What Are They Silent about at The Shymkent Refinery? Part 3

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There is another problematic piece of equipment at the SNPZ along with the recently failed heat exchanger. The defect was found in the catalytic cracking, which was installed in March 2018. But that's not all. According to our source, two fatal incidents occurred at the plant in the first decade of January 2023. PKOP LLP had not yet signed a contract with an insurance company. Orda looked into the situation.

In the first part, we wrote that the breakdown of the heat exchanger at the Shymkent refinery cannot be considered a force majeure. The malfunction of the part was known at the beginning of the year. In March, the specialists of the manufacturer, which is located in China, even came to fix it. They had said that under favorable conditions, the heat exchanger would be able to work for no more than a year. But In May, there were issues with it once more.

In the second part, we wrote that the diesel plant has been under modernization since 2011. In 2020, PKOP LLP ordered a DN System compressor station for a diesel installation.  Although initially, the estimated cost of the project was almost two times cheaper, approximately $27-29 million was spent on it. During the conclusion of the contract, one of the founders of DN System was the business partner of Timur and Dinara Kulibayev at the Shymkent Petrochemical Company. The SNPZ and the SNK are connected by a pipeline overpass. The chemical plant receives both raw materials from the refinery and energy resources in the form of steam and purified water from it.

A Defect In a New Installation

In March 2018, commissioning work began on the RFCC catalytic cracking with a capacity of 2 million tons per year. It was designed and built using the technology of the American company UOP. The cracking installation has become the most complex in technological terms.

The part at the Shymkent refinery was needed for processing heavy oil residues to obtain liquefied gas, gasoline and light gas oil. The depth of processing would thereby be increased. Already in mid-August, the owners of the plant announced that they had started receiving raw materials for the catalytic cracking reactor. This was the completion of the modernization and reconstruction of the entire refinery.

In addition, as part of the second stage of the SNPZ modernization project, Merox hydrocarbon gas purification plants, Prime G+ gasoline hydrotreatment, Claus sulfur and PSA-2 hydrogen purification plants were launched simultaneously with cracking. The plant's capacity had increased to 6 million tons per year. To complete the modernization project, which started in 2011,  in 2017, the Development Bank of Kazakhstan opened a credit line for $932 million for up to 13 years.

As the source at the Shymkent refinery said, a defect was detected at the catalytic cracking this year.

The defect was found in the rotor of a steam turbine, which generates about 20 megawatts of electricity in the chain. They need a backup rotor, which cannot be repaired in Kazakhstan. Previously, repair sections were always created, but now they are not. This is also the SNPZ's error. Or is it still another gravy train for business?  the source said.

Automated Monitoring System

According to the new amendments to the Environmental Code, from 2023 all large enterprises of the I category must introduce online control and transmit all information to the authorized body in the field of environmental protection. An automated monitoring system (AMS) therefore had to be installed at the Shymkent refinery. In 2021, the company announced that it had started developing design and estimate documentation.

According to BAYS LLP, it was they who developed the AMS project for the plant. The company is the official exclusive representative of the Italian SISGEO (a leading developer and manufacturer of measurement equipment – Ed.) in Kazakhstan. It should be noted that BAYS LLP was responsible for the maintenance of the AMS at the monument of the 25th anniversary of independence in Astana in 2020 and 2021.

At the same time, the Shymkent Refinery is listed as one of the projects of the Monitoring Systems Group company. The company is mainly engaged in AMS development and maintenance. What exactly they did for PKOP LLP is not unknown.

The design and estimate documentation for the project of an automated emission monitoring system has not yet passed state expertise, but PKOP has already signed a contract for equipment with a long lead item (LLI). They will receive it in nine months: the order period with the discussion of working documentation takes two months, logistics will take another month, as a result, 5-6 months will be spent on the production of the LLI. Are they really blurring the eyes of KazMunayGas, rushing, but at the same time violating?  the interlocutor shared.

It should be noted that data on a similar monitoring system at the Atyrau refinery with a deadline are available to the public. It will be put into operation by the end of 2023 at four technological installations. Thus, it is planned to reduce emissions to 82% by 2028.

A Series of Deaths 

There have been several deaths among top management at the plant. Two out of three were due to a heart attack. In July 2017, at that time, Vice-president of the Shymkent refinery Aslan Mynbayev, the younger brother of ex-Minister of Oil and Gas Sauat Mynbayev, died at the age of 40. He was appointed Vice President for the Modernization and Development of JSC "PKOP" in 2015. He oversaw the Shymkent refinery's modernization, which was so often suspended.

In different years, Mynbayev worked for KazTransOil JSC, Kazmortransflot and Caspi Bitumen (bitumen production plant in Mangystau region).


Screenshot neft-gas.kz

On July 2, 2019, Bolat Baetov, Technical Director of PKOP LLP, died after a protracted illness. He was one of the founders of the plant. At the refinery, he began working as an operator of a technological installation and rose to one of the heads of the enterprise. Baetov took part in the start-up of the technological workshop, reconstruction and modernization of the Shymkent refinery.

Under his leadership:

  • A new technological process has been introduced to produce jet kerosene and diesel fuel from highly paraffin oil
  • The quality of products has improved 
  • The output of light petroleum products has increased by 3-4%
  • The depth of oil refining – by 20%

Baetov worked at the plant for 35 years

Bolat Baetov/ Photo otyrar.kz

On July 14, 2023, another vice-president of the Shymkent Refinery, Daniyar Makishev, died of a heart attack. He was 35 years old. This happened just during the breakdown of the heat exchanger, which needs to be replaced. The Shymkent refinery was stopped for catalyst regeneration from July 3 to July 14.

Problems with Personnel

Now the plant is managed by six people:
  • President Yerbolat Kozhabayev
  • First Vice President Zhiyuan Jiang
  • Vice President of Production and Strategic Planning Zeng Xudong
  • Technical Director Bakhit Eregenov
  • Director of Financial Risk Control Zhi Lunhai
  • Chief Engineer Chen Qingkun

According to a source at the refinery, Yerbolat Kozhabayev is "a lawyer with no experience in oil refining." The president of PKOP LLP, indeed, is a candidate for law, but he is an economist by his second education (2003), and the third – a bachelor of oil and gas business (2010). He even managed to work as a judge of a specialized interdistrict economic court (2004-2006), after which he left for the oil and gas sector.

Kozhabayev has occupied the chairs of directors in legal support. Thus, JSC TD KazMunayGas was engaged in transport and trade operations with oil and petroleum products in Kazakhstan and abroad until June 2010. After the purchase of 80% of oil refining assets, the company refocused on refining oil and providing the domestic market. JSC was renamed into JSC "KazMunayGas – processing and marketing" and Kozhabayev was its CEO from April 2017 to May 2018. It should be noted that Yerbolat Kozhabayev even managed to work as the CEO of KazMunayGazOnimderi JSC. The company previously operated the KazMunayGas gas station. Later, this asset was given for privatization, and it became the property of Timur Kulibayev. He worked for two years as the general director of "JV "CASPI BITUM" LLP, and in July 2022 became the president of "PKOP" LLP.

Instead of genuine professionals, either their students or friends and relatives work. The first head Erolat Kozhabayev is a lawyer with no experience in oil refining. A bitumen plant is far from a refinery, so the person simply does not make the right management decisions. Findir, lawyer, chief estimator, chief economist have no experience in oil refining. They do not provide the needs of the plant in time, all the time looking back at businessmen. You ask, what is the way out? The plant should be managed by a person loyal to KMG, and not by Bian Dyzhy (CNPC President for Central Asia and Russia – Ed.). Perhaps it should be chosen from the locals who know the needs of production. So that he could assemble a group for operation, organize a repair shop, additionally train personnel at other plants, a source in the Shymkent refinery shared. 

Employee Insurance

The LLP annually enters into a contract with an insurance company. The insurer was a subsidiary of Halyk Bank – Halyk Life. The last contract between the companies expired on December 31, 2022, and they did not conclude a new one. Halyk Bank's subsidiary sent price offers on October 21, 2022, with a 50% discount.

On January 6, 2023, representatives of Halyk Life sent a letter to the management of PKOP LLP, reminding them that their employees have not been insured for six days. The contract, however, remained unextended. 

Screenshot of the Halyk Life letter

The top managers of the plant chose another insurance company - Nomad Insurance. As follows from the letter dated February 22, 2023, addressed to the compliance officer of Samruk-Kazyna (our editorial office has the document), the management of the Shymkent Refinery concluded a tender from one source, preventing three more insurance organizations from getting it. In addition to Halyk Life, there were two other companies that provided their price offers with discounts of 30% and 40%. According to a complaint, the damage from such a contract amounted to 40 to 60 million tenge. Nomad Insurance was also unable to resolve the issue of insurance in time after a fatal accident. The reason was the "late conclusion of the contract".

According to Orda's source, the contract was concluded in the first decade of January 2023. And it was on these dates that two fatal cases reportedly occurred at once.

KazMunayGas cannot punish its subordinates for poor organization of work, safety, unreliable operation and decisions that entail losses in money. They are mainly interested in personal gain. They were supposed to insure themselves until the end of 2022, but in the end, they dragged their feet until the first decade of January. These days there were fatal cases. Businessmen from among the management of PKOP do not understand that the enterprise entrusted to them is a strategic object,"  a source in SNPZ said.

Shymkent Oil Refinery/Photo by petrosynthesis

As a consequence, the incident caught Samruk-Kazyna's attention. They conducted an audit, pointed out 59 concerns and demanded that they be eliminated at the appointed time.

Three Years without Major Repairs

The inter-repair run is the non-stop operation of the equipment between scheduled preventive repairs. As with cars that regularly need maintenance, the plant also needs inspection.

On July 18, Deputy Chairman of KazMunayGas Dmitry Makeev said at a press conference in Astana that the Shymkent refinery will switch to a three-year inter-repair period within two years. Two other plants will do this by 2027. But this is no easy task. First, it is necessary for a third-party organization to conduct a technical audit, which will prove that the refinery can operate without stopping for three years.

According to our source, the management of the Shymkent refinery has already found the company, whereas experts have questions about its competence.

Having so many reasons for poor–quality operation of the plant, they ordered a technical audit from the Karaganda company "Expertus" LLP, from fellow townsmen Yerolat Kozhabayev and Daniyar Makishev (died July 14, 2023 - Ed.). Specialists in oil refining do not know this company. The representatives of the LLP took the digitization materials of the equipment from PKOP, putting their stamps. How does the Shymkent refinery plan to switch to such a run at all, sitting on the needle of Chinese manufacturers of catalytic cracking and other installations? Simple examples of equipment with malfunctions are a defect in the rotor of a steam turbine, a compressor 302, a heat exchanger T-201. I am silent about the implementation of such projects as AMS, nodal substation, CC-302 and the expansion of the refinery,  the source added.

How, with such serious problems, withholding of information and regular breakdowns, does the Shymkent Refinery want to work for three years without any stops? Orda does not have the answer to this question. We will continue to cover the oil and gas industry.

Original Author: Maria Gorbokonenko

DISCLAIMER: This is a translated piece. The text has been modified, the content is the same. Please refer to the original article in Russian for accuracy.

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