Bakytzhan Utegaliyev: The impossible is possible.// Sovet Direktorov. No.4 (58), 2011.
It so happened that for nearly 6 years of existence of “Sovet Direktorov” magazine the heroes of its "Personality" section have been businessmen and executives working in Almaty and Astana. We always wanted to expand the geography of location of our heroes.
Several months of searching for the Personality beyond our capitals were finally rewarded in April with meeting with Bakytzhan Utegaliyev, Deputy General Director for Commercial advisory at "Mangistaumunaigaz" JSC.
For a few hours of our interview with Bakytzhan Sisengalievich we managed to talk about almost everything. In fact I was enjoying not the interview itself, but the exchange of opinions with my vis-à-vis.
By Gaziza ZhapparovaPhoto by Nikita Basov
PERSONALITY
Bakytzhan Sisengalievich Utegaliyev
Deputy General director for commercial advisory at "Mangistaumunaigas" JSC
– Bakytzhan Sisengalievich, as far as I know, you worked in London for Chevron, a foreign world-renowned company where you held a great position with growth perspectives, high salary and employee benefits. Why did you leave all that and return to Kazakhstan? I am sure you surprised many people by returning here.
– Did I? What is true - that is true, I did surprise (laughing together).
Everything was really great: I was considered a quite promising oil trader, I was highly valued, the management of the company supported my proposal of the new project of transporting crude oil and appointed me as the supervisor of that project. But, put the benefits aside, still and all, my home is here in Kazakhstan.
– Nostalgia?
– You see, when you live far away from everything familiar, away from the things that any of our compatriots consider trivial, away from the native language, music, poetry and, as it may sound pompous, away from philosophy and wisdom of ancestors, you begin losing something important that helps to hold on and overcome difficulties. My family and I greedily caught any mentions about Kazakhstan, thrillingly and amusedly watched TV news and programs about our native land.
Who has lived far away will understand me.
– Which position were you offered after returning to Kazakhstan?
– First, Head of Oil exports at “Kazmunaigas” Trade House”. I was charged with the task of bringing the sales system to international standards, renegotiating the terms of the contracts and building relationships with foreign partners. It was necessary to examine the logistics that would allow expanding the geography of sales.
– How many employees were there at that time?
– When I arrived the department consisted of 9 people. Surely, they did their job, closed sales but no one ever sold beyond the CIS territory. I also had to prove that we too have right for more cost-effective directions of supplies; to negotiate not from a begging position but on equal terms with any oil trader. не с позиции просящего, а на равных с любым нефтетрейдером. It was the very moment when my experience as a trader, all my contacts and knowledge helped me a lot. All that required building up a system not only internally in the company, but also explaining everybody how oil is sold in the world to begin with. I had to take part in a governmental commission as an expert on export sales. It was necessary to explain all industry specifics and to talk about how market price is formed and what sorts of oil exist, etc.
From day to day for a half a year I drew and told the governors at all levels about the stages of selling oil to end users, what happens to it when we transfer it, about all inspection aspects, all risks and possible losses, payment systems and terms of payment…
– It is said that difficulties can be overcome when there is excitement and passion for the work. I think this greatly helped you then. What happened next?
– Then, rather in parallel, we built on logistics. Let’s assume that we delivered oil to Odessa or Novorossiysk. Then what? At that moment we didn’t even have our own tankers; it was difficult to move to Europe, the operations with European oil traders had not been established. Having examined the Black Sea’s shipping we began hiring tankers, which resulted in an increase in profitability of the deals. After Kazmortransflot expanded the geography of transport services we got an opportunity to go further and extend our business network; we managed to raise the volumes of shipments on CIF terms.
– But freight companies had always been there, all the more so most international forwarding brands entered Kazakstan market quite quickly.
– Yes, but oil transportation has its own specific features, because of which we were at a position when everybody dictated us their terms. I had to defend my own point of view, to prove my case and tell everybody that I also had conditions and we wanted to work on equal terms. The government of the country played a significant role in building relationships between Kazakhstan and Russia, taking into consideration absolutely all details. Due to this, we obtained extended potentials of transiting our oil through Russia to European countries.
– What about your cooperation with tax authorities?
- During tax inspections, our tax authorities applied the regulations that they were familiar with. Previously they did not include in pricing the costs associated with the costs of the buyer. We had to explain that these pricing formulas were used at world markets of crude oil and complied with the economic market laws. Let me get off the subject, now in terms of the large-scale crisis oil traders, as well as refineries in Europe and America are looking for new financial instruments (formulas) for buying and selling.
Having agreed, the tax authorities claimed to confirm all expenses by providing supporting documents. We can show all the costs associated with the costs incurred on the territory of Kazakhstan: tariffs of "KazTransOil" and organizations providing services to us; but beyond there are commercial activities and international standards , and you may know foreign companies keep all the terms in strict confidentiality. It was necessary to negotiate with traders, inspections and other companies so that they give some conclusions and supporting documents. There is a great bulk of documents to collect along the entire chain: bank charges, inspection tariffs, transportation costs, insurance, etc.
I should note that the competence of our tax authorities in oil trading has significantly improved, and now they use all the tools of the international standards.
- I can imagine how difficult it would be if you hadn’t put so much effort in due time into improving the base of oil industry regulations ...
- Come on, I myself was excited about explaining what, how and from where. Many of the things I thought of and polished up on the way, so that no one there would have difficulties or collisions. Remember, as in the joke about the teacher who said to his student, that while he was explaining him a rule for a hundred times, he understood it himself. (laughing together).
You must always remember that even the most brilliant and professional manager cannot do anything alone, without good professionals, without a good team, one in the field, as they say, is not a warrior. This I know for sure.
- What was the next step?
- The management of "KazMunaiGas" National company, taking into account my experience, appointed me as Deputy General Director for Commerce at JSC " KazakhOil - Aktobe". This company was acquired by a national company together with the leading Russian company JSC "Lukoil Overseas" (50 /50). And there I had to build the sales policy from scratch. After that, I went back to "KazMunaiGas" trading house as the first Deputy General Director. In November 2009 I was appointed as Deputy General Director for Commercial advisory at «Mangistaumunaigas" whose assets were jointly acquired by NC "KazMunaiGas" and CNPC.
- It turns out that you belong to so demanded "crisis managers" whom the domestic industry is lacking.
- You know, when I see the results of my work done in accordance with the modern forms of management, and after a certain stage I hear good grateful reviews and gladly meet many people with whom I have worked, I realize that I did something good and useful.
- Bakytzhan Sisengalievich, I know that «Mangistaumunaigas" became the winner in the Republican contest "Paryz" in the nomination "Best Collective Agreement." Tell us what were the fundamentals of your regulations in relations with your employees?
- This is, of course, social security of the employees, creation of a friendly atmosphere in relations with public authorities and trade union.
- Speaking of responsibility: what activities are carried out in "Mangistaumunaigas" in terms of social responsibility?
- All activities associated with, as you say, social responsibility, though for us these are normal state of things, are related to humans, such as commitment of money to build Aktau-Kalamkas roads, every year we are honoring our veterans of the oil industry, on the Day of oil industry we provide cash bonuses, we also make out education scholarships for students in universities of Kazakhstan and abroad including in Russia, China , the Czech Republic and in other countries.
- So the main value for you is human capital.
- You know, because shareholders have agreed on the rotation of the top managers every three years, for our whole team it is very important to leave any significant trace after ourselves, we would also like to see that after we leave the other leaders continued to do what we did and even more. We have already shown and proved everything that was needed: high competence, professionalism, care for the environment, the staff and residents of Mangistau region, etc. Now the important thing for us is to fix the result, to show our countrymen that they deserve the best; and we originated a high level of management to comply with by the succeeding managers.
- Such a pleasure to hear something like this from young top managers. You know what most people think about competent and entrepreneurial leaders.
- Initially we also slightly faced with a kind of disbelief, but it did not stop us. But you know how great it is to see the employees who have just returned from a trip to Almaty and Astana to see the Asian Games , where we sent them as a reward for excellent work results . Imagine how enthusiastically they told everyone how proud the felt for the country, our people, for themselves, when they saw the beauty and magnitude of what was happening!
Actually, I think that it's good to give people a chance to see as many new places as possible, to meet as any new people as possible. We send most successful school graduates abroad; for the children of our employees we organize trips to summer camps, including the Carpathians. Such trips allow you to develop, to see the world and view the homeland in a new way, such trips revive an ability to appreciate the land where you live, strengthen pride for the country, the people; and we really have much to be proud of.
- It should be noted that the areas you supervised include the purchase of goods. How do you make purchases from domestic producers? In my opinion, in our country there aren’t many companies producing the equipment for your industry...
- Previously , of course, it was more difficult. The companies selling the equipment used to lack transparency. You know, engineering had long been in decline. However, the situation is improving: existing plants are increasing their capacity; new production sites are being created.
Beside buying and selling businessmen began building plants. Moreover, they bring cutting-edge technology and set the prices below the imported analogs.
- And do they fully conform to your company standards? And because they are high, it requires the presence of foreign capital. Moreover, as far as I know, with the appointment of the new Director General and arrival of a new team in "Mangistaumunaigas" there began a large-scale modernization process.
- Of course! All wise business leaders are interested in quality work, development and profit. They do not waste time; they are improving technology and increasing production. See, it's a two-way process: each of the parties stimulates the other to improve. We implement modern technology of oil production, the suppliers are struggling to understand and accept our aspirations and in turn they offer something new, sometimes give out surprising but very effective rational ideas.
- Turns out to be the idyll... Please understand that I am not looking for the negative side, I'm glad for the development of Kazakhstan's industry...
- I agree with you 100%. Of course, much needs improvement, but I am personally pleased with the fact that our production is not standing still. Many are experiencing financial difficulties, but they can be solved.
The government does a lot for this: programs are introduced; funds are allocated, soft loans are provided. The only thing I want is that more people should be aware of all the opportunities.
- Indeed, my half-a-year Astana citizenship showed me, a media representative, by the way, that many of the targeted programs are real projects simply unknown to most Kazakhstani citizens. Many people know about the existence of the State program for accelerated innovation and industrial development, but very few people know how it might be useful to each of us. It's not just loud slogans; this is exactly how our media present almost all actions of the government; they are quite applicable and thoroughly calculated measures. Oh, I got off the subject, seems like I touched the painful issues. Now back to our affairs. To what extent does your company implement innovations?
- This relates to our core business, we actually were the first to apply new technology for oil production. Former CEO of "Mangistamunaigas" Aidarbayev Alik Serikovich, being a professional in the petroleum industry, broke most of the hitherto existing stereotypes about possible volumes of crude oil production; many believed that the peak volumes had passed. Having revised previously approved programs, we identified new challenges with current technology. Currently we initiated an order for the production of new types of long-stroke pumping units. We have significantly increased oil production by applying best practices, for the next 12 months it is expected to produce more than 5 million 700 thousand tons of crude oil.
- You are justifiably optimistic about the development of economic sectors involved in the oil industry. And where would you advise businessmen to invest their efforts and resources in Aktau region? It seems to me that there are many opportunities to start their own business.
- You know, I would recommend entrepreneurs to invest in the creation of infrastructure facilities along the coastal zone of Aktau. In my opinion, this is a very promising direction, especially when taking into account the full support of the regional authorities.
- Taking into account the relatively high cost of land and real estate in Aktau, I think entrepreneurs with great funds are able to start these projects, but not the SME representatives...
- You know, one must remember that the state has already helped the entrepreneurs by providing various forms of benefits. For example, the Free Economic Zones. Lords, you are granted tax preferences, there is a list of priorities, investing in which you have the opportunity to receive concessional financing from various associations, foundations and other institutions. The number of niches where you can work and earn not immediate profit but a steady income with real prospects for business development is just huge! The local administration is open for a dialogue and ready to support entrepreneurial initiatives, because they understand that this is for the benefit. What of that? Be active! And small and medium-sized businesses as well as large investors in our region are given the green light. You just need to act.
Today I know there is a program for the development of chemical cluster. It is an amazingly interesting direction. Just for the fun of it, I did some calculations, and so, there is no need of a particularly large capital, and if you still realize a couple of projects the revenue will be very substantial.
- But if we talk about innovative business, then without expensive equipment and a license one cannot get along...
- Well, no, actually. Typically, the significant proportion of the production costs is raw materials. Almost all operating capital is spent to purchase them. In the case of the chemical direction, all the raw materials are available almost for free: water, gas, tidal power, crude oil, salt, limestone. In addition, all in one place.
Here is an example : in the production of inhibited hydrochloric acid which is consumed in the oil industry in large quantity, the main component is calcium chloride, which is produced from salt, gas and limestone. All these are available in our region, and hence, there is an opportunity to earn huge money.
- Previously I imagined the West Kazakhstan region as difficult to live in from the ecological point of view. However, it seemed to me, in Aktau this problem is not so acute.
- I certainly would not say that the air is crystal-clean. But the offshore wind and widespread modernization of equipment on oil-producing companies, of course, positively impact on the region's ecology.
- But flamingos used to winter there! Their natural instinct is hard to cheat!
- Well, once flamingos wintered, then of course! (Laughing)
If you visited here ten or fifteen years ago, you would see a large number of petroleum gas flares.
Now there is no single flare in this region, everything is utilized and recycled. The regulations have become strict, thankfully. Yes, and the sea, of course, helps cleanse.
- It is so exciting to talk to you that it is difficult to stop. Can we now talk about your personal life?
- If discreetly, then ok. (laughing)
- On what principles do you build relationships with employees: authoritarianism or democracy?
- One of my most important achievements, I think, is the ability to build proper communications.
This also applies to relationships with my family and friends, and contacts with colleagues, and of course, relationships with partners. Besides the fact that I myself always strive to understand, to hear, to be heard, the work in a foreign company and a corporate culture adopted there showed how to build relationships with others and how important it is to build those relations up but not to adjust the rest for oneself.
You see, in companies with a strong corporate culture, there are no small points. The attitude, comfortable and well equipped workplace, positive image of the employer, built on concrete facts, the transparency of the system, teambuilding activities, good benefits package... Looking at the experience of global companies we are also trying to implement all these positive things.
- Each of us is trying to live right: not to do evil, to help others, to be a good person, to respect parents and family... What would you add to the list of values that are important to you?
- Good parenting. I am infinitely grateful to my father, who spent much time with me explaining something, teaching, advising if I came for advice. I personally feel pity seeing that today’s youth learns mostly from the Internet, magazines and movies. Of course, young people today are much more educated than us, but I see no soul in their eyes, you know what I mean...
- Thank you very much, Bakytzhan Sisengalievich, for a live emotional conversation. I haven’t noticed that we have talked for almost three hours. Ah, I wish there were more such interview heroes as you! I sincerely wish you, your colleagues, co-workers and the whole company success, prosperity and most importantly health to realize all the plans.
- Thank you! To the audience of "Sovet direktorov" in turn I wish to take to heart a remarkable quote by Antoine de Saint-Exupery: “If you want to build a ship, don’t drum up the men to gather wood, divide the work, and give orders. Instead, teach them to yearn for the vast and endless sea; then they will build a ship and sail."
Utegaliyev Bakytzhan: The impossible is possible.// Sovet Direktorov. No.4 (58), 2011.
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