(SRI) – KazMunaiGas Exploration Production (KMG EP), the London-traded Kazakh oil company, continues to suffer production losses amid prolonged strikes at two of its major oil fields.
Last week, KMG EP said total loss of oil production at Uzenmunaigas, one of the two oil fields and the company’s core production facility, caused by the dispute amounted to 85,000 tonnes, mainly due to disruptions in well servicing and well workover operations.
The oil company did not provide an estimate of losses suffered at the Karazhanbasmunai unit but earlier his month a KMG EP spokesman said that production “suffered insignificantly.” Karazhanbasmunai is a Kazakh-Chinese joint venture between CITIC, China’s biggest state-owned investment company, and KMG EP.
The protests began on May 10, RFE/RL reported, citing a participant, when several hundred oil workers at the Karazhanbas field stopped working and demanded better contracts, including higher wages. One week later there were about 1,000 workers on strike. Some also declared a hunger strike to draw more attention to their situation.
KMG EP said the strike was illegal, a decision which was upheld by the local district court in the city of Tupkaragan. The company since fired 72 people for participating in the strike and disrupting operations. Meanwhile, police in Aktau, the capital city of the oil-rich Mangistau region where the Karazhanbas field is located, arrested 37 people who staged a protest in support of striking oil workers.
While KMG EP said the protests at Karazhanbas have begun to wind down and the number of of strikers at the unit has decreased to 164 people, some independent media, including by RFE/RL, put the number of striking workers at thousands.
According to Kairgeldy Kabyldin, head of KMG EP’s parent company KazMunaiGas, the strikers’ demands at Karazhanbas are unrealistic.
“They receive a salary of KZT250-450,000 ($1,700-$3,100), depending on the level,” he said. The average monthly salary in Kazakhstan is about KZT80,000 ($550), according to the State Statistics Agency.
However, oil workers complained that they are forced to pay prices several times higher than in other parts of Kazakhstan.
Protests at KMG EP’s Uzenmunaigas facility in western Kazakhstan began on May 24, when a number of workers went on strike demanding that a new system of payment be introduced.
“Some of the Uzenmunaigas workers, especially from the transportation unit, did not come to work which disrupted normal well servicing and well workover operations,” KMG EP said in a statement to investors.
KMG EP maintains that the Uzenmunaigas strike is also illegal and said it fired 62 people for participating in the protest actions.
“The company believes that the demands of protesters are unfounded and this was confirmed by the Zhanaozen city court,” KMG EP said in a statement on June 16. “In accordance with the Labor Code, [KMG EP] has started the process of dismissing the participants of the labor action for breach of contract.”
KMG EP said it is willing to negotiate with the protesters but only following a “complete cessation of the illegal protests.”
The strike has crippled operations at Uzenmunaigas. According to the Expert-Kazakhstan business weekly, the utilization rate of specialized machinery has been less than 50% and as low as 20-40% during the strike, significantly affecting production.
Last week, KMG EP said the total loss of oil production caused by the dispute amounted to 85,000 tonnes, but warned that the degree of total impact on annual production depends on how quickly the company will be able to get back to normal regime.
While KMG EP has downplayed both strikes, they represent the most significant protest actions in recent years. The intensity and the duration of the strikes have far exceeded similar protests at other oil and gas and mining facilities in Kazakhstan.
The Kazakh government has so far kept a low profile, letting the oil company as well as the local authorities handle the situation. However, it may soon be forced to step in, as opposition groups look to use the situation to galvanize popular protest that extends to the general population.