Tengizchevroil produces liquefied petroleum gas (LPG) in addition to crude oil, dry gas, and sulfur. LPG production volume primarily depends on crude oil output and ranges between 5 percent and 6 percent of crude oil production volume. TCO produces propane and butane which meet European standard specifications. In 2015, TCO sold 1.3 million metric tonnes (MT) of LPG to a diverse customer base.
TCO focuses LPG sales to the wholesale term market under long-term contracts to pre-qualified customers. TCO sells to the wholesale spot market only on an "as needed" basis when additional production quantities are made available to pre-qualified customers. TCO does not operate in the retail market.
Sales and Transportation
Customers: TCO has established a long-term, diverse and capable customer base which support reliable product off take under term sales agreements.
Markets: TCO sells LPG to Kazakhstan and to export markets using rail and seaborne deliveries. Export sales are based on Incoterms 2000, typically as delivered at frontier (DAF) or free on board (FOB) sales to TCO's pre-qualified customers.
Kazakhstan: TCO sells LPG inside Kazakhstan. Sales are made using a monthly request for proposals (a tender process). TCO delivers LPG to end destinations of Kazakhstani customers to ensure that TCO meets its product stewardship commitments. TCO's tender is open to all customers which meet TCO's pre-qualification criteria.
TCO tender award criteria include, but are not limited to, the following considerations:
- Prior lifting and contract performance
- Tender price for each product grade
- Quantities - which must be within the consumption needs of end users and be consumed solely within Kazakhstan
Export: TCO sells LPG by
- Rail deliveries to regions of Europe bordering CIS countries and
- Seaborne deliveries are made to Black Sea and Mediterranean Sea region countries (from Black Sea terminal).
Prices: TCO sells LPG based on market prices using LPG price quotations published by Argus and/or Platts which are leading global providers of energy industry information and price assessments. When negotiating LPG prices, TCO considers the competitive environment in each market place.
Rail Transportation: TCO leases a fleet of LPG rail tank cars to transport all production safely and reliably. TCO obtains rail plans through freight forwarders for shipments from Kulsary to end destinations.
Seaborne Transportation: Term sales customers typically lift LPG on vessels that customers own or charter. The vessels must meet TCO requirements and the marine terminal from which the lifting is made. Most spot sales customers also own or charter vessels. TCO may charter vessels for delivered sales to some spot customers.
Potential Customer's Pre-Qualification Criteria
TCO assesses all potential customers from commercial, financial, logistical, and technical perspectives. All potential customers must meet TCO's requirements under its business review process. TCO gives strong preference to establishing commercial business relationships with end users. All potential customers must demonstrate organizational capability and meet these criteria:
- Understand and meet LPG product stewardship and safety requirements
- Achieved medium to large size as an end user and\or a LPG distributor
- Achieved a minimum of 3-5 years of practical and recent experience in the LPG industry
- Established and sustained safe and reliable LPG receiving, handling, storage and distribution operations
- Own or lease assets including rail tank car discharging facilities, gas bottle filling stations, auto gas stations, rail tank cars, vehicles, rail terminals, marine terminals, and/or related facilities that will support steady and sustained LPG purchases
- Developed and retained employees with substantial LPG handling, transportation, sales, and logistics experience
- Developed a permanent, long-term customer base, if a distributor
- Developed sustained financial performance for the last 3 financial years and demonstrated the financial capability to make pre-payments or open Letters of Credit to secure contract sales quantities
Documents to be submitted to assess LPG inquiry: