Why the CEO of the petroleum-equipment maker Allen Global is rushing to invest in Kazakhstan26 november 2014, 14:03
A lot of countries proclaim themselves business-friendly to try to attract foreign investment.
Jerry Nichols, CEO of the American oil and gas equipment maker Allen Global, has learned that many of the claims are bogus.
In a lot of so-called business-friendly countries, overseas investors find themselves running a gauntlet of regulation, red tape and other problems, he said.
Not so with Kazakhstan, said Nichols, who became a believer in just one trip in October.
He’s so excited about Allen Global’s prospects in the country that he’s opening an office in Astana, plans to start an equipment assembly operation near the capital and will have the company take part in Expo 2017 in Astana.
“I’m ecstatic about what I saw,” said Nichols, whose 66-year-old Springfield, Missouri, company does business in 60 countries.
“I’ll be committing significant resources – time and money – to developing a business in Kazakhstan that can become a springboard for business throughout the CIS and beyond.”
Josh Studl, head of the Washington-based trade-promotion company Trevian International, encouraged Nichols to visit Kazakhstan.
Studl, whose company for the moment focuses entirely on Kazakhstan, thought Allen Global’s oil, gas and minerals recycling equipment was perfect for the resource-rich country.
Josh Studl, head of the investment-facilitation company Trevian International, and Azamat Amirtayev, president of the Kazakhstan Association of Software Companies, at the 2012 Astana Economic Forum. The two signed a business-cooperation agreement at the event. Photo courtesy of Trevian International.
Studl lined up and attended Nichols’ meetings with government and business officials in Astana.
They included representatives of the national oil and gas company KazMunai Gas; the Association of Mining and Metallurgical Enterprises, which represents Kazakhstan’s biggest mining corporations; TauKen Samruk, a national holding company that has stakes in Kazakhstan’s top mining operations; the electrical-power giant Samruk Energy; the national development agency Baiterek Holdings; and the national investment-promotion agency KazNex Invest. Nichols also had unofficial discussions about Expo 2017.
The officials at the meetings quickly recognized that Allen Global’s products could help Kazakhstan’s extraction industries, which together account for the lion’s share of the country’s gross domestic product, Studl said.
Its mainstay line is equipment that recycles petroleum-based and other liquids by filtering out contaminants and water.
The equipment not only saves money by allowing a company to recycle motor oil, transmission fluid and similar products, but also eliminates the waste caused by disposing of these products.
This Allen Global recycling equipment removes color and acidity from contaminated liquids. Photo courtesy of Allen Global.
Another Allen Global product that could help Kazakhstan is modular refining plants.
Kazakhstan has three huge refineries -- at Shymkent, Pavlodar and Atyrau --which are being renovated through 2016 at a cost of more than $1 billion each.
The cost of building a modular refinery is a fraction of erecting a traditional one -- $50 million to $100 million for a modular versus several billion dollars for a behemoth.
Modular refineries also reduce petroleum-product transportation costs. Instead of having one behemoth serve a huge region, you can locate several smaller refineries next to sources of oil and gas or close to consumers.
Like many international companies, Allen Global organizes its global operations by region, selecting one country per continent as a regional headquarters.
Nichols’ visit to Kazakhstan convinced him that he should choose Kazakhstan rather than Russia as Allen Global’s hub for the former Soviet Union and North Africa.
A key reason, he said, was that Kazakhstan represented a sizable market for his company’s products.
Other reasons were the enthusiasm and helpfulness of the Kazakh officials he met in October, and an array of new incentives – including tax breaks – that the government rolled out this year to attract overseas investors.
Nichols said Allen Global Eurasia will open an office in Astana soon. Its initial focus will be marketing the company’s products across the Commonwealth of Independent States, not just in Kazakhstan, he said.
The assembly operation he plans to start in the Astana area will make finished products from components shipped in from the United States.
The Customs Union that Kazakhstan belongs to will allow Allen Global to export duty-free to the important Russian market and to Belarus the products that it assembles in Astana,
That tariff-free market will grow when the trade bloc, which will become the Eurasian Economic Union on January 1, adds new members, starting with Armenia and Kyrgyzstan.
Nichols said his discussions with Expo officials led to his decision that Allen Global should have an exhibit at the event.
His company’s eco-friendly oil, gas and minerals recycling equipment will be a great fit for the Expo’s “Energy of the Future” theme, he said.
In addition to establishing an Allen Global presence in Kazakhstan, Nichols plans to introduce some of its global partners to the country.
One is Rockwell Automation, which automates and supplies control rooms for Allen Global equipment.
Rockwell Automation will also provide service and support for Allen Global’s equipment in Kazakhstan, as it does in other countries that have Allen equipment.
Another partner that Allen Global will introduce to Kazakhstan is Alpharetta, Georgia-based Evoqua Water Technologies, whose business involves conserving clean water and treating contaminated water.
Allen Global re-refining equipment made the contaminated motor oil at the left as good as new. Photo courtesy of Allen Global.
Much of Kazakhstan is arid or semi-arid, and its water supply has become even scarcer in recent years.
That has led to the country making water a national priority, starting with creating a Committee of Water Resources in the Agriculture Ministry to come up with a coordinated response to the issue.
Some of the key challenges are reduced rainfall due to climate change; neighboring countries taking more water from rivers flowing into Kazakhstan; the crumbling of Soviet-era infrastructure for transporting water, both in rural areas and cities; and increased water pollution.
Evoqua will be able to help with many of these, Nichols said.
Trevian International’s Studl said he and Nichols met because of the investment-promotion efforts of Kairat Umarov, Kazakhstan’s ambassador to the United States.
An employee of Springfield, Missouri-based SRC Companies briefs Kairat Umarov, Kazakhstan’s ambassador to the United States, and Missouri Congressman Billy Long, on SRC’s operations. SRC is a global leader in rebuilding equipment for the industrial, construction, automotive, truck, marine and agricultural sectors. Photo courtesy of the Kazakhstan Embassy in Washington.
Kazakhstan has mounted its biggest investment push ever this year, with the country’s Number 2 official, Prime Minister Karim Massimov, heading it. Diplomats like Umarov are participating in the effort. Umarov’s role has been particularly important, since the United States is the world’s biggest economy.
Umarov introduced Studl to Missouri Congressman Billy Long, who was excited about letting companies in his district know about opportunities in Kazakhstan.
Missouri Congressman Billy Long, left, with Katherine Allen and Jerry Nichols of Allen Global, a Trevian International client that wants to add Kazakhstan to its list of international markets. Katherine’s family founded Allen Global’s forerunner, Allen Filters. Jerry is Allen Global CEO. Photo courtesy of Allen Global
Long invited Studl to accompany Umarov on a trade-promotion trip the ambassador agreed to make to Long’s Springfield-area district.
One of the business leaders Studl met in Springfield was Nichols, who was intrigued enough by what he’d heard about
Kazakhstan’s investment climate that he asked Studl to set up a trip there as soon as possible.
Nichols said his visit to Astana confirmed everything he’d heard.
In fact, he’s since become an enthusiastic Kazakhstan promoter, telling others about the country’s opportunities.
“Kazakhstan is flying too low under the radar for most American companies,” he said. “It’s unfortunate that a lot more don’t know about it. I’m doing what I can to spread the word.”