Why Have Employees of Oilfield Service Companies Been Protesting?

Oil sector workers recently held a protest in Astana at the Ministry of Energy. 150 people came to the capital from the Mangystau region, but by the evening they were detained in a matter of minutes. Orda.kz studied the opinions of experts on why the demands of employees do not need to be perceived emotionally and why Zhanaozen residents demand employment in a state-owned company

At the entrance to the Ministry of Energy, dissatisfied employees of oilfield service companies with sleeping accessories, other things, and food supplies made it clear that they intended to stay for a while. The management of the main national oil and gas company JSC "KazMunayGas" received the "delegation" on the condition that there would be no representatives from the press. The company's press release revealed the outcome.

"When workers transfer to another (oilfield service) company, they must retain all previous working conditions, including the amount of wages and social package… However, it is necessary to act within the framework of legal procedures, and workers should understand this,"

Arkhan Umarov, head of the KMG staff, is quoted as saying.

Negotiations will continue, but so far without satisfying the main demand – employment in the "KazMunayGas" subsidiary, "Ozenmunaygas". It is also fully state-owned, which means that it works in full compliance with labour legislation and provides employees with all social safety nets, i.e., sick leave, holidays and other delights of official work.

On the evening of the protests, the SOBR arrived at the building of the Ministry of Energy. They first encircled the protesters, then began to round up and stuff them into paddy wagons. Our colleagues, journalists from Vlast, were among the detainees.

Initially, the workers demanded to cancel the result of the tender, which was lost by their oilfield service company, BerAli Mangistau Company LLP. The winner of the tender was "Kezbi" LLP, which offered a lower price for services. The latter, in order to calm the situation in Zhanaozen, offered its competitors' workers employment with a salary of 700 thousand KZT per month, but people shot the offer down and came to Astana. You can read more about the two oilfield service companies in our previous article.

Regional Idea

On March 27, Orda.kz wrote that residents of the village of Jetibay, located between the regional centre of Aktau and the city of oil workers - Zhanaozen. The residents blocked the road with a demand to employ them in oil fields that are located near the village. Akimat employees explained that employment is possible only if there are vacancies. Their explanation fell on deaf ears and people continued blocking the movement of vehicles, and, in turn, MangistauMunaiGas JSC's work.

They turned down the jobs offered by the akimats' employees in the construction and road sectors with salaries ranging from 200 to 450 thousand KZT. On March 30, They went on a hunger strike, which came to nought in 2 days thanks to the same local executive bodies' persuasions. People were promised help with work and thus departed.

A similar situation is happening now with the employees of the aforementioned BerAli Mangistau Company LLP from Zhanaozen, which lost the tender for work in a subsidiary of KMG Ozenmunaigas. As political scientist Daniyar Ashimbayev explains in his telegram channel, employment in the oil industry is a dream job for local residents. It guarantees a social package and confidence in the future in a region that has a large influx of population, including from neighbouring countries.

"It should be understood that when they talk about the "protesting oil workers of Zhanaozen", it is extremely rare to talk about the oil workers themselves. Basically, employees of service companies who have an expired contract or lost a tender are "buzzing" (which, to put it mildly, allows us to conclude that the owners of the losing company are behind the "protests"). Let's add the unemployed here, but not only locals, but also visitors. And Mangystau, as you know, is the only region in Kazakhstan that has a positive migration balance (except for megacities)."

Ashimbayev also writes that work at Ozenmunaigas is so desirable that it has generated a huge number of fraudulent employment schemes. And people are willing to pay millions. The expert also wrote about the company's employees' ties with religious organizations.

"In addition, OzMG (Ozenmunaigas -Ed.) collectives have close relations with local informal groups, in particular, with religious radicals interested in financial donations from employees and the presence of levers of influence on local and central authorities."

At the same time, the parent company of Ozenmunaigaz, KazMunaiGaz, explained earlier that the people who are now protesting at the Ministry of Energy favoured this year's tender-winning Kezbi company a year prior. This may indirectly indicate that employees are inspired and sent to protests almost certainly by the owners of oilfield service companies themselves and thus influence the results of tenders in which violations have not been found during an audit.

OzenMunaiGas

"KazMunayGas's" subsidary — "OzenMunayGas" — employs more than 9 thousand people. At the same time, it produces relatively little (5.3 million barrels per year). According to the KMG report, in 2022 OzenMunaiGas reduced oil production by 4.4% compared to the previous year. The financial indicators of the company are therefore not rosy enough to recruit new employees.

Political scientist Gaziz Abishev on his telegram channel points out what people do not notice: several deposits in the West of the country are not what they used to be. Meanwhile, residents of the districts do not want to lose income and move to labour-deficient regions (for example, the North Kazakhstan region) or change their place of employment, including via taking retraining courses for specialists.

"In a number of western regions, the oil industry is running out of steam and does not produce the former growth. Demographics, meanwhile, are going through the opposite dynamics. In the medium term, it is not possible to provide people with well–paid jobs to maintain stability,"

Abishev writes.

In a conversation with an Orda correspondent, the head of the Union of Oilfield Service Companies of Kazakhstan, Nurlan Zhumagulov, also confirmed that the oil industry has the highest-paying jobs in the West. He communicated with the protesters and they all say that they will not be able to support their families if they work in other industries, at least not in the way they are accustomed to. People also want stability and clear prospects for the years ahead as a minimum.

"They say: we are tired, they throw us from one project to another. A tender is held every year. First they work in one company, then in another. Today, the meeting was held at OzenMunaiGas, and they were told there: guys, employment is in the order of the queue,"

Zhumagulov says.

The queue for employment in the company is set by the Zhanaozen akimat along with the oil company and local residents. Vacancies in OzenMunaiGas and its subsidiary, Ozenmunaiservice, which is engaged in the repair of wells, are distributed according to lists in order of priority.

Protest-inclined Zhanaozen's Problems Have Gone Nowhere

Nurlan Zhumagulov also says that the city in the West of Kazakhstan was originally created as a rotational village with no more than 30 thousand people. However, it gradually turned into a 150-thousand-strong city, where, in addition to residents of the surrounding villages, Kandases from Uzbekistan and Turkmenistan are actively resettling. Opportunities for work are also not increasing along with the lack of economic diversification. The number of jobs is limited and the population is growing. These are all the same problems that were in Zhanaozen in 2011 when protests broke out and were brutally put down by the authorities. Protests here in January 2022 eventually spread to Almaty and other cities of the country.

At the same time, the agriculture and manufacturing industries in the region are not developed, almost everything is imported, which means it is more expensive than in many regions of Kazakhstan. Salaries in the oil sector provide a comfortable life, but there are not enough places for everyone. Employees of the company "KazMunayGas" and its subsidiaries receive an average of one million tenge under the Unified Wage System (ESOT). This was introduced by the ex-Minister of Labor and Social Protection Serik Abdenov, nicknamed Mr. "patamushta (cause' - Ed.)" for his explanation of the need to raise the retirement age for women. ECOT has annual indexation of the salaries of KMG employees regardless of profitability. People are used to this and do not try to comprehend new market realities.

"Kezbi LLP offered a lower price at the tender, and the workers are not sure that they will receive the same salary as before, and they will have to strike again. But these are the procurement rules of Samruk-Kazyna. I believe that one of the ways out of this situation is for Ozenmunaigas to independently conduct purchases, that is, to make an exception and conclude contracts not for a year, but for 3 years in order to increase the planning horizon for companies and their employees,"

the head of the Union of Oilfield Service Companies believes.

Our other interlocutor Serik Burkitbayev, the former Minister of Transport and Communications and former head of a number of national companies, including JSC NC "KazMunayGas", believes that it is necessary to reject the demands of the workers. He points out that the protesters do not currently have the high qualifications required for the relevant work. People also do not study or receive certificates.

"There should be no compromises. The state should offer a way out. The people cannot be blamed, they are who they are. Those who run the country should think. It is necessary to train people today. We will see the effect of this in five years. And we, even a high–ranking government official, have 2-3 years - this is the cap season of planning, and 3-5 years of management. So they are wondering why invest if those who will replace them will get all the credit, as money needs to be utilized today. But are we building a state or what?"

Burkitbayev said in an interview Orda.kz.

He recalled the plans for the development of Aktau as a tourist and industrial cluster and the garment factory in Zhanaozen. They decided to build the factory after 2008 and even imported Italian equipment that there is still no word about.

KMG Management's Mistakes

The telegram channel Protenge has also written about the long-standing blunders of the national company recently. They recollected about a luxury hotel in the suburb of Turkish Bodrum Kempinski Hotel Barbaros Bay Bodrum. 75% of its shares belong to a KMG subsidiary, KazMunayGas-Service LLP, and 25% to a Turkish citizen. The joint company is called Aysir Turizm ve insaat A.S.

The national company acquired the share in 2006 for $40 million, hoping for profit, but the luxury hotel brought losses for the most part. The first attempt to get rid of the asset was made in 2015. But no one bought the shares of the hotel for $50 million.

As it turned out, Kempinski Barbaros Bay Bodrum has not been bought to this day. The main shareholder has also not had access to the luxury asset since 2016. KazMunayGas responded to journalists' request about the reason briefly:

"The actions of minority shareholders have created obstacles for the participation of KazMunayGas-Service LLP in the operational management of Aisir and the activities of the hotel."

It turns out that for several years, the Turkish co-owner with 25% of the shares, has kept Kazakhstan's oil and gas company away from both the hotel and the profit that it may be generating.

Everything that is happening looks like the very consequences of many years of mismanagement. And again the question arises: is there a migration and demographic policy in the country as well as effective measures to improve human capital? Kazakhstan is a large and sparsely populated country, but the economy, based on the extraction of resources and processing very little of them, is not keeping up. Poverty and lack of education paired with a high birth rate generate the same poverty and discontent, which could ignite again.

Original Author: Maksim Skopin

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. The article has also been modified to reflect the state of events as of 13/4/2023