Kazakhstan Oil and Gas Industry
Since early 1990s, Corporate Social Responsibility (CSR) concept has gained much amount of popularity within the business industries for both the developed and developing nations (Buldyabayeva 2014). Initially it used to have Anglo-American feature of stakeholder based economy, and next to this CSR has been influenced by the US view of market driven operation of the business. Later, over the time familiarity of CSR with the business environment has transformed it to be useful for both the social and environmental aspects of the business operations. According to the Wang et al. (2016), CSR is the key proponents of the different views regarding the social issues, which are linked to the core business of companies. However, xxx argued that CSR is only a marketing concept, a generalised speech of the corporations that take care the public image of the firm, however fails to make any important change to the firms’ business profile. Utilising the CSR is highly constrained to the business factors and controlling managers who itself do not have moral responsibility for the community and business at individual level (Hopkins 2016). There have been various instances, where CSR is being used by the firms; however, oil industry is one of the sectors that has utilised the CSR as one of the efficient strategy to penetrate the market without any escalation. In addition to this it has been seen that oil and gas firms operate in challenging locations that often lead them to mistrust and hostility from the local population (Yakovleva 2017). This report is aimed to analyse the policies and approaches of CSR in Tengizchevroil, where it will provide light on both the positive and negative impact of CSR practice. Through evaluation of the CSR practice in the selected organisation this report will provide recommendation for the firm to implement the CSR in proper way so that it can mitigate the present gap between themselves and the community, where they are operating.
Kazakhstan oil and gas industry is one of the dynamic sectors of the country’s economy that provide substantial amount of contribution to the GDP of the nation. Since its freedom from Soviet rule during 1991, the country has gained Foreign Direct Investment (FDI) of 18 billion USD by the end of 2010, which has aided the country’s economy to bolster as one of the rapidly growing economy (Paramonov, Vladimir and Alexei 2015). According to the recent research by Wegenast (2016), it has been found that oil and natural gas production has enhanced the country’s economy by a large extent through providing higher scope of employment. Recently it has been found that world’s largest oilfield Kashagan is located in the Kazakhstan, which is expected to transform the country as one of the biggest producer of gas and oil (Zaurbekov et al. 2018). According to the estimation of 2010, it has been found that the country has produced 79.5 million tons of natural gas and crude oil during 2010, which is higher than 2009 figure by 4% (Abdrakhamnova et al. 2014). Substantial amount of FDI and investment in the oil and natural gas sector has helped the economy to enhance its production. As per the report of Appel et al. (2015), it has been found that Kazakhstan has exported 72 million tons of crude oil and natural gas during 2010, which is accounted for 91% of total oil production in 2010 by the country (Werner et al. 2016). It has been found that on the territory of Republic of Kazakhstan, there are almost 202, oil and natural gas field is situated, which are yet to be utilised for production of the oil and natural gas. The country has outstanding amount of potential to enhance its economic growth through higher employment rate in the oil and natural gas sector, however most of the oil and natural firms operating in this regions are owned by the foreign nations (Pacyniak et al.2015). FDI is substantially high in the country that has aided the economy to face rapid boost, however, excessive dependency on the foreign investment has crowded out the actual effect or having high amount of natural gas and oil reservoir within the country’s geographical boundary. There is plenty of Petroleum Company operating within the geographical boundary of the country and among them Kazmunaigas is one of the largest firms, which has been positively engaged in full cycle. Next to this Tengizchevroil is another renowned brand, which is accounted for production of 75,000 metric tonnes of natural gas and crude oil per day, making it second largest firm in the country (Tengizchevroil.com, 2018).
Overview of Tengizchevroil
CSR is one of the important factor of breaching the gap between its performance and society requirement, thus according to the (Teng 2017), Tengizchevroil considers it very seriously. Considering, CSR as the core value of the firm it performs social responsibility with highest importance. For the Tengizchevroil its CSR can be divided into three categories, which are environmental performance, worker’s safety program and community investment program (Tengizchevroil.com, 2018).
The Tengizchevroil has invested 3 billion USD in environmental program since 2000, which has caused reduction in air emission from 91% to 73% (Pacyniak et al. 2015). Through the programs like Gas utilization program, Environment monitoring system and water minimizing process of the firm has tried to reduce its carbon footprint (Tengizchevroil.com, 2018). Minimizing waste usage is another ambitious program from Tengizchevroil to align itself with the CSR strategy. According to the statistics it has been observed that the firm has reduced its waste by 2737 tons, thus it has taken care the environmental performance as mentioned by the CSR guideline (Rashidi et al. 2017).
Tengizchevroil takes workers safety seriously in order to attain organisational goal without any issue. According to the statistics it has performed 55 million man hours of work without any accident.
Tengizchevroil’s worker safety program has helped the firm to eliminate health issues in its operational zone. In addition to this according to the CSR guidelines, the firm has invested subsequently to enhance the contractor’s health under the Contractor Health, Environment and Safety Management program (Buldybayeva 2014).
It has been observed that the firm has invested subsequently in programs like Egilik social infrastructure and through community investment program that has enhanced the firm’s CSR performance. Through investment of 450 million USD in community enhancement program and the firm has enhanced its CSR performance (Kabdiyeva 2015).
Tengizchevroil, popularly known as the TCO being one of the largest firms in the Kazakhstan has been chosen in this report for analysis of CSR practice under its operational framework. TCO’s share holders are Chevron, who enjoys 50% of the company’s share, then comes the KazMunaiGas, which is a Kazakh National oil company that enjoys 20% of the total share. ExxonMobil is the second largest shareholder with holding of 25% share and lastly is LukArco that has 5% of total brand share (Raimbekov et al. 2016). During 1993 Government of Republic of Kazakhstan and Chevron came under contract for production of oil and natural gas for coming 40 years and since then, TCO as a whole taken responsibility of the community, where they are operating. According to the Yudnikova (2016), TCO is aimed to work in such a way with which they can improve the life of the population of community where they are working. In order to do this, the brand has been utilising the CSR framework under their business operation since the agreement has been signed between the Chevron and Government of Kazakhstan. Utilising the CSR framework, TCO has showcased great amount of respect to the governmental agreement and it has also developed various social investment programs that are included in the CSR framework of the firm (Tengizchevroil.com, 2018). Utilisation of the CSR under the framework of the firm has not only provided positive effect to the firm while mitigating the gaps between itself and community where it is performing; CSR has possessed various negative effects too. Details regarding the various advantages and disadvantages of the CSR program in TCO have been highlighted below:
Egilik Voluntary Program in Atyrau Oblast:
TCO’s Corporate Social Responsibility (CSR) Practice
Tengizchevroil under agreement with the Government of Kazakhstan during 1993 and since then it has introduced various ambitious program in order to keep it on track with the CSR (Chmykhalo and Shefer 2017). During the firm’s initial five year it had launched ambitious Atyrau Oblast project to develop social infrastructure of the Atyrau Oblast. For this purpose the brand has induced 50 million dollar in the program during the initial five year with the collaboration of Atyrau Oblast Akimat (Munoz 2018). Next to this during 1999, TCO introduced its first voluntary program as Egilik Voluntary, which came into operation during 2000 in order to enhance the deteriorating infrastructural situation of the nation (Buldybayeva 2014). Its estimated budget during 2003 was as high as 12 million USD, which is aimed to replace the waster system of Kulsary and aid the infrastructural development (Tengizchevroil.com, 2018). Besides this, focus of these programs is to develop the health issues of the nation through allocating proper residential area to the employees and education to the offspring of the workers. CSR argues that firms need to provide enough amount of focus in the social events in order to reduce the gap between itself and community, where it is working. Following the CSR guideline the firm has till now induced $185 million dollar in development of the Kazakhstan’s infrastructure that has enhanced the growth of the nation and aided the firm to keep itself up along with the framework of CSR (Kalyuzhnova et al. 2015).
Social Investment Program (SIP) is one of the ambitious initiations of TCO, which is aimed to develop the social condition of the various communities, where the firm is operating. For this purpose, the firm induce 1 million dollar annually, which help to fulfil the organisational goal through fulfilling the society’s goal. According the council of SIP developed by the Tengizchevroil, social investment strategy is aimed to change the vector towards action based urgent problem solving methods and achieving the desired goals through prioritising the development works. Through CSR framework, the firm has identified that it is highly important for the firm to enhance education, provide environmental protection, and promote supply of drinking water as well quality health care in the Atyrau region under the SIP (Kalyuzhnova et al. 2015). When it comes to the facilitating education to the Atyrau region, then it can be seen that the TCO has invested 28 million USD for developing the education condition of the region (Chmykhalo and Shefer 2017). In addition to this, promoting training for skill development of the population of Atyrau region has been one of the main focuses of the firm during last one decade. TCO provides scholarships to 70 high schools graduated for higher studies and internship for 3000 students every year in order to enhance the education of the firm (Tengizchevroil.com, 2018). Next to this, when it comes to the development of hospitals, transportation, infrastructure and environmental program, then the firm has induced 450 million USD in various projects. There has been separate project by the TCO, which was being introduced by the firm in order to gauge the water scarcity of the region.
Positive Impact of CSR in TCO
CSR has both the positive and dark side in its framework, which germinates from the conceptual gap in managerial performance (Trong 2014). One of major drawback of the Tengizchevroil CSR framework is that it doesn’t showcase its carbon emission level properly. In addition to this there has be no evidence of the anti corporate campaign in Kazakhstan that has aid the firm to manipulate it CSR result. Lack of governmental control over the Tengizchevroil has helped the firm to exploit the local labour under the name of internship program. Tengizchevroil has been going through transitional phase, where it is shelving higher amount of local employees utilising the skill gap. Though Kazakhstan has joined the EITI to restrict the foreign firm from exploiting the environment, natural resource, however the government has failed to imply the same in front of the large firms like Tengizchevroil, which covers itself utilising the CSR practice (Kasekende et al. 2016).
Through analysing the company history and considering its experience with CSR practise, it can be said that Tengizchevroil has new challenges in front of it. The firm strives to create and promote a sustainable corporate image of itself as part of its proactive strategy. In order to gauge the present situation of the firm following recommendations can be articulated:
Development of relation with government – Tengizchevroil being a transnational organisation need to enhance its clarification process badly in order to create good relation with the government.
Revamped social investment program – TCO need to revamp its social investment programs in order develop a comprehensive business strategy, which is aligned with the government’s CSR strategy.
Prioritising communication channels – Lack of communication with the competent authority is one of the major issues for the Tengizchevroil. It require to develop proper communication strategy, which will promote CSR as a shared concern of the firm, link the CSR to the core business of the firm and demonstrate organisational support to align itself with the CSR strategy.
Community and environment improvement – It is important for the firm to develop such strategies that can incorporate the native population of the Kazakhstan into the business of the firm. It will help the firm to grow strong relationship with the local population.
Enhanced contribution to the community wellbeing – Though it has been observed that the firm has invested substantially into socio economic process; however, it has failed to address all the social requirement of the nation. Thus it would be better for the firm to enhance its contribution to community wellbeing program.
Negative Impact of CSR in TCO
Developing reward and recognition – it would be better for the firm to introduce R&R system according to the CSR, in order to influence the employees to work harder. It will help the firm to attain organisational goal, while fulfilling the operational goal and align itself with the CSR practice.
Conclusion:
The report has analysed the policies and approach of the CSR and through the analysis it has been found that, it is a key instrument to gauge the social issues of the firms along with refining the social impacts of value chain and social dimension under the competitive context. This report has been made depending upon the Tengizchevroil, which is one of the biggest oil and natural gas production firm in Kazakhstan. The report tried to analyse the firm’s CSR performance through analysing the advantage and disadvantages of CSR of the firm. From the analysis it has been found that the Tengizchevroil has utilised CSR as tool to fulfil its organisational goal. Though there has been vast amount of ambitious program from the firm to enhance the social factor of its operating zone, yet little has been done in practical. Under the blanket of the CSR the firm has exploited local population while fulfilling its organisational goal. To conclude it can be said that CSR is certainly a tool, which has been made to gauge the gap between the firm and communities, where it operates, however large firms has utilised it as cover to hide their malpractice. In order to control the situation, the report has provided recommendation for the Tengizchevroil, which can be utilised as the corrective measure to make it really up to the mark of CSR requirement.
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