OREANDA-NEWS. August 24, 2010. JSC KazMunaiGas Exploration Production (“KMG EP” or “the Company”) announces that on 16 August 2010 PetroKazakhstan Inc. (“PKI”) and Lukoil Overseas Kumkol B.V. (“Lukoil”) have entered into Amicable Agreement (hereinafter – the Agreement) on the dispute regarding JSC Turgai Petroleum (“TP”).

Main agreement

The dispute between Lukoil and PKI arose in 2005 over Lukoils pre-emption right to acquire a 50% stake in TP. On 28th October, 2009 the Stockholm Chamber of Commerce issued the Final Award (Case No. V (066/2004)). The circumstances of the arbitration were described in the Circular to shareholders and GDR holders on the acquisition of PKI dated 24 September 2009, the corresponding KMG EP press-release as of 6 November 2009 and Financial Statements for 2009 full year results announced on 1 March 2010, which are available on the Company’s website (http://www.kmgep.kz). Due to the dispute, PKI ceased consolidation of TPs results in its financial statement in 1H2010. According to the Final Award Lukoil was entitled to acquire a 50% of TP from PKI and compensation by way of damages and accrued interest to such damages.

According to the Agreement the ownership structure of TP remains unchanged: PKI and Lukoil will continue to jointly own TP in equal shares. Furthermore, PKI shall pay to Lukoil approximate amount of USD 438 million as compensation of damages.

Separately CNPC Exploration and Development Company Limited (“CNPC E&D”) and KMG EP entered into an agreement on principles (the “AOP”) on 28 July 2010. In accordance with AOP the payment of compensation to Lukoil will be financed by PKI. KMG EP will be held harmless in respect of any liability in relation to the payment of the compensation or any loss relating to such liability.

Locked dividends of TP

In relation to the Arbitration between Lukoil and PKI, from 2008 TP stopped distribution of its dividends to its shareholders. In the framework of the Agreement PKI and Lukoil agreed in a set period of time to solve the issue of distribution of the dividends from TP. KMG EP will be entitled to be credited with its portion of the dividends from TP via its holding in PKI.

Other agreed items

KMG EP will increase its presence in the management of PKI group of companies which will increase involvement of KMG EP in the day to day operations of PKI group.

Agreement is conditional upon satisfaction of certain conditions by the parties and the agreement of the court. Expected time for the final settlement is 25th of August after which KMG EP will provide further update.