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Supply chain management: local content

We believe in conducting ourselves according to the highest standards of business practice. This not only means being true to the Dragon Oil Code of Conduct, which we initiated in 2009; it means looking at how our business impacts the local host areas in which we work.

Having implemented our Dragon Oil Code of Conduct in 2009 to ensure best practice throughout the company, we followed it with a programme to ensure that our contractors follow our code as well. For every project, we conduct a competitive bidding process where we set out specific requirements defining quality, delivery and integrity. We select suppliers based on the best available offer while also taking into account reliability, experience and any previous working relationship we may have had with them.

In 2011, we started to encourage actively our suppliers to use locally sourced labour and materials. In 2012, we laid the foundation of this strategy by endeavouring that any tender we receive for major projects needs to comprise a minimum of 20% local content, if at all possible.

We are also leading by example. In 2010, we allocated land in the harbour area to contractors to allow them to construct platforms and gathering blocks near Dragon Oil’s operations. This not only helped us to supervise the contractors and keep to deadlines, but also had the effect of bringing more local jobs and orders for supplies to the area.

In 2011, the Dzheitune (Lam) Block 1 and C platforms were built in our ship yard followed by the Dzhygalybeg (Zhdanov) Block 4 gathering platform as well as the Dzhygalybeg (Zhdanov) B platform.

Use of local content brings benefits to everyone: our employees, our suppliers, the local community and our host government. Development of the Cheleken Contract Area fields means new opportunities for local businesses and new jobs for local people in, for example, construction and transport.

This helps to stimulate development of the small- and medium-sized enterprise sector within the country. We partner with more than 20 local companies for contractual work and materials supply, and the value of contracts awarded to local companies within the past three years amounts to approximately US$26mn. Currently more than 3,000 local workers are employed by our contractor companies working on infrastructure projects in the Cheleken area.