OREANDA-NEWS. January 28, 2013. An extended session with the participation of management of KMG and its subsidiaries was held in its offices on 11 January with a view to discussing the Address of RoK President N.A. Nazarbayev to the People of Kazakhstan 'KazMunayGas 2050 Strategy: New Policy of the Established State'.

In his speech, Chairman of KMG’s Management Board Lyazzat Kiinov noted that the President had clearly indicated the new political and economical course of development of our state, already established in socially, economical and political terms.

- KMG as the national holding company participating, directly or through its subsidiaries, in the implementation of large-scale hydrocarbon projects, has been given a special role in following individual directions of the State of the Nation Address, - L. Kiinov emphasizes.

It is emphasized in the Address by President of RoK that today the worlds’s multinationals are working out development strategies for half a century ahead. KMG is not an exception, having adopted the Development Strategy until 2022 establishing qualitative and quantitative indicators that provide for sustainability and increase in the economic performance of the entire holding company.

According to the Strategy, KMG is planning to strengthen geologic exploration work on land and offshore for the purpose of hydrocarbons reserveses growth, increase production of oil and gas, create a flexible oil and gas transportation system, increase the capacity of the refineries and improve oil products quality, along with creating an effective and transparent asset management system. That is, everything as stated in particular orders of the most important presidential documents.

- In the next 10 years activities of the extracting enterprises with participation of JSC “KazMunayGas” will be aimed to stabilize the production level of the extracting companies and increase the crude oil and gas condensate output to 35.4 MMtpa from 21.1 MMtpa in 2011 due to the Tengiz, Kashagan and Karachaganak projects, - Lyazzat Kiinov said.

- For example, it is expected that oil production in the “Tengizchevroil” LLP should increase to 38.6 mn tons – mainly due to implementation of the Future Growth Project, while JSC “KazMunayGas”, with its 20% share of participation in this project, will get 7.7 mn tons of oil, - L. Kiinov noted.

As for the Kashagan field, as part of the pilot devekopment planning (PDP) in 2015 the production is expected to amount to 13 mn tons of oil annually, taking into account KMG’s 16.81% share - 2.3 mn tons of oil. Futher, taking into account the next Stages of Development of the Kashagan Project, oil production will increase to 51 mn tons annually at the peak of oil production. Besides, it should be noted that KMG has been appointed as Agent for the “Kalamkas-Offshore” field development, which is an appreciation of KMG’s authority.

Karachaganak is also considering the options of 3 development phases, which assumes annual stable production of 10.1 mn tons of liquid hydrocarbons, thus national company as the participant of the Project with 10% share will credit to its operational indicators up to 1 mn tons of oil annually. Furthermore, expansion of production capacity and increase in gas production are expected.

In his Address, the Head of State paid special attention to development of science and modern technology. Today KMG, moving in line with the modernization of all spheres of domestic production, aims to create and develop a modern Center for acquisition, processing and interpretation of geological and geophysical data; adoption of reservoir simulation and management technologies; application of the up-to-date enhanced oil recovery methods; development of deposits with sour gas and high gas-oil ratio, as well as deepwater fields with high sensivity of the environment and ecology. For marginal shallow water fields new development methods will be used.

In the refining sector, where KazMunayGas controls all three existing refiniries on the territory of Kazakhstan, we should move from raw material supplies to cooperation in the sphere of energy processing and exchange of the latest technology, - Lyazzat Kiinov said. – At present, production process modernization programs are being implemented in the Atyrau, Pavlodar and Shymkent Refineries. In the Atyrau Refinery contruction of the Aromatics Production Complex and Deeper Hydrocarbons Conversion Complex has started, each of them requiring a billion of investment. As a result of the conducted works with involvement of major engineering companies of internatinal renown, we will get modern enterprises capable of producing raw materials for development of the petrochemical industry. The annual processing capacity of the three refineries will increase to 21 mn tons by 2022, from 11.4 mn tons in 2011. The conversion rate will increase to 90%. The quality of motor fuels will meet the Euro-4 and Euro-5 standards.

In this regard, Chairman of KMG’s Management Board L. Kiinov has instructed all refining divisions of the company to ensure full control over implementation of the projects for modernization of the refineries in order to completely satisfy the domestic market requirement for fuels and lubricants meeting the new environmental standards by 2025, and increase the national company’s share in the local oil products market from 18% up to 30% by acquisition of assets and construction of new service stations under the brand of KazMunayGas.

According to L. Kiinov, in the gas sergment the main focus will be on 3 major projects: construction of the Beineu-Bozoi-Shymkent gas pipeline with the total capacity of 10 bcm of gas annually; construction of line “C” of the Kazakhstan-China gas pipeline with the capacity 25 bcm of gas annually. Today the capacity of this gas pipeline is already 30 bcm of gas annually thanks to the lines “A” and “B” submitted in 2009 and 2010; contruction of the Tobol-Kokshetau-Astana gas pipeline with capacity of 1.5 bcm of gas annually, costing 213 bn KZT. Construction of these gas pipelines will render it possible to gasify up to 900 settlements of the republic, including the city of Astana.

At the end of November, 2012 at a meeting with heads of central state bodies and akims of all levels, the Head of State gave an instruction to ensure timely delivery of the required natural gas volumes for uninterrupted heating season in Almaty. As L. Kiinov stated, the instruction was meticulously implemented in the shortest time. This resulted in the recent agreements of JSC “KazMunayGas” with Chinese, Russian and Uzbek partners on deliveries to the southern region of Kazakhstan of up to 4 bcm of gas total, that is 500 mn cubic meters more than, in the previous years.

- These are all large-scale, socially oriented projects, which are very important for the country, - L. Kiinov said.

In the engineering industry there are considerations to construct jointly with investors and under the control of KMG a ship-building/ship-repair yard in the village Kuryk; an industrial park in Znanaozen, a premium OCTG connections plant; as well as an oil and gas equipment enterprise.

In compliance with the provisions of the Address by President of RoK and program article of Head of State “Social Modernization of Kazakhstan: 20 steps towards the Society of Universal Labor”, KMG will continue implementing the Social Resposibility and Sustainable Development (SRSD) management processes. KMG’s mission in this sphere has been and remains the same: positioning itself as the leader in the oil and gas industry, secure the reputation of a socially responsible corporate citizen relying on such fundamental values as competence and intergrity, transparency and social responsibility.

As it was noted, the state has provided an opportunity for the ordinary public to participate in the “People’s IPO” Program, in order to become a shareholder of these companies. In 2012, for the purpose of the instructions of the President under the “People’s IPO” Program, shares of JSC “KazTransOil” entered the the domestic stock market. Among KMG’s companies, the next ones to be offered on the stock market will be the shares of JSC NMSC “KazMorTransFlot” and JSC “KazTransGas”.

- I am confident that KMG group of companies will direct all efforts to achieve the goals set and implement the initiatives and instructions of the Head of the State, - L. Kinov concluded.

In conclusion of the event for discussing the Address of RoK President, the Chairman of KMG’s Management Board L. Kiinov instructed the structural subdivisions and subsidiaries to prepare an Action Plan for implementation of the strategic document.

The following speakers further delivered their reports at the meeting, General Director of the KazMunayGas EP JSC A. Aidarbayev, Acting General Director of JSC “KazTransoil” S. Utegaliev, General Director of JSC “KazTransGas” S. Sultangali, General Director of JSC “Kazakh Institute of Oil and Gas” U. Karabalin, Vice-Rector for Educational and Information Technology of JSC “Kazakh-British Technical University” B. Abdrakhmanov, Acting General Director of JSC “A.B. Bekturov Institute of Chemical Sciences” K. Praliyev.