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    COUNTRYSUSTAINABILITYREPORTKAZAKHSTAN

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    ABOUTTHISCOUNTRYREPORT

    The present report is part of the Sustainability Reportsthat Saipem started to publish in 2003, being aware of

    the importance of informing the stakeholders on thesustainability approach Saipem implements in the areas

    of the world where it operates.

    The report focuses on a specific country or area anddescribes the principles, activities and performance

    that has been achieved by Saipem and its OperatingCompanies toward sustainable development.

    The report has been structured to provide easy accessto key indicators and information. It is divided into two

    parts: the first part gives an overview of Saipem andits business around the world, while the second part

    focuses on the specific country. This latter is composedby a first section describing the country, a second

    section describing Saipem presence in the country andits sustainability approach, and finally a third sectionreporting the overall sustainability performance of

    Saipem, addressed to different stakeholders.

    The report has been structured using an approachconsistent with the GRI Guidelines, identifying those

    indicators more representative of Saipem presence inthe country.

    The Country Sustainability Reports, together with theannual Saipem Sustainability Report, represent the mainSaipem tools to communicate its vision for Sustainability

    to all its stakeholders.

    METHODOLOGY

    This Local Sustainability Report has been developedin accordance with the principles of materiality,

    stakeholder inclusiveness, sustainability context andcompleteness. As for the annual Saipem Sustainability

    Report, this Local Report is strongly focused onstakeholders. All relevant and legitimate stakeholders

    in Kazakhstan have been identified and their needsanalysed. This Report is intended to describe Saipemcommitment, performance and its engagement with

    the Kazakh stakeholders.

    A set of Key Performance Indicators (KPIs) wasselected to support the information to be provided

    to stakeholders. Data are taken from the informationsystems used for the general management and

    accounting of companies operations or from publicdata made available by recognised Institutions.

    This Local Sustainability Report illustrates Saipemactivities in Kazakhstan, covering all projects

    conducted by Saipem Companies in Kazakhstan,which represents the consolidation area of the data.

    All data have been reported for 2009 and, whenavailable, for previous financial years.

    Information and data updated at 2009.

    INDEX 1 Message from the CEO 2 Overview of Saipem

    in Kazakhstan 3 Letter from the Management

    Part 1

    4 Introduction to Saipem

    5 Saipems Sustainability Approach 6 Saipem at a glance 8 Saipem in the World

    Part 2

    10 Kazakhstan

    10 Country Overview

    10 Economic and Energy Overview11 Social and Environmental Aspects

    12 Saipem presence in Kazakhstan13 Main projects14 Company Organisation

    and Management System16 The Approach to Sustainability16 Local content17 Sustainability Reporting

    17 Showing the Sustainability Value of Local Content Strategy

    20 Sustainability Performance20 People20 Total Workforce20 People Management21 Training23 Safety26 Health29 Industrial relations30 Environment30 Protection of the Environment32 Improvement Activities33 Oil Spills Prevention

    and Mitigation Measures

    33 Waste Management System35 Environmental Monitoring36 Customers37 Customer Satisfaction Feedbacks38 Subcontractors & Suppliers40 Local Communities40 Health Promotion41 Education42 Socio-Economic Development42 Environmental Protection42 Culture43 Local Authorities

    44 Future Challenges44 Glossary & Acronyms

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    SAIPEMSUSTAINABIL

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    1

    MISSION

    Pursuing the satisfaction of our clients in the energy industry, wetackle each challenge with safe, reliable and innovative solutions.

    We entrust our competent and multi-local teams to provide

    sustainable development for our Company and the communities in

    which we operate.

    the wide range and complexity of ouractivities, our engagement with localstakeholders requires a comprehensiveapproach to sustainability. Furthermore,the variety of projects undertaken andthe differences between countries wherethese activities are performed demandthat a distinctive local approach bedeveloped.

    We publish these Reports on ourLocal Business Sustainability in orderto favour open dialogue and enhance

    the development of local relationships,helping us to ensure that we operate atall times in an increasingly sustainablemanner.

    Saipem is an international Oil&Gascontractor with approximately 48,000employees and operations in more than60 countries.

    Saipem plays a significant role inits market sector and contributessubstantially to the economicdevelopment of the countries in whichit operates.

    We consider business sustainability tobe an integral part of our strategy. Our

    commitment is to create long-termvalue for all our stakeholders, especiallylocally, by identifying common goals andagreeing on specific initiatives. Given

    MESSAGEFROMTHECEO

    Pietro Franco TaliUmberto Vergine

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    SAIPEMSUSTAINABIL

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    Saipem is working in Kazakhstan through different Companies and Branches,always pursuing the satisfaction of its clients. Our presence in Kazakhstan has

    always been based on a commitment of working responsively and contributingto the economic and social development in the area, and also to create stable

    and trustworthy relations with the local neighbouring communities, the Districtsand the Oblasts authorities.

    By promoting Local Content, in term of employment, transfer of know-how andprofessional qualification of local suppliers and subcontractors, Saipem sets a

    goal to contribute to the growth and development of the region. Local Contentis an essential element of our policy in Kazakhstan, recognising that this can

    differentiate our way of working from the one of our competitors.Besides, the very difficult climatic conditions and the sensitive areas with highenvironmental value and biodiversity of the Caspian Sea, have represented a

    technological challenge for Saipem. In fact, our company intensively worked on thedevelopment and improvement of its technological assets and operations, in order

    to minimise the ecological footprint of its activities, both onshore and offshore.Aware of their responsibility, Saipem Companies in Kazakhstan have always

    applied a focused approach towards their employees, in promoting their growthand personal development, and guaranteeing their health and safety at work,

    also spreading a strong safety culture in each activity and operation conducted inthe Country.

    The promotion of local content and the proactive and open approach in therelation with the communities have demonstrated to be a success factor for both

    our present and future in the Country. Saipem scope in Kazakhstan is thereforeto create long term value through a sustainable business strategy based on its

    core attitude, generating wealth and promoting a sustainable development forthe host country.

    Giuseppe Caselli

    Saipem Country Manager Kazakhstan

    IL

    ITLETTERFROMTHEMANAGEMENT

    3

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    COUNTRYR

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    project management and constructionservices with distinctive capabilities in

    the design and the execution of large-scale offshore and onshore projects.

    The organisation, since providing manydifferent kinds of services, has been

    rationalised into three global BusinessUnits: Onshore, Offshore, Drilling. It

    enjoys a superior competitive positionfor the provision of EPIC/EPC servicesto the oil industry both onshore andoffshore; with a particular focus on

    the toughest and most technologicallychallenging projects activities in

    remote areas, deepwater, difficult oil.The Group is a truly global contractor,with strong local presence in strategic

    and emerging areas such as West Africa,Americas, Central Asia, Middle East,

    North Africa and South East Asia.

    Saipem is an international companyemploying over 37,000 people from

    around 115 nationalities. The major partof its human resources (85% in 2008) is

    locally employed.

    Saipem, 43% owned by Eni, is aninternational group with a strong bias

    towards oil and gas related activitiesin remote areas and deepwater. The

    Company began operations in the1950s and it is now a leader in the

    provision of engineering, procurement,

    INTRODUCTIONTOSAIPEM

    Operatingand Engineering Hubs

    EngineeringCentres

    Yards and MainLogistic Bases

    Other Main Areasand Representative Ofces

    2%

    2%

    3%

    23%

    3%

    4%

    5%7% 7%

    7%

    8%

    10%

    19%

    Saipem workforce distribution by nationality (2008)

    Philippines

    India

    Kazakhstan

    NigeriaItaly

    Russia

    Peru

    United Kingdom

    Others (

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    SAIPEMSUSTAINABIL

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    Saipem believes that a correct, openand cooperative relationships with allstakeholders is vital for the success ofeach complex project Saipem carriesout, frequently in very remote and mostchallenging areas.

    Saipem has a presence in manylocations around the world, operatingwith a decentralised organisation inorder to respond to local needs andsustainability issues. Everywhere itworks, the Company plays an activerole in the local communities, mainlyoffering employment opportunities,and personnel training; by workingeffectively with local suppliers andsubcontractors, creating economic and

    social value, and finally by contributingto infrastructures construction (e.g.access roads, construction camps withall the facilities such as hospitals, powergeneration, etc.).

    Saipems international workforce andbreath of internationalism is anotherfacet of sustainability: all personnel aretreated with dignity, always respectingtheir rights, cultural values, localcustoms and traditions, their diversityand identity.

    For each project, social, economic andenvironmental effects are continuouslymonitored, as well as the satisfaction ofcustomers requirements.

    SAIPEMSSUSTAINABILITYAPPROACH

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    COUNTRYR

    EPORT

    SEMISUBMERSIBLEPIPELAYING VESSEL

    J-LAYING VESSEL

    SEMI-SUBMERSIBLECRANE AND

    PIPELYING VESSEL

    DRILL SHIP

    (including 28 construction vessels andFPSO), and world class engineering and

    project management expertise.Saipem capabilities are also supported

    by significant fabrication capabilitiesbased at the core of major oil andgas provinces (Angola, Azerbaijan,Congo, Kazakhstan, Nigeria, UAE,

    Mediterranean Sea and Indonesia), witha potential of fabrication of 130,000

    tonnes per year.These unique capabilities and

    competences, together with a long-standing presence in strategic frontiermarkets, represent an industrial model

    that is particularly well suited to EPIC(Engineering, Procurement, Installation,

    Construction) projects.

    DRILLING

    Saipem vast experience in managingdrilling activities, associated with an

    adequate technological and operationallevel, have progressively developed the

    Companys actual capabilities. Overmany decades of performance, Saipem

    has drilled over 7,100 wells, 1,750 of

    OFFSHORE

    Saipems pioneering work in pipelineinstallation (a total of 28,000 km

    laid since late 1950s) is matched byits experience in installing offshore

    platforms, in which it has masteredboth the heavy lift and the float-over

    techniques.Saipem has now evolved into an

    integrated EPCI contractor, havingcompleted some 120 offshore

    construction projects over the lastten years, including groundbreaking

    achievements from complex deepwaterdevelopments to major trunk line systems.

    FPSO (Floating Production Storageand Offloading) units are also part of

    Saipems offshore line of products, bothas new-built delivered turnkey to thecustomer, and as tanker conversions

    leased to and operated for the customer,as well as marine terminals and

    conventional buoy moorings.

    Saipem owns a strong, technologicallyadvanced and highly-versatile fleet

    SAIPEMATAGLANCE

    6

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    SAIPEMSUSTAINABIL

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    PIPELAYING

    REGASIFICATION PLANT

    POWER PLANT

    DRILLING RIG

    JACK-UPDRILLING RIG

    EMISUBMERSIBLEDRILLING RIG

    challenging projects in difficultenvironments and remote areas.Land pipeline design and constructionhas historically been one of themainstays of Saipem business. TheCompany has laid a record of 100,000km of pipelines on five continents.

    Saipem Group has designed and built37 grass-roots refineries, more than 500process units and more than 400 plantsworldwide to produce chemicals fromnatural gas.In recent years, the Company hasdesigned and constructed more than40 power plants and four IntegratedGasification Combined Cycle plants,two of which are the worlds largest,with a power output of about 550 MWeach.

    Saipem plays also a significant role inthe design and execution of a large-scale civil infrastructure projects andalso offers integrated environmental

    remediation services, such as thoserelating to soil and ground water andcontaminated sites.

    which have been offshore, totalling anoverall depth of about 17.8 million m.

    Offshore, Saipem operates both inshallow and deep water using jack-ups,semi-submersible units, a tender assisteddrilling vessel and a drill ship. ForOnshore, Saipem operates with around100 Rigs self-owned.

    ONSHORE

    Saipem offers a complete range ofservices, from feasibility and front-endstudies to design, engineering,procurement, and field construction,most often on an EPC contractual basis,for complex oil & gas facilities, includingproduction, treatment, liquefaction,refining and petrochemical plants,pipelines, pumping and compressionstations and terminals.

    Saipems expertise focuses on theexecution of large projects with a

    high degree of complexity in termsof engineering, technology andoperations, with a strong bias towards

    7

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    COUNTRYR

    EPORT

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    REST OF EUROPE 2006 2007 2008Revenues ( million) 1,093 954 878

    Investments ( million) 17 14 9

    Workforce (units) 5,610 3,618 4,793

    Local Workforce (% of total) 86 85 73

    Energy consumption (toe) 12,222 44,386 63,095

    HSE Training (hours) 27,105 43,991 29,444

    AMERICAS 2006 2007 2008

    Revenues ( million) 545 745 590

    Investments ( million) 14 188 233

    Workforce (units) 2,730 4,021 4,562

    Local Workforce (% of total) 74 71 87Energy consumption (toe) 12,222 52,392 115,130

    HSE Training (hours) 60,497 68,401 74,357

    WEST AFRICA 2006 2007 2008

    Revenues ( million) 1,570 1,677 1,950

    Investments ( million) 31 54 49

    Workforce (units) 5,170 5,814 6,471

    Local Workforce (% of total) 69 69 67

    Energy consumption (toe) 10,043 52,744 56,633

    HSE Training (hours) 37,861 102,014 146,953

    NORTH AFRICA

    Revenues ( million)

    Investments ( million)

    Workforce (units)

    Local Workforce (% of total)

    Energy consumption (toe)

    HSE Training (hours)

    SAIPEMINTHEWORLD

    ITALYRevenues ( million)

    Investments ( million)

    Workforce (units)

    Local Workforce (% of total)

    Energy consumption (toe)

    HSE Training (hours)

    Additional data for investments

    Further investments not allocated by Areas were (in million) 458 in 2006, 1,184 in 2007 and 1,463 in 2008.

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    006 2007 2008

    372 727 1,475

    7 42 8

    231 1,690 1,783

    47 43 55

    435 33,160 35,991

    441 36,765 47,626

    SAUDI ARABIA 2006 2007 2008

    Revenues ( million) - 1,912 1,599

    Investments ( million) 9 65 81

    Workforce (units) 2,730 4,937 5,300

    Local Workforce (% of total) 97 97 96

    Energy consumption (toe) 35,125 59,322 64,439

    HSE Training (hours) 7,432 89,275 210,281

    REST OF ASIA-PACIFIC 2 6 2 7 2 82006 2007 2008Revenues ( million) 2,112 1,433 1,375

    Investments ( million) 2 4 26

    Workforce (units) 2,575 2,429 3,533

    Local Workforce (% of total) 54 65 66Energy consumption (toe) 11,166 45,997 34,682

    HSE Training (hours) 46,824 73,365 86,170

    006 2007 2008773 1,051 1,135

    8 18 68

    080 5,295 5,982

    98 98 91

    371 69,382 14,566

    143 8,441 125,996

    CIS 2006 2007 2008Revenues ( million) 1,052 1,031 1,092

    Investments ( million) 68 75 107

    Workforce (units) 6,641 6,486 5,566

    Local Workforce (% of total) 83 78 72

    Energy consumption (toe) 77,183 65,738 86,502

    HSE Training (hours) 405,012 369,070 325,588

    Additional data for 2006

    In 2006, some data were allocated to vessels (seaworld), including a total workforce of 3,147 units, an overall energyconsumption of 187,598 toe and a total 64,595 hours of HSE training.

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    Kazakhstan is the largestcountry in Central Asia and

    one of the most sparselypopulated in the world. The

    country has considerablemineral wealth and vast

    areas of arable land. Itpossesses enormous fossilfuel reserves and plentifulsupplies of other minerals

    and metals. Kazakhstansindustrial sector rests on theextraction and processing of

    these natural resources.It also has a large

    agricultural sector featuringlivestock and grain.

    Kazakhstans economy islarger than those of all theother Central Asian states

    and it now counts onsignificant investment in its

    vast upstream oil and gasresources.

    Kazakhstan inheritedsignificant amounts ofinfrastructure from theSoviet times and has a

    relatively well-educatedpopulation.

    COUNTRYOVERVIEW

    KAZAKHSTAN

    Economic indicators

    Gross Domestic Product (2008 est.) (billion $) 135.6

    GDP real growth rate (2008 est.) (%) 2.4

    GDP per capita (2008 est.) ($) 11,500

    Inflation rate (consumer prices) 2008 est. (%) 17

    Industrial production growth rate (2008 est.) (%) 2.4

    Labour force(2008 est.) (million) 8.412Labour force by sector (2006 est.): agriculture (%) 32

    industry (%) 18

    services (%) 50

    Unemployment rate (2008 est.) (%) 6.6

    Source: CIA World Fact Book (2009) Kazakhstan.

    Energy supply and direct consumption

    Production Import Export Consumption

    Coal and Peat 42,271 651 (12,629) 7,272

    Crude oil 65,837 6,471 (58,871) 6

    Petroleum Products - 1,704 (3,326) 8,782

    Gas 22,125 9,279 (12,637) 15,759

    Hydro 668 - - -

    Combustible Renewables and Waste 73 - - 73

    Electricity - 358 (286) 4,423

    Heat - - - 8,319

    In thousand tonnes of oil equivalent (ktoe) on a net calorific value basis.

    Source: 2006 Energy Balance for Kazakhstan, IEA Energy Statistics.

    ECONOMICANDENERGYOVERVIEW

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    Social indicators

    Population (July 2009 est.) 15,399,437

    Life expectancy (2009 est.)- total population 69 (male 63, female 73)

    Population growth rate (2009 est.) 0.4%

    Religions Muslim (47%), Russian orthodox (44%), Protestant (2%), other (7%)

    Literacy rate (1999 est.) 99.5%

    Languages (2001 est.) Kazakh (state language) 64.4% Russian (official, used in everyday business) 95%

    Source: CIA World Fact Book (2009) Kazakhstan.

    Environmental indicators

    Area(1) (sq km) 2,724,900

    Land use (2005)(2): - arable land (%) 8.28

    - permanent crops (%) 0.05

    - other (%) 91.67

    Electricity Consumption (2007 est.)(2) (bln kWh) 64.69

    CO2emissions(3) (kt) 180,925

    CO2emissions per capita(3) (t) 11.9

    Freshwater consumption(1) (mln cm) 19,906

    Freshwater consumption per sector: - agricultural (%) 58

    - industrial (%) 27

    - households (%) 3.6

    (1) Statistical Agency of RoK (2007) Statistical Yearbook Kazakhstan in Year 2007.(2) CIA World Fact Book (2009) Kazakhstan.

    (3) World Statistics Pocketbook (2007) Kazakhstan Summary Statistics.

    SOCIALANDENVIRONMENTALASPECTS

    View of Atyrau

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    2006-2008 period, Ersai started theexecution of other projects such as theProcurement and Fabrication of semi-complex steel structures such as PipeRacks and the huge project Hook Up

    and Commissioning of Complex D andA Offshore Facilities.

    In 2007, Ersai started the second phaseof Yard development which included

    the extension of the quay side, byadding additional 200 m of jetty, plus

    the construction of 100 m mooringdolphin and 200 m service jetty; and the

    construction of more than 1,700 m ofbreakwaters protecting the Kuryk port

    water front basin.Today Ersai is the leading company in

    Mangistau region fully equipped with alltype of cutting, bevelling, welding andpainting equipment and cranage up to1,000 tonnes lifting capacity which can

    provide very large range of services.

    Saipemis working, as contractorcompany, in the context of the

    North Caspian Production SharingAgreement (PSA), for the appraisal

    and development of 11 blocks of theKashagan field located in the Kazakh

    sector of the Caspian Sea, 80 km south-east of Atyrau. It is the first large-scale

    offshore petroleum development inKazakhstan.

    Saipem was awarded by Agip KCO,main PSA Operator in the period2005-2008, a series of contracts

    for engineering, construction andinstallation.

    Saipem is also working with land drillingrigs in the north of Kazakhstan. Saipem

    is operating in Kazakhstan through itsbranch (Saipem Kazakhstan Branch).

    Saipar Drilling Co BV(Saipar) is a JointVenture between Parker Drilling Co andSaipem SpA, created to provide six rigs

    and conduct the work to KarachaganakPetroleum Operation BV. Saipar hasmobilised its own Drilling Camp to

    place all personnel involved, providingaccommodation apart from additional

    work places.

    Saipem reality in Kazakhstan isrepresented by different Companies,

    namely Saipem Kazakhstan Branchwith offices in Almaty, Aktau, Uralsk,

    Atyrau, and Aktyubinsk; Saipar Drilling,as Joint Venture Company with Parker,based in Aksai, and Ersai as merging ofSaipem Groups worldwide experiencein offshore and onshore construction,

    installation and capabilities with Kazakhbusiness group ERC Holdings.

    Ersai Caspian Contractor Llc (Ersai)was founded in September 2003 in

    Aktau and started its initial operationas investment activities with the

    construction of the fabrication andlogistic Yard in a shore area of about

    220 hectares located in MangistauskayaOblast, Karakia District, village of Kuryk,

    70 kilometres south of Aktau city. TheYard is a fully equipped construction

    base with the fabrication and personnelaccommodation facilities necessary toconduct its commercial activity.

    The first phase of construction of theKuryk Yard was completed in 2005,

    when Ersai started the implementationof Trunk Line and Production Flowline

    project as a subcontractor of Saipem forthe client Agip KCO in Kashagan project.

    In August 2005, Ersai commenced thefabrication of simple steel structures

    under Piles and Flares Project. In

    SAIPEMPRESENCEINKAZAKHSTANRussia

    China

    KyrgyzstanUzbekistan

    Tagikistan

    Afghanistan

    Pakistan

    Iran

    Azerbaijan

    Turkmenistan

    Kazakhstan

    ASTANA

    Kuryk Yard

    Caspian

    Sea

    AralSea

    BalkashLake

    AlmatyAktau

    Atyrau

    UralskAksay

    Aktyubinsk

    Saipem Kazakhstan Branch sitesErsai sites

    Saipar site

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    Main projects conducted in the last 5 years

    Name Client DescriptionErsai Caspian Contractor Llc

    Pipe Racks project Keppel Kazakhstan Llp Procurement & Fabrication (assembling and welding of Pipe Racks; Non Destructive Test-NDT and Joint Coating of all welds; Painting and fireproofing) of Ancillary Steelwork & Piperacks.

    Pipe Racks project Agip KCO Procurement and Fabrication of Ancillary Steelwork & Piperacks; testing of piping, supply and installation of E/I and telecom

    material; overall project management.

    Piles & Flares project Saipem Assembling and Welding of cans for the various lengths of piles to be transported. Assembling and welding of flares. NDT and Joint

    coating of all welds. Skidding of Pipe Racks and Manifolds.

    Trunklines Saipem Pipe Coating and Load out.& Production Flowlines

    Hook-up and Agip KCO Hook up & commissioning of Complex D and Complex A offshorecommissioning facilities. In Kuryk yard the following activities are being

    carried out: inshore works for the reinstatement of Loose Items,prefabrication, marine logistics.

    D-Island Rig Conversion ExxonMobil Activities execution in D&R phase consists of the following steps:Decommissioning and material & equipment inspection; cutting; fitting; welding; non-Relocation of the D Island destructive testing; final dimensional control; painting; finalRig 401 and Rig 402 release inspection. Activities execution in EPFC1 phase foreseesand EPFC1 Engineering, Procurement, Fabrication and Construction.

    Saipem

    Kashagan Field Development Experimental Program

    Trunklines Agip KCO Laying and Trenching Trunkline from Very Shallow Water section& Production to Island D (HUB1) and to Onshore Process Facilities (OPF); Laying

    Flowlines project No. 2 Fibre Optical Cables between Very Shallow Water to IslandD (HUB1) and to OPF; Laying and Trenching Intrafield linesProduction Flowlines, Laying Power Fibre Optical Cable, LayingMethanol and Chemical Umbilical, between Island D (HUB1) andIsland A; ROW Road construction 23 km.

    Piles & Flares project Agip KCO Manufacturing, assembly, transport and installation of 45 piles (80) and 2 flares. Total weight of around 15,000 tonnes;

    Installation of 17 module barges.

    Development Agip KCO Mobilisation of rigs, offshore erection and common testing of theof Drilling Units rigs, rig-up commissioning and acceptance testing, operating drills

    on 12 wells on the Island D, Operations & Maintenance of drillingunit and its common devices.

    Rig 5827 Zhaikmunai Operation and maintenance of onshore drilling unit.

    Rig 5870 OTG Operation and maintenance of onshore drilling unit.

    Rig 5843 Zhaikmunai Operation and maintenance of onshore drilling unit.

    Saipar Drilling Co BV

    Karachaganak Oil Field

    Rig 2 (owned by KPO BV Operation and maintenance of onshore drilling unit.Saipem and KBG)

    Rig 107 (owned by Parker) KPO BV Operation and maintenance of onshore drilling unit.

    Rig 216 (owned by Parker) KPO BV Operation and maintenance of onshore drilling unit.

    Rig 249 (owned by Parker) KPO BV Operation and maintenance of onshore drilling unit.

    Rig 258 (owned by Parker) KPO BV Operation and maintenance of onshore drilling unit.

    MAINPROJECTS

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    The Health, Safety and Environment(HSE) Management System of SaipemCompanies in Kazakhstan is based on

    the Corporate Standards and Guidelinesand complies with the requirements

    of OHSAS 18001:2007 and ISO14001:2004.

    The Companies commitment toimprove its Health, Safety, and

    Environment Management System hasacquired a big significance during last

    years, which is reflected in investmentsthat the Companies make in this

    direction. The Companies Management,in addition to a financial commitment,

    has employed significant manpower andtechnical resources to provide health

    COMPANYORGANISATIONANDMANAGEMENTSYSTEM

    All the activities in Kazakhstan areunder the responsibility of the Saipem

    Kazakhstan Country Manager.Saipem Kazakhstan Branch is

    coordinated by a Branch Managerreporting directly to the BU Drilling Chief

    Operating Officer at Corporate.Ersai is managed by a General Director.Both Companies have a structure with

    Human Resources, Administration,Finance & Control, Procurement & Asset

    Departments, and HSE Teams orDepartments.

    14

    Saipem Kazakhstan Branch organisation chart

    New/future projects

    Name Client Description

    AZ 5946 Agip KCO Provision of winterized 3000 HP offshore land drilling unit forNorth Caspian Sea Region.

    AZ 5947 Agip KCO Provision of winterized 3000 HP offshore land drilling unit forNorth Caspian Sea Region.

    B R A N C H

    M A N A G E R

    HUMANRESOURCES,

    ORGANISATIONAND ICT

    PROCUREMENT

    &

    SUBCONTRACTS

    CORPORATE

    (INTEGRATED

    PROJECTS)

    ADMINISTRATION,

    FINANCE AND

    CONTROL

    ONSHORE ANDOFFSHORE

    ASSETSMAINTENANCE

    DRILLING

    PROJECTS

    TRUNKLINES& PRODUCTION

    FLOW LINES

    AKTOBEPILES& FLARES

    URALSKD-ISLAND

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    care of its employees and effectiveupdating of work safety managementprocess.

    For the implementation of Sustainabilityobjectives within Kazakhstan area,2 Sustainability Facilitators werenominated in this region, one in Saipem

    Ersai organisation chart

    Saipar Drilling organisation chart

    O P E R A T I O N S

    M A N A G E R

    RIG

    SUPERINTENDENTFINANCEPROCUREMENT HSEHR

    Kazakhstan Branch and one in Ersai, toestablish a direct link between socio-economic activities in Kazakhstan and

    the Sustainability Team at Corporatelevel. The Sustainability Facilitators aresupported by different departmentsrepresentatives who submit the data onregular basis.

    Saipar has been incorporated inAmsterdam, The Netherlands in 2000,with official registration of a branch in

    Kazakhstan in July 2000. Saipar is thedrilling contractor for KPO BV, and hasmobilised 6 rigs in total.

    G E N E R A LD I R E C T O R

    D E P U T Y G E N E R A LD I R E C T O R

    O P E R A T I O N S

    M A N A G E R

    HUMANRESOURCES,

    ORGANISATIONAND ICT

    PROCUREMENT

    &

    SUBCONTRACTS

    QUALITY, HEALTH,SAFETY,

    ENVIRONMENT& SUSTAINABILITY

    ASSETS

    COMMERCIAL

    ADMINISTRATION,

    FINANCE

    & CONTROL

    CONTRACTS

    & LEGAL

    DRILLING

    PROJECTS

    INVESTMENT

    PROJECTS

    DEPUTYFINANCE MANAGERCHIEF ACCOUNTANT

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    THEAPPROACHTOSUSTAINABILITY

    The Sustainability Teams of KazakhstanSaipem Companies provide a SaipemCorporate focus for Sustainability by

    directing policy and planning, andimplementing best practice, training

    and reporting. Every year, SustainabilityTeams together with the Companies

    Management, develop a SustainabilityPlan based on the analysis of the

    needs of Companies stakeholders,thus creating effective Community/

    Stakeholders engagement.

    Local ContentSaipem Companies in Kazakhstan are

    working on the promotion of localcontent with the creation of long-term

    16

    Kazakh content

    investments, the creation of partnershipwith local companies and the

    maximisation of projects value executed

    in country, in term of local employmentand procurement of materials andservices.

    Local content is considered a marketdifferentiator that creates strong

    competitive advantage among othercompanies.

    For operations in Kazakhstan a series ofLocal Content Rules shall be applied,

    rules that were developed in accordancewith Saipems strategy for local

    communities development in worldwidelocations where Saipem is operating, as

    well as taking on board the local RoKlegislation and Clients commitments to

    local communities:

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    Externalitiesevaluation studyErsai CaspianContractor Llc

    Saipems commitmentto sustainability is mainlyrepresented by a comprehensiveLocal Content Strategy.To provide support and evidenceof the value generated troughits commitment to sustainabilityin terms of wealth, skillsand entrepreneurial capacity

    created, Saipem had decided tomeasure economic and socialimpacts of its Local ContentStrategy. In fact, measuringthe tangible benefits of a LocalContent Strategy is the keyto demonstrate sustainabilityof the business and improve

    stakeholder relationship at locallevel.

    As defined by J. Stiglitz (NobelPrize for Economy) Externalitiesare actions of an individual or a

    firm that have effect on anotherindividual or firm for which thelatter does not pay (in case of

    positive impact) or is not paid

    (in case of negative impact).

    Therefore Saipem SustainabilityTeam has implemented amethodology to measure theexternalities produced by itsactivities in an area.In September 2009, the first

    pilot study with applicationof the externality evaluationmethodology has been carriedout for the activities of ErsaiCaspian Contractor Llc.For the purpose of the

    study, four key categories ofimpacts have been identified:

    economic value, employment,human capital developmentand environmental impact.Moreover the quantificationof each impact has also been

    geographically split, and eachrelated part attributed tothe following administrativeboundaries: the KarakiyanskiyDistrict, the Mangistau Oblastand the Republic of Kazakhstan.The study is clearlydemonstrating, in terms offigures and multipliers, the

    important contribution Ersaiis bringing to the Kazakh

    socio-economic system and thefundamental role playing by

    Saipem in contributing to the

    development of the region.

    MethodologyThree socio-economiccategories of the impactsrelated with Saipem LocalContent Strategy have beenidentified and quantified,namely:

    Economic Value: Financialimpact of payments made byErsai Caspian Contractor Llcto finance its locally sourced

    operating expense and to paytaxes. It is measured as the

    sum of direct, indirect andinduced impacts.

    Employment: Ersai CaspianContractor Llc brings animportant contribution to theincrease of local employmentthrough creation of direct,indirect and induced jobs.

    Human capital development:Ersai Caspian Contractor Llccontributes to the increaseof the usable knowledge

    and skills of its employees interms of additional lifetimeearnings expectancy andincreased employability.

    SHOWINGTHESUSTAINABILITYVALUEOFLOCALCONTENTSTRATEGY

    the number of Kazakhstanpersonnel employed in servicesrelative to oil operations should

    increase each year as a result oftraining programs; goods, works and services of

    Kazakhstan Origin should bepurchased by the Operator or itssubcontractors;

    equipment materials andfinished products manufacturedin Kazakhstan should be used,provided that they meet state and/orinternational standards;

    involve Kazakhstan organisations inthe performance of services relativeto oil operations, so long as theymeet the standard, price and qualitycharacteristics of similar work andservices provided by non-residents ofKazakhstan;

    develop training programs for

    Kazakhstan citizens in accordancewith the subsoil use contract.

    Sustainability ReportingThe Sustainability Teams issue internalreports in order to provide an overviewof the Companys environmental,economic and social performancethrough an established SustainabilityAccounting System. The AccountingSystem allows collecting monthlyinformation and data about Economicperformance, social performance,outdoor indicators & QHSE Performance,through a series of differentperformance forms.To better monitor expenditures and toensure transparency of data submittedto Saipem Corporate Report, adedicated cost centre is used, to whichall sustainability initiatives are charged.

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    In addition to the three socio-

    economic categories, anothercategory has been analysed andquantified, the environmental

    impacts. Per definition,environmental impact is a negative

    impact. The impacts are theconsequence of the fact that

    Ersai, to be able to conduct itsoperations, consumes resource

    (water, fuel, electricity), produceswaste and emissions to air.

    To define the multipliers (thenumber that gives the magnitude of

    an impact or a process), a processof stakeholders engagement with

    quantitative and qualitative surveyshas been done. The results of thequantitative survey and the data

    from Ersai accounting system(e.g. finance, procurement, QHSE,

    human resources, training, etc.)have allowed defining the multiplier

    for each of the identified impact.

    Quantitative ResultsBelow figures summarise the

    quantitative results of the study.

    Economic resultResult shows that Ersai

    contribution to RoK is about

    1.4-1.5 times the direct expenditure

    in terms of local purchasing, salariesand taxes. That means if Ersaistop activities, the total impact

    in the Republic of Kazakhstaneconomy is a loss of 350-375

    mln USD. As a result of its corebusiness in the oil & gas support

    constructions and services sectors,Ersai is able to turn directly to local

    suppliers and sub-contractors morethan oil operators or engineering& design companies are typicallyable to do (Ersai local purchasingin 2009 is equal to approximately

    49% of its total OPEX purchasing).

    Employment resultResult shows that Ersai contribution

    to RoK is about 3.0-3.2 times thelocal direct employment. That

    means if Ersai stop activities, thenumber of local unemployed willbe 6,300-7,000 people, of which

    approximately 45% at the regionallevel (Mangystau Oblast) and 20%

    at the local level (KarakiyanskiyDistrict).

    Human capital developmentresult

    Result shows that Ersai contribution

    to the RoKs capacity building

    is about 1.8 times its directexpenditure in training. Thatmeans if Ersai stop activities, theexpected economic loss value in

    five years in term of lost salaryfor local employees is 20-25 mln

    USD. Total income and social taxespaid by trained Ersai employees,during the 5 years, can generatepotential additional revenues of

    USD 6-8,000 (NPV per capita) forthe Government.

    Qualitative ResultsA stakeholders survey has

    been conducted to collectqualitative information. In total17 stakeholders have been

    interviewed, 12 of them were localsuppliers, while the remaining were

    representatives of local institutionsand administrative/social bodies.

    The survey was conducted intwo parts. In the first part, the

    stakeholders were asked to rankfrom 1 (no impact) to 5 (decisiveimpact) the perceived impact of

    Ersai on some selected topics,naming:

    Impact categories

    Economic valuemln USD

    (purchasing, salariesand taxes expenditure)

    Employmentjobs (No.)

    Human CapitalDevelopment

    mln USD

    Direct impacts

    ~250 (1)

    ~2,100

    ~2.5

    Total impacts

    ~350-375

    ~6,300-6,700

    ~20-25(expected value in 5 years)

    Local Content Strategy

    Multipliers

    1.40x - 1.50x

    3.00x - 3.20x

    1.75x - 1.85x

    Note: Economic value and Employment gures refer to year 2009 whilst Human Capital Development refers to expected gures in a 5 years time horizon.(1) Direct impacts calculation considers salaries as retained earnings; source: Arthur D. Little analysis.

    18

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    1. Overall impact - How do you

    rate the overall impact of Ersaiactivities to the local economy/society as a whole?

    2. Local market development -How do you rate the overallimpact of Ersai activities tothe development of the localmarket?

    3. Employment How do you ratethe impact of Ersai activities inthe creation of new jobs in thedistrict?

    4. Household income - How do you

    rate the impact of Ersai activitiesin terms of change incurred inthe income level of households inthe district?

    5. Know-how improvement/Skills enhancement - How doyou rate the impact of Ersaiactivities in terms of changeincurred in the local workforceskil ls?

    6. Quality of life - How do you ratethe impact of Ersai activities in

    terms of change incurred in the

    quality of life of resident people?

    In the second part, the stakeholderswere asked to identify, startingfrom a long list of externalitieswhich was the major impact ofErsai for each of the economic,social and environmental area.

    The charts below summarise theresults derived from the survey.

    1.50

    2.00

    2.50

    3.00

    3.50

    4.00

    4.50

    5.00

    Qualitative ResultsMax Max Max Max Max Max

    Local marketdevelopment

    Employment Householdincome

    Know-howimprovement

    Qualityof life

    Overall

    Min

    Min Min Min

    Min

    Min

    Average results of the stakeholders survey. Each stakeholder provides a rank on the perceived impact of Ersai on the 6 different topics, grading themfrom 1 (no impact at all) to 5 (decisive impact). The value on the circle is the average score.

    4.06 4.19 4.034.28

    4.004.24

    Perceived major impactof Ersai activitiesin the social area

    0 2 4 6 8 10

    (No. quotations)

    Decrease of localunemployment

    rate

    Know-howimprovement

    Health carefor

    employees

    Culturalexchange

    Risk ofaccidents

    9

    6

    1

    1

    Despite know-how improvement is perceived onaverage as the most impacted category, it has notbeen suggested as the top impact in the socialdomain.

    Perceived major impactof Ersai activitieson the environment

    0 2 4 6 8 10

    (No. quotations)

    Increase oftrafc

    Water

    consumptionWaste

    generation

    Energyconsumption

    Soildisturb

    GHGemissions

    9

    3

    3

    2

    Increase of road trafc is a major stakeholdersconcern; this likely to be due to its highest visibilityif compared to other impacts.

    Perceived major impactof Ersai activitiesin the economy

    0 2 4 6 8 10

    (No. quotations)

    Directincrease of

    local market

    Increase

    of employeesincome

    Inducedincrease of

    local market

    Variationof income

    expectation

    Variation ofination rate

    8

    6

    2

    1

    The variation of ination rate, which emerged fromthe 2004 SIA Report as one of the potentialnegative effect of Ersai operations, is not perceivedas such by stakeholders.

    19

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    Kazakhstan (the Companies).With full regard and respect to its

    employees, the Companies carry out fairand open policy at all working stages.General obligations of the employees

    and the Companies are stipulatedin Collective Agreement and Labour

    Contract.

    Total Workforce

    Saipem Companies in Kazakhstanemployed 4,739 people in 2009, 63%

    of them are local.Saipems commitment to local

    employment was driven by differenttargets. The Companies in Kazakhstan

    are approaching a strict policy to involveas much local employees as possible.

    The local content strategy satisfiesexternal stakeholders such as local

    authorities and clients who have a directinterest in it. There are two aspects that

    mainly characterise the Companies

    relationship with its employees: a highinvestment in training and an important

    interest in HSE matters.

    People Management

    One of the programs for developmentof Local Content is the Retention

    Plan. This is the program to motivate

    PEOPLE

    Employees represent the main keyresource for strategy implementationand the basic factor of sustainability

    in Saipem Group. The importanceof human resources role in Saipemis the base of Companys Personnel

    Management Policy.Involving highly qualified and motivatedemployees, creating good environmentfor their effective work and continuousprofessional development are the basic

    purposes of Saipem Companies in

    SUSTAINABILITYPERFORMANCE

    1,000

    2,000

    3,000

    4,000

    5,000

    Increase of Saipem Companieslocal staff over total workforce

    2006 2007 2008 2009

    2,002

    527

    1,475

    2,323

    783

    1,540

    3,268

    854

    2,414

    4,739

    1,742

    2,997

    No. of Local EmployeesNo. of Expatriate Employees

    20

    Women employeesin Ersai

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    21

    Key Resources and retain them in theCompanies. The advantages of theprogram are the implementation of a

    loyalty attitude within the Companiesresources, career prospective and jobcontinuity. A personal saving accounthas been created for each employeein the KazInvestBank, where everyyear the Companies allocate a deposit,depending on seniority achieved, of theMonthly Basic Gross Salary. This projectis scheduled for a 5-years-period foreach Key Resource. Up to now, 63 KeyResources have signed their RetentionPlan Agreements.

    The second approach is the Assessmentof Potential with the aim to gatherinformation, which may be usefulin appraising the potential skills ofyoung resources. Seventeen employeeshave passed the Assessment, theinformation collected allowed theHead of Departments and Supervisorsto accurately plan the steps of theirprofessional development, andanalyse their strengths and areas ofimprovement.

    It is worth to point out that with the

    purpose to develop Kuryk Local Contentin Ersai, 26% of local people are fromKuryk, who are mainly recruited in thebeginning as trainees and go throughprofessional training at the ProfessionalTraining Centre and then involved inoperational activities.

    Training

    Under the program Karaganda StateUniversity Students, 15 graduated havebeen employed by Ersai in different

    disciplines (welding, Quality Control,environment, etc.); with a mentoringfrom highly qualified internationalspecialists. An agreement about anInnovation and Education Consortiumcalled Corporate University has beensigned between Karaganda StateTechnical University and Ersai with thepurpose to establish a cooperationwith mutual interest where a wellexperienced Contractor submits themost challenging requirements from the

    270

    176

    168 35

    1,320

    2008 Saipem Training Man Hour

    InformationTechnologies& languages

    Managerial& behavioural skills

    OtherProfessionalskills

    TechnicalProfessionalskills

    HSE

    392

    10,842

    973 3,260

    822

    2009 Saipem Training Man Hour

    InformationTechnologies& languages

    Managerial& behavioural skills

    OtherProfessionalskills

    TechnicalProfessionalskills

    HSE

    offshore industry to one of the mostprestigious and reputed University in theRepublic of Kazakhstan and the latterfine-tunes their courses accordingly.

    In the frame of the promotion ofLocal Content, Saipem Companies inKazakhstan has launched the YoungGraduates Program. In January 2008,24 young graduates with engineeringbackground from Uskemen, Karagandaand Almaty Technical Universities wereselected with the aim to develop localpersonnel to cover important rolesin the Companies. Training of younggraduates includes intensive Englishlanguage courses, training on the job in

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    23

    Companies. To mitigate this problem, in2007 English courses started on boardaddressed to all crew members and at

    the training centre of the Ersai KurykBase. At the same time, D-Island DrillingProject developed an English trainingcourse on board.Also, in order to promote Companyscore objectives and to disseminate theTop Managements strong commitmenttoward HSE objectives, the localHSE personnel working in SaipemKazakhstan Drilling BU, participated in atwo-weeks training course organised bySaipem, in Romania.

    One of the good examples of localcontent training and development canbe local crew of Tie-in Barge (M10),the scope of activities is connecting thepipelines from Karabatan OPF (onshore)and HUP-island in the Kashagan fieldand from island to island pipeline.Today the percentage of local personnelonboard of tie-in barge grows to 80%.Besides, training activities helped toincrease the qualification and expertiseof local employees from helper to rigger.

    Quality of living

    For the improvement of living conditionsin Kuryk Base, recreational facilities have

    been built during the last two years suchas soccer pitch and new gym facilities.

    Safety

    Saipem Companies in Kazakhstan arestrongly committed to Saipem SafetyVision and always intend to diffuse thesafety culture at the working place.HSE performance during 2006-2009 hasbeen maintained at lower level throughpreventive measures like training,

    toolboxes, meeting, engineeringcontrols, proper maintenance program

    Weldingtraining

    conducted byKaragandaUniversity

    Lecturer

    Safety performance

    2006 2007 2008 2009

    Worked Man Hours 8,520,701 8,374,044 10,888,112 13,595,251

    Lost Time Injuries 16 6 10 11

    LTI Frequency Rate 1.88 0.72 0.92 0.81

    Fatal Frequency Rate 0.00 0.00 0.00 0.00

    Total recordable Frequency Rate 3.29 2.39 2.20 2.21

    Leading indicators

    2006 2007 2008 2009

    Safety Hazard Observation Cards 3,536 3,408 4,732 4,762

    Job Safety Analysis 9,985 3,035 5,385 6,276

    Tool Box Talks 26,719 28,104 39,955 47,345

    HSE Meetings 4,943 5,388 4,972 3,336

    HSE Inspections 4,022 4,414 5,926 5,426

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    following initiatives have been plannedso far: to elaborate ad hocRisk

    assessments for all the identifiedmicro-activities to review; Leadership in Safety (LiS)

    training cascaded down, by theManagement, to all Workforce 5Stars Intervention training for allForemen;

    Confined Spaces Entry training forall Foremen and Supervisors;

    80% of Safety Hazards ObservationCards (SHOC) followed up by therelevant Responsible within 1 week;

    to assist Expatriated Supervisors/Foremen with translation duringSafety Tool Box Talks;

    to fully implement the JourneyManagement Plan, with particularemphasis to the emergency responsein case of a car accident;

    to investigate the causes of theseaccidents and to organise specialarrangements for avoiding them.

    In year 2008, Ersai has been certifiedagainst OHSAS 18001 Standard for itsSafety Management System.

    More than 698 million KZT were spentin 2007-2009 for execution of HSEactivities on banning of injuries, riskdecrease, accident rate and unplannedlosses.The basic activities are: modernisation of processing

    equipment, technical devices andemergency alarm; equipmentmaintenance; introduction ofprogressive and safe technologies;

    provision of employees withpersonal protective equipment;

    training and advance training;improvement of work on HSE;hazard and risk management,banning of traumatism, reduction ofaccidents rate, decrease of risks andunplanned losses.

    To facilitate First HSE Induction of newEmployees and Visitors, a new Trainingfacility was installed at the main Gateof Ersai Caspian Yard; so that firstInduction and PPE distribution can

    be performed on arrival to the KurykBase.

    The Companies Top Management isstrongly committed to the professionalgrowth of Local Safety personnel.In particular the following trainingactivities were carried out: Leadership in Safety Train the

    Trainer Courseconducted bySaipem Corporate Representatives.

    Leadership in Safety Courseconducted by Saipem CorporateRepresentatives. All HSE Englishspeakers were trained.

    IMS Internal Auditorsconductedby BV Certification at Kuryk Yard.

    International Certificate inOccupational Safety and Healthconducted by British Safety CouncilServices. 2 Safety Representativeswere trained.

    Safety & Labour Protectionas per RoK Legislationconductedby local college Standard GroupLLD and representative ofMangistau Labour Department.The entire Safety Department wastrained.

    Production Safety as per RoK

    Legislationconducted by localcollege Bolashak. The entire SafetyDepartment was trained.

    Hazard Awareness/RiskAssessment conducted by clientAgip KCO. The entire SafetyDepartment was trained.

    Special Training CoursesonConfined Space Entry Safety, HazardIdentification, Work Safety atHeights, Safety Watch at the workplace conducted for all Safety Staff.Pursuant RoK Law and New Fire-

    Fighting Plan, a fire drill in Saipemoffice in Atyrau has been conductedjointly with SP & ASR Unit ofDepartment of Emergency Situation.

    Leadership in Safety (LiS)In 2007 Saipem Corporate HSEDepartment began the Developmentof the Leadership in Safety (LiS)workshop, an innovative and highlyinteractive training program withthe far reaching aim of creating a

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    26

    strong Safety Culture within Saipem.During 2008 Saipem Companies

    Management & Supervisory Staff hasattended 1.5 days LiS workshop.

    It is now with a great satisfaction thatSaipem Companies in Kazakhstan canconsider the first application phase of

    the guiding values of LiS in Kazakhstan

    concluded.Through a series of workshops andmeetings, the basic framework wasconveyed to all employees with an

    identical sense of uniformity andcommitment, involving almost two

    thousand people, located in differentareas and often at great distances fromeach other (Atyrau, Aktau and Kuryk).

    On the one hand, the emotionalimpact of the video along with the

    words of Saipems CEO, Pietro FrancoTali provided the ideal bridge between

    the intentions of top management athead office and the world of Saipemsoperating activities, emphasizing

    the single intent which binds thesetwo worlds. On the other, the work

    carried out by the facilitators forged animmediate connection with the listeners,

    creating that direct dialogue which isthe basis of any training experience. Inthis regard, it shall be emphasized theimportance of the results by the team

    of facilitators, both those who came

    from Saipem Corporate and here inKazakhstan.

    LiS Cascading Event for the personnelworking on D-Island was conducted

    together with the employees wives andchildren. It is innovative in the simplicity

    of the message and its ability to get thatmessage across collaborators and their

    families.

    Good feedback from the Client and ourworkforce has been noticed.

    Health

    Employees health is a priority of SaipemCompanies in Kazakhstan. The medical

    team comprises 60 persons (of which 54are local), both doctors and nurses.

    In addition to curative medicalassistance, the team carries out

    preventive medical activities throughmedical fitness examinations,

    vaccination and different informativecampaigns thus minimising medicalcurative costs to zero.

    Ersai Kuryk Base has a clinic and amedical licence for provision of first aidand transportation. In addition to that,

    Ersai is working with the MangystauRegional hospital in Aktau, used as

    primary evacuation hospital for Ersaiemployees in case of need.

    In year 2008, Ersai has refurbished

    LiS in Ersai

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    Trunk linesand

    productionFlow linesonshore

    Trunk linesand

    productionFlow linesoffshore

    KashaganD-Island

    ErsaiCaspian

    ConstructorLlc

    Piles&

    Flaresfabrication,assembly

    andinstallation

    DrillingRig5843

    and 5827

    SaiparDrilling

    HUCProject

    Average(annual)

    20

    40

    60

    80

    100

    120

    Vaccination of the Expatriate personnel

    (%)

    20

    40

    60

    80

    100

    120

    Accomplishment of the medical tness examinationfor the Expatriate personnel (%)

    20

    40

    60

    80

    100

    120

    Accomplishment of the medical tness examination for the Local personnel

    (%)

    Performance Target

    (*)

    (*) No Local Saipem Employees.

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    and equipped 3 hospital rooms,which will be utilised by Company

    employees. However, the Hospital can

    use these rooms for other residents ofMangystau Region for providing medicaltreatment when they are empty. As the

    continuation of this program, in 2009Ersai has equipped two hospital rooms

    (Traumatology and Cardiology) with themedical equipment and furniture.

    Besides, as a result of good investmentin growth of Kuryk village, complete

    refurbishment activities have beencarried out in Kuryk Hospital, which

    will be a good starting point for mutual

    beneficial relationship in medicaltreatment for Company employees.

    Every year, the Companies in Kazakhstanimplement a Cardio Vascular DiseaseProgram. In 2008, 25 people have

    participated (8 person - high risk groupcalculated as score of risk; 17 persons- low risk group); 14 employees (56%

    of the participants to the program)maintained their score, while 11 (44%)

    managed to diminish it.Health Risk Assessment Program wasimplemented within Kazakhstan area

    and now trainings are ongoing.

    28

    20

    40

    60

    80

    100

    120

    Medical evacuation Drills(%)

    5

    10

    15

    20

    25

    First Aid Training (%)

    Performance Target

    Trunk linesand

    productionFlow linesonshore

    Trunk linesand

    productionFlow linesoffshore

    KashaganD-Island

    ErsaiCaspian

    ConstructorLlc

    Piles&

    Flaresfabrication,assembly

    andinstallation

    DrillingRig5843

    and 5827

    SaiparDrilling

    HUCProject

    Average(annual)

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    A Work Place attestation process wascarried out by Vostok-Ekologia, a certifiedorganisation, in 2007 at Ersai Kuryk

    Base and Karabatan premises. Onepart of the attestation was dedicatedto the evaluation of the occupationalnoise level. The results showed thatnoise exposures are at acceptable level,not exceeding 80 dB, which might beindicative for further attention andprecautions to avoid hearing losses.However, the Health Department ofErsai implements a hearing protectionprogram aimed at monitoring each yeara number of employees, among those

    that might be at certain risk of hearingreduction due to noisy workplace.

    Ersai has received a Certificate ofCompliance on Accommodation andCatering services. For the improvementof sanitary condition, dedicated hygienefunction on operational sites has beenestablished.

    Industrial relations

    The cooperation between trade unionsand Companys administration isconsidered essential to regulate labour

    Castoro 12operations in

    the Caspian Sea

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    30

    agreements and carry out activities onthe principle of social partnership.

    Since November 2007, a trade unionTrade Union of JSC Saipem SpAemployees has been functioning in

    Saipem Kazakhstan Branch, and acollective agreement has been signed.About 24% of Saipem employees are

    member of the trade union.

    As for Ersai, in June 2004 the firstcollective agreement has been signed fora period of three years. The trade union

    that represents the interests of Ersaiemployees is the Public organisation

    Independent Trade Union Aktau, whichwas founded in 1992 and is the member

    of Association of Independent TradeUnion of Kazakhstan (Karaganda). There

    are 235 (12.91%) employees-membersof this trade union.

    In 2009, another Trade Union wasfounded, the Public organisation

    Independent Trade Union Karakia,which comprises 83 (4.56%) employees-members. The last Collective agreement

    was signed in July 2009.

    One strike has been carried in 2008

    at the Ersai Base, as a result of whichthe Company, in collaboration with

    the selected representatives of labourcollective, has organised a voting

    concerning the working schedule. Thevoting brought to a change in the work

    schedule, and now 5/2 work regimeis applied to all Kazakh employees of

    Kuryk Base.

    In 2009, despite of the difficult financialand economic situation all over the

    world, Saipem Companies in Kazakhstan

    have made decision to maintain anannual salary increase of 5%, as itis reflected in the revision of new

    Collective Agreement for all CompaniesKazakh employees.

    ENVIRONMENT

    Saipem Companies in Kazakhstan havein place an Environmental Management

    System. The Management System wasdeveloped in light with specifications

    from the international standard ISO14000:2004, being designed to allow

    continuous updating, amendment and

    improvement, resulting from analysisof incidents, reports and changedcircumstances within the management

    system and allocated scope of work.

    In 2008, Ersai EnvironmentalManagement System has been certified

    by BV Certification according to ISO14001:2004.

    Protectionof the Environment

    From the beginning of SaipemCompanies operations in Kazakhstan,

    a series of environmental and social-related issues were identified, such asa low environmental perception andsustainable use of resources among

    the local population, an environmentallegislation package still being underdevelopment and implementation;a low dissemination on schools of

    environmental programmes thatwould help in implementing a wealthy

    environmental awareness among theyoung generations.

    Besides, the Caspian Sea characteristics,such as shallow, closed waters,

    surrounded by large marshlands astransition zones to the mainland,

    together with the enormous semi-aridsteppe that is surrounding it, make itto be a very sensitive locations where

    to deploy and undergo large industrialactivities. The sensitivity of the area

    constitutes a technological challengefor Saipem to minimise the ecological

    footprint of its activities.For marine operations, the main factor

    to be considered is the non-dischargepolicy, applied for the entire CaspianSea, along with the restrictions andlimitation on types of materials that

    are to be used. On the transition zone,the area formed mostly of marchlandsand swamps, the ecological limitationscome mostly from the sensitiveness of

    locations that represents the nestingarea for migratory and local avian

    species and also for the local biota.These, combined with the limited

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    The biodiversity found in theCaspian Sea and on its coastsmakes the region one of the

    most precious ecosystems in theworld, with a very high degree of

    biological endemism.In particular, the transition zone of

    the North Caspian Sea is an areaapproximately 10-kilometre long,where the water depth increases

    from approximately 0.5 metres toapproximately 1.5 metres.

    Because of the physical andenvironmental characteristics of theSea, the design and construction ofsafe vessels and technologies with

    a low environmental impact hasbecome a primary technological

    objective for the entire Kashaganproject.

    The Asset Technologies Functionof Saipem SpA was involved in thedevelopment of a system of small

    ultra-light vessels called Mondine(rice weeders), designed for

    operations in the transition zone,where no other craft can operate.The system enables the excavation

    of a trench of the desired depthand burying of the pipe at thesame time using the material

    removed during excavation forbackfill without contaminating the

    surrounding environment.In this way, the pipes, previously

    laid by the Castoro 12 and towed

    afloat into the transition zone bythe small pontoon Storione, are

    buried in excess of two metresbelow seabed by the Mondine and

    covered by the excavated soil to

    protect the pipe from ice, leavingthe seabed as flat as possible and

    minimising the environmentalimpact.

    This new system allowed avoidingthe dredging of a wide canal toenable the access to standard

    vessels, which would have requiredthe excavation of huge amountof soil with serious physical and

    biological effects especially on theseabed sediments and the benthic

    community.

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    The Mondine

    MODULARSYSTEMFORPOSTTRENCHINGANDBACKFILLINGINEXTREMELYSHALLOWWATERS

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    accessibility of the area and the extremeclimate conditions, made this particular

    area difficult to approach.Operations performed on the main land

    of Kazakhstan, range from pipelines andcommunication optical cables, to plant

    construction and drilling rigs. Theseactivities are influenced by the rough

    and new surrounding environment withlarge range of temperature scaling from-40 C to +40 C, to landscape diversity

    ranging from coastal ecosystems tosteppe and mountain areas.

    Improvement Activities

    Saipem Companies have defined

    and implemented an Action Plantogether with a monitoring program,to monitor quarterly the environmental

    performance and measures to controland reduce the environmental impacts

    from construction activities. Besides,the Plan includes measures such

    as environmental monitoring of airbasin, sea and ground water, soil

    and radio-ecological control; wasteremoval; purchasing of oil spills

    prevention equipments and training

    of related personnel for spill responsemanagement.

    In order to decrease air emission frompainting shelters activities special

    filters were provided. In 2009 SewageTreatment Plant was modified and

    expanded, which improved thetreatment process and permitted to

    reuse treated water for dust-suppressionon the roads of the Yard.

    In 2008 Kazakhstan ratified the Kyotoprotocol, regarding the control ofthe greenhouse gases emissions.

    Saipem Companies have endorsedfully compliance and support to localauthorities, for the collection, process

    and reporting of all data in a timely andproper manner. Trained and experiencedpersonnel have been allocated for these

    activities.To improve the environmental awareness

    of employees, training courses arecarried out by Environmental personnelon topics like Environmental Legislation

    in the Republic of Kazakhstan, ISO14001 standard requirements, the

    waste management system, oil spillresponse, etc.

    The Caspian Seaand its sensitiveenvironment

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    were faced in Kazakhstan are relatedto waste segregation and generally

    related to waste management programs

    implementation. A limited number ofcertified waste handling operators wasavailable on the local market at the

    beginning of operations.Saipem Companies policy toward themanagement of waste is based on theprinciple that the generation of waste

    should be limited and waste should besegregated, in a controlled manner, asmuch as possible close to its source ofgeneration, for further re-use and re-

    cycling, and ultimately safe disposal tobe ensured.

    In this regard, Saipem Companieshave established and implemented

    dedicated Waste Management Plans inall bases and sites to define the internal

    organisation for waste management,classification, segregation and storage of

    wastes, in accordance with the KazakhEcological Laws and International Codes

    and Regulations.

    The Waste Management Plans (WMP)are defining in details the Companysvision regarding the management ofwaste; describe and assign the roles

    and all responsibilities, taking carethat adequate and sufficient resources

    are put in place to ensure a practicalimplementation of the plan.

    The generated waste is primarily beingcollected and segregated into dedicatedwaste containers, as per class of hazard,

    from the non-hazardous wastes suchas bulk packages to general domesticwaste, to the highly hazardous wastesuch as used oil, spent batteries and

    mercury lamps.The waste containers are being

    transferred to local waste handlingcertified contractors, with whomSaipem Companies have ongoing

    services contracts. These contractorsare periodically audited in order to

    ensure that they are up-to-date and incompliance with all the relevant Kazakh

    rules.

    Ersai, for improvement of WasteManagement System within the Kuryk

    Base, is planning to purchase waste

    200

    400

    600

    800

    1,000

    1,200

    1,400

    Emissions

    (tonnes)

    2006 2007 2008 2009

    NOx SO2

    4

    8

    12

    16

    20

    Waste

    (thousand tonnes)

    2006 2007 2008 2009

    Hazardous Non-hazardous Total

    Drilling Operations Onshore

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    ITYDuring the period of ecological

    monitoring of air-shed of the territory,the following results emerged:

    for all components, fixed normalmaximum concentration limit onborder of a sanitary-protective zone;

    for all components, fixed normalmaximum concentration limit onemission points of construction site;

    the comparative analysis of a secondstage monitoring in 2008 showeda stability of average concentrationof the majority of measuredcomponents.

    In general, it emerged that on theboundary of protection zone andon the territory of industrial site anecological situation in air-shed meetsenvironmental legislation requirements.

    Ersai is also conducting monitoringactivities on sea water, focusing onwater quality, bottom sediment, marineflora and fauna. In 2009, to improvethe monitoring, two additional points ofmonitoring were added.As result, it was observed that allenvironmental components of marineenvironment meet the requirements of

    the national legislation for the CaspianSea.

    Besides, Ersai has introduced amonitoring plan for controlling the

    incinerator with the purpose to disposethe domestic and oily waste.

    An established record and a continuousmonitoring system were implementedin all bases and sites, with dedicatedenvironmental personnel, in orderto raise the overall environmentalawareness, implement and continuouslyimprove the Waste Management Plansin particular and the EnvironmentalManagement Plan in general.

    Environmental Monitoring

    According to the Environmental Code ofRepublic of Kazakhstan, all individualsand legal entities involved in specialuse of natural resources should provideindustrial environmental monitoring.

    Environmental monitoring of airon boundary of sanitary protectionzone and directly on emission points(ventilation tubing of productionshelters, exhaust pipes of dieselgenerators, etc.) is aimed at measuringground layer pollutants concentrationof harmful chemical substances (HCS).This allows the creation of a data bank

    based on the measurements essentialto further identify the ways to mitigateenvironmental impacts by tracingand preventing the most harmfulenvironmental factors.

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    EnvironmentalManagement

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    overall soil condition in the Kuryk Basearea with the aim to:

    - conduct systematic observations ofthe soil condition, determine the main

    sources of pollution, and define theareas with the highest soil pollution rate;

    - evaluate the soil condition of thestudied territory, forecast and elaborate

    measures aimed at rational usage of thesoil and its preservation, and decreasethe negative effects of the production

    processes;- to uncover and control in time both

    the changes within the soil structureand condition of the top-soil and theproduction activities.

    For the entire life-time of functionalityof the Karabatan project, a full-scale

    monitoring program was put in place,with a local specialised subcontractor.Aspects monitored during this project

    were the underground water usingdedicated perimeter drilled water-wells;air emissions, the quality of the soil and

    Operationsduring winterseason onCaspian Sea

    subsoil and the conservation of fertiletop-soil that was stripped out before the

    beginning of the construction works.

    CUSTOMERS

    As highlighted in the mission, all SaipemCompanies pursue the satisfactionof their Clients through developingeffective innovative and top quality

    solutions, with full respect of the legalrequirements on safety, quality, health,

    sustainability and environment of the

    Republic of Kazakhstan.

    Saipem Companies are working inKazakhstan for several companies in theoil and gas industry, such as Agip KCO,

    ExxonMobil, etc.

    In general, the Kashagan FieldDevelopers request a strong focus on

    Kazakh content and require all potentialsubcontractors to do the same.

    It is important to ensure that Kazakh

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    ITYlocal content involvement contained in

    Schedule G.

    In line with the approach of a directrelationship with stakeholders,Ersai hosts in its Yard some Clientsrepresentatives that oversee dailyactivities. There are also some scheduledaudits from the Clients side in order toensure compliance with all standards.These audits analyse all activities,processes, operations as well as theQHSE management system.In November 2009, the final handoverto Agip of as-built data books forOnshore and Offshore Main Trunk lineswas completed. This involves all theas-built documentation relevant to theinstallation of the Onshore and OffshoreTrunk lines from Onshore ProcessingFacility (OPF) at Karabatan to complexIsland D.The task of maintaining the OnshoreTrunk lines ready for their intendedpurpose was accomplished at the end ofDecember 2009.

    Customer SatisfactionFeedbacks

    During 2007, the Piles and FlaresProject have received feedbacks fromthe Client AKCO, appreciating thecompanys good safety performance

    design, engineering, projectmanagement, manufacturing andconstruction capabilities are considered

    when planning development workscopes, in order to provide full and fairopportunity for the Kazakh industry(including consultants, suppliers andcontractors) to pre-qualify for work.For all companies working in theKashagan Full Field DevelopmentProject, a series of standards in termof local content are required. Suchstandards, outlined in every contractin a part called Schedule G, are aminimal percentage of invoicing thatremains in the Republic of Kazakhstan,and which is divided by local employeeexpenditure, local supplier andsubcontractors and taxes locally paid.For the projects considered, the ProjectOperator asks a percentage of around35% divided as follows: around 16%payments to national personnel; around17% payments for national materialsand services; around 2% payments toRoK Budget (taxes).Saipem Kazakhstan Branch fullycomplies with the Kazakhstan Contenttarget defined by the Clients.Local content performance is not

    instead requested for Ersai CaspianContractor Llc because it is considereda local subcontractor, despite that, theCompany complies with the requests of

    Activities atKuryk Yard

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    during the production season, and alsocongratulated the Piles and Flares Teamfor the preparation and quick execution

    of Module 11 installation.Trunk lines Project as well receivedcustomer satisfaction feedback for the

    successful completion of 28 inch SG TieIn at KP 43 pipe line construction.

    In this, it has been mentioned that safeworking conditions were maintained atthe higher standard level and the Client

    have congratulated all personnel whowas involved in the completion of that

    scope of work for the well done job andfor the tight schedule within which thejob was completed with no injuries to

    personnel nor equipment failure.

    In the implementation of Pipe RacksProject, the Client AKCO made a good

    remark on the performance sayingthat Ersai has come a long way in thelast 5 years, with each year showing

    improvement.

    SUBCONTRACTORS& SUPPLIERS

    The relations with business partners arebased on principles of long-term mutual

    profit, full execution of obligations,honesty, transparency and fairness, thus

    respecting business partners ethicalprinciples which are stipulated by

    cultural and other differences as well.Saipem Companies follow legislationregulating competition, support free

    competition and entrepreneurship, andcarry out fair open policy with regard to

    competitive organisations. In order tominimise risks in relation with business

    partners, corporate standards have beendeveloped.

    For the diffusion of safety culture,Subcontractors personnel working onErsai Yard are trained for first safety

    induction and also for Permit to Workcourses.

    Moreover, audits are conducted onSuppliers and Subcontractors with

    the purpose to assess the SuppliersQHSE Management System against ISO

    9001, OHSAS 18001, and ISO 14001International standards and give the

    feedback on improvement actions to be

    15%

    11%

    1%

    28%

    28%

    1%

    16%

    Local Expenditures for Ersai 2009

    Subcontractors

    Transportation

    Raw materials

    Other services

    Investment

    Other costs

    Labour

    20%

    40%

    60%

    80%

    100%

    Saipem Kazakhstan BranchQualied suppliers and subcontractors

    2008 2009

    27

    73

    34

    66

    InternationalLocal

    20%

    40%

    60%

    80%

    100%

    ErsaiQualied suppliers and subcontractors

    2006 2007 2008 2009

    40

    60

    26

    74

    13

    87

    36

    64

    InternationalLocal

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    taken and to pre-qualify the suppliers inthe Vendor Data Base.Approximately 16 audits have been

    conducted by Ersai Audit Team up to2008.Another strong element, which isinvolved in the evaluation of theKazakhstan content of the project,is the economic value of goods andservices purchased from local suppliers.As a result of the commitment towardKazakh content, most of Saipemsuppliers are now locals.In total, almost 65% of purchasesof Saipem Companies in Kazakhstanare from local vendors (suppliers andsubcontractors).

    14%

    3%

    44%

    14%

    9%

    16%

    Local Expenditures for Saipem Kazakhstan Branch 2009

    Subcontractors

    Raw materials

    Other services

    Materials

    Other costs

    Labour

    Pipelyingin the

    Caspian Sea

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    While the volume of local supplies wasremaining stable; the percentage is

    diminishing due to high purchase ofmaterial (steel) from abroad for Pipe

    Racks project.

    LOCALCOMMUNITIES

    Saipem Companies in Kazakhstanare strongly committed to working

    responsively and contributing positivelyto the socio-economic development of

    the communities they operate in.

    Every year, the Companies establish aSustainability Plan, based on the analysis

    of the needs of local community,focusing mainly on activities for healthpromotion, education, socio-economic

    development, culture and environmentalprotection.

    In the past years the following activitieshave been carried out.

    Health Promotion

    From the beginning of the Companiesactivity in Kazakhstan, they

    strengthened its relations with medicalinstitutions. Each year, in the frames ofthe Sustainability Plan, the Companies

    contribute to Public Health, by providingmodern equipments (e.g. a defibrillator

    in 2006 for Atyrau Regional Hospital,

    an artificial support breathing apparatusin 2008 for the Kuryk village hospital, aHuman Plastic Skeleton for the Atyrau

    Regional Ambulance Center 03 in 2008,medical surgery instruments and medical

    waste incinerator in 2009 for the Kurykhospital, etc.), and by supporting

    the reparation and refurbishment ofPublic Health properties (e.g. provision

    of an ambulance car in 2007 for theAtyrau Regional Ambulance Center

    03, reparation of 4 Kuryk HospitalAmbulance cars in 2008, refurbishment

    of 3 rooms of Aktau Hospital in 2008and two others in 2009).

    Besides, Ersai supported financially thetraining of five local cardiosurgeriesspecialists of the National Scientific

    Centre of Surgery Syzganov (Almaty) atthe cardio Centre for the Diagnosis andTreatment of Congenital Heart Disease

    in Bergamo (Italy). This training willpermit to start the practice of surgery

    of Kazakh kids born with heart disease

    10

    20

    30

    40

    50

    Expenditures for Local Communities (million KZT)

    2007 2008 2009

    3.44

    24.13

    47.84

    Aerial viewof the ErsaiFabrication Yardin Kuryk

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    SAIPEMSUSTAINABIL

    ITYtogether with an information support

    to the University in advising modernadvanced technologies in order to

    align educational program in line withmodern industry requirements anddeveloped enterprises needs. Duringthe visit to Karaganda State TechnicalUniversity on May 14, 2009, anAgreement to create an Innovation-and-Education Consortium CorporateUniversity has been signed betweenthe two parties.

    Saipem Kazakhstan Branch supportedthe creation of mini-developmentalcentre in Secondary School forchildren without opportunity toattend kindergarten. This mini-centrewas equipped with special furniture,essential medical equipments, teachingsupport, educational games and toys forKazakh and Russian-speaking children.

    Besides, a school for children withhearing losses was equipped withcomputers to create a class on Inclusivelessons. Inclusive education is a processof removing barriers with help of usingspecial software as a resource forlearning new skills.

    Saipem Kazakhstan Branch supporteda local school for orphans by providingnecessary equipments for studyand refurbishment for the boardingschool. A summer holiday for theseorphans in Continent camp located inShchuchinsk was funded by Saipem.

    and, after surgery, the rehabilitation athome. Ersai is proud of this particularcontribution in the development of

    childrens healthcare in Kazakhstan andis intended to support in future thetransportation of children of MangystauRegion, where the Company operates,to Almaty for all necessary treatments.

    Saipem Kazakhstan Branch supportedan AIDS Prevention Centre withprovision of personal computers. ThisCentre is the only one in Atyrau Oblastand it plays a significant role for AIDSprevention and treatment.

    EducationIn October 2008 Ersai has signed amemorandum of mutual cooperationwith the Karaganda State TechnicalUniversity. Main objective was toestablish a cooperation with mutualinterest where a well experiencedContractor submits the most challengingrequirements from the offshore industryto one of the most prestigious andreputed University in the Republic ofKazakhstan, and the latter fine-tunes itscourses accordingly.

    Based on this program, 15 graduatedhave been employed by Ersai indifferent disciplines (welding, QC,environmental, etc.). Training seminarsand courses on Quality System Topicsby Ersai QHSE Team have beendelivered to University students,

    Initiatives

    for localcommunities

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    main purpose of these talks was tofamiliarise pupils with significance ofenvironmental protection and waste

    recycling in modern world.Besides, Ersai, in collaboration with

    NGO Mangystau Tabigaty, is conductingawareness campaigns addressed to

    Kuryk population, in the field of ecology,protection of flora and fauna.

    Apart from training, landscapingactivities are carried out in cooperationwith regional schools, the Companiesenvironmental team provides practical

    support on these activities.

    On regular basis, Ersai is organisingthe voluntary cleanup of Caspian

    beach from the debris and rubbish incooperation with local community,

    where green team is providing with

    necessary trucks and other facilities.

    Culture

    In accordance with Mangystau RegionGovernors Decree No. 2238 dated

    December 10, 2008 About assigningof social patronage on monuments

    and in the frames of activities onprotection of historical-cultural heritage,

    Ersai has taken under its responsibilityreconstruction of the monument

    Socio-Economic Development

    To enhance the level of businessknowledge within local community,

    Ersai opened a Business Incubator inKuryk, with the aim of supporting and

    nurturing the start-up of small businessin the early stages, by providing office

    spaces and training activities.

    In 2008, English and ComputerCourses have been carried out for

    42 unemployed people and 66schoolchildren, and one office has

    been equipped with all the necessaryequipments (11 new computers, printer,

    fax, scanner, projector and screen).

    Saipem Companies also supportand fund local initiatives aimed atimprove local infrastructures (e.g.

    water infrastructures in Makat Region),or recreational infrastructures (e.g.refurbishment of the Kuryk Sport

    Complex).

    Environmental Protection

    During school year 2008, together withschool directors, Saipem Kazakhstanheld talks about The importance of

    Environmental Protection amongschoolchildren of Atyrau schools. The

    The importanceof preservinglocal culture

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    Saipem Companies in Kazakhstan aimat becoming the leader in provision ofservices for the onshore and offshoreindustry and infrastructures in theCaspian Area, by applying HSE andQuality best practices thus respectingtiming and cost for project execution,and be locomotive of the developmentof local content and loc