agenda continues to evolve, BG's view is that operating responsibly is the major contribution a company can make to this programme.
With an investment to date of around $2.1 billion, BG is the largest UK investor in Kazakhstan, and was one of the first western companies to take an interest in the country's vast resource potential.
A world leader in natural gas, BG Group's focus is on connecting competitively-priced resources to specific high-value markets. The portfolio is a broad one - covering Exploration and Production, Liquefied Natural Gas (LNG), Transmission and Distribution, and Power Generation. Among the 27 countries in which BG operates, Kazakhstan is one of the core areas of focus - evidenced through the Group's joint operatorship of the giant Karachaganak field, its shareholding in the CPC oil export pipeline and its continuing interest in exploring new upstream and downstream business opportunities.
"Doing business responsibly" is how BG Group defines Corporate Responsibility (CR), and this is articulated in its Statement of Business Principles. CR is central to the Group's decision-making - insofar as it places as much emphasis on "how responsibly" it works as it does on "exactly what" it does. This approach impacts not only on the way BG contributes to the Sustainable Development of the country where it operates, but also on the way it treats its employees, how it makes its investment decisions and how it manages its responsibilities to the environment. Leaving a lasting legacy of which one is proud means not being driven by the immediate imperatives of a particular project. If an activity provides genuinely sustainable value for its local stakeholders, it will also mean a better business generally, as well as a more supportive shareholder base. BG Group's SD contribution lies in its support for the country's social, environmental and economic development priorities - and by building businesses which integrate these with its own objectives.
One of the main BG Business Principles contains the pledge to "go beyond compliance with local environmental regulation to meet internationally accepted best practice". At the Karachaganak field, through the operating company Karachaganak Petroleum Operating B.V. (KPO), extensive remediation and replanting has been undertaken, and new technologies - such as flare-less well testing - are dramatically reducing emission levels.
On the national level, one way in which BG Kazakhstan has responded to the severe environmental problems inherited from the Soviet era is by sponsoring the BG Chair of Environmental Technology at the Almaty Institute of Power Engineering and Telecommunication. Working in conjunction with western universities, the Chair runs research and environmental development programmes to address issues such as water management and the definition and remission of industrial pollution. Since 1996, more than 150 engineers and scientists have graduated in a special Masters degree, which now equips them with the expertise and skills to manage such programmes in Kazakhstan. In 2008, in partnership with Conservation International, BG Kazakhstan also launched a project to train field conservationists in photographic skills, to help them better document, and raise awareness in, species of wildlife which may be under threat.
Recognising the range of social and developmental challenges in the countries where it works, BG has created a social performance function in order to ensure alignment with host community and government goals. The social programmes it organises worldwide also aim to ensure that "neighbouring communities benefit from our presence on an enduring basis". In Kazakhstan, this is reflected in programmes that focus on environmental protection, education and training - at an investment of $3.1 million to date.
With so many worthwhile causes to support, BG Kazakhstan has taken a proactive approach to its philanthropic and charity activity. A major event in its calendar is the annual BG Energy Challenge - a challenging, crosscountry, team-building event designed to bring together people from the energy sector to not only compete but to pledge funds for charity. Since it was established in Kazakhstan in 2006, the Energy Challenge has raised over $150,000 for the National Paralympic Committee of Kazakhstan - a key event for athletes preparing for the 2008 Beijing Olympics. BG also enjoys partnerships with the National Triathlon Federation of Kazakhstan, for which it provides sports equipment and training courses, and the Boarding School for Disabled Children in Astana, where it has built an outdoors facility to help develop the children's physical and social interaction skills.
Economic - education and training
Kazakhstan's openness to Foreign Direct Investment has meant the growth in demand for new skills to be provided from within the country. In response to this, BG Kazakhstan supports a number of post-graduate programmes at the Kazakh British Technical University (KBTU) in Almaty. Administered in cooperation with Shell, the British Council and four British universities, BG funds have supported the establishment of the BG/Shell Graduate School, which has to date produced 22 Masters graduates in Human Resources Management and Petroleum Engineering. BG has also provided KBTU with a new lecture hall, electronic library and video conference equipment, and plans to extend distance learning capability through the provision of e-library software. At the more junior level, the BG Education and Career Guidance programme helps young people make the right decision when selecting their future profession. Delivered through the National Research Education Information Centre and the Almaty Internet Education Centre, the programme is unique in primary vocational training. Some 300,000 schoolchildren can access the programme through 600 children development centres, and gain skills designed to equip them how to compete in the modern world of business. In Uralsk- the region where the Karachaganak field is located - more than 150 young adults from the "Zhas Dauren" orphanage have benefited from a nine-month programme to equip them with IT and web-design skills, and facility in the English and Kazakh languages. In addition, a series of mini-MBA training courses are being conducted for small and medium sized entrepreneurs in the WKO oblast. Through its obligations under the Karachaganak Final Production Sharing Agreement, KPO (BG 32.5%) provides $10 million annually for regional infrastructure projects, which range from the construction of schools, hospital wings and sports facilities to new roads and gas distribution lines.
Looking ahead with SD
Sustainable Development is gaining greater prominence in Kazakhstan, and is now one of the government's key policy priorities. BG Group has made clear its desire to help with the growth of this programme, and is responding in a number of ways. To help facilitate cross-ministry alignment on the understanding of SD, in April 2008, BG Group launched its sponsorship of the Regional Environment Centre (REC) Initiative. In a year-long course, spread over four modules, 40 senior government officials gain exposure to international SD thinking, and work together to increase their understanding of SD issues. With its partners in Karachaganak, BG is also developing a Sustainable Development approach to current and future field activities, where a major opportunity to demonstrate the philosophy of operating responsibly is the proposed multi-billion dollar Phase III development. This would see the creation of 10-15,000 local jobs during construction and several hundred permanent positions on completion. A commitment to Sustainable Development is at the heart of this initiative, which places an emphasis on local content, employment creation, and skills development and training. By virtue of its long association with Kazakhstan, as well as the economic importance of the Karachaganak field, BG Group is well positioned to help contribute to the government's growth agenda. As well as existing operations and potential exploration opportunities, it is using its market expertise to work on a range of measures that might improve energy efficiency in the country and help towards self-sufficiency in oil and gas. Kazakhstan will continue to grow as a leading provider of competitive energy to the increasingly important Central Asian markets, and Sustainable Development will play a key role in delivering this growth. Through the steps that it is taking - locally, regionally and nationally - BG Group is playing its part in helping to achieve this. The company's interests are closely aligned with those of the Republic -and, by working in constructive partnership, it looks forward to joining in its future success.