Contractor Engagement

The Company seeks to improve its HSE processes with contractors, which are based on identifying, assessing and mitigating risks at all stages of work and service delivery by contractors and subcontractors at KMG Group production facilities.

The Company requires contractors to strictly observe and fulfil the legislative requirements of the Republic of Kazakhstan, KMG Vital Rules, requirements of the Company’s HSE policies and standards.

To reduce incidents involving KMG’s contractors, audits were conducted in 12 SDEs in 2023 for compliance with the processes of HSE contractor engagement, and 587 recommendations were issued to improve the situation.

Based on the analysis of organizational structures of services of HSE in organizations of the Company in 2023, SDEs were recommended a specialist on interaction with contractors in the HSE field should be included in the staff.

Also included in contractual agreements are penalties for contractors who violate the law requirements of Kazakhstan and requirements of KMG standards in the HSE field.

For the management of potentially dangerous situations and avoidance of accidents in the HSE field “Vital Rules of KMG“ have been introduced in the Company, which also apply to contractors, allowing employees to get acquainted with actions that they can take steps to protect yourself and your colleagues from accidents.

In accordance with the Policy and the MS, employees of the Company, including contractors, have a legal right to refuse or stop work in case of a potentially dangerous situation that reasonably endangers the life and health of employees or the environment.

In 2023, as part of process improvement SDEs has carried out a systematic assessment of the performance of contractors in HSE areas, which has enabled each SDE to identify potential gaps in its contractor management systems to set objectives for improvement.

VOLUME STRUCTURE BY TYPE OF SERVICES PROVIDE

PERCENTAGE OF INCIDENTS BY TYPE OF SERVICES PROVIDED

Based on the results of the work carried out in 2023, 873 contractors provided services and performed works for SDEs in all business areas of the Company. The most significant shares of the total volume of services and works are Production and maintenance of equipment – 25.8 %, Transport and Logistics – 17.6 %, Fire and Industrial Safety – 7.09 %, Construction and Installation 6.51 % while the total volume of Oilfield Services is 36.8 %.

Evaluation of performance of contractors in the HSE field for 2023 showed that the most number of accidents related to production occurred in the directions “Well Drilling and Maintenance“ – 21.1 %, “Food and Cleaning“ – 21.1 % and “Transport and logistics“ – 15.8 %.

To improve communication and efficiency of HSE contractor engagement, a forum of heads of HSE Services of SDEs was held in 2023 on the topic “Efficiency of Incident Investigation and HSE Management of Contractors” with the participation of representatives of Samruk-Kazyna JSC and consultants of Baitau Partners, a company providing training and consulting services on occupational health and safety.

The forum reviewed the most relevant cases on process approaches and HSE management of contractors, in particular, the analytical approach to finding solutions to problematic tasks in process management based on the Deming/PDCA cycle and its application to the management of contractors on the example of Chevron.

To reduce incidents involving KMG contractors, an analysis of the systemic causes of incidents (accidents, fires, road accidents) that occurred in 2023 was carried out, based on the results of which further work on contractor engagement will be focused and aimed at the following:

• audits of SDEs for compliance with corporate requirements for HSE contractor engagement, identification of gaps in contractor management systems for further improvement;
• improving communication and informing contractors in HSE (sending flashes and information sheets on incidents that occurred in the Company, holding meetings and forums, sharing experience, education and training);
• compliance with the requirements to conduct pre-mobilisation audits of contractors as the most important procedure for risk management prior to commencement of works;
• control and monitoring of HSE requirements to contractors within the framework of concluded contracts;
• generation of reports on contractors, as part of the process of information system development and automation of HSE management;
• ranking of contractors based on HSE performance and increasing requirements for HSE competence and training of contractors’ employees, development of HSE leadership and commitment.

The company requires contractors to strictly comply with the legislative requirements of the Republic of Kazakhstan, the Company’s policies and standards in the HSE field, which are taken into account when concluding contracts for the provision of services and performance of works.

The Company’s key HSE requirements are pre-mobilisation audit – compliance of the contractor’s machinery and equipment and personnel prior to commencement of works, development and implementation of the HSE Plan by the contractor (before, during and after works) and assessment of the contractor’s HSE performance.

The lost time injury rate (LTIR) per 1 mln man/hours involving contractors in 2023 was 0.15.

The fatality accident rate (FAR) per 100 mln people/hours – FAR (FATALITY ACCIDENT RATE) involving contractors was 5.08 in connection with the deaths of 8 contractor employees caused by fire.

The motor vehicle crash rate (MVCR ) per mln km travelled involving contractors was 0.28 in 2023.

In order to confirm the GAP analysis data conducted by subsidiaries and their verification, audits of compliance of processes for interaction with contractors in subsidiaries and affiliates, compliance with the requirements of corporate policies and standards in the HSE field are planned in 2024, including: control and monitoring of the implementation of policies and standards, expertise, analysis and risk assessment, recommendations for the elimination of constraints (systemic causes) on interaction with contractors in the HSE field in SDEs.

Rates of lost time injury, fatality accident and motor vehicle crash involving contractors