KazMunayGas E&P Launches Major Development Plan

KazMunayGas Exploration & Production (KMG E&P) has launched an ambitious, three year, 100 billion tenge plan to dramatically expand its oil and gas production.

The company is also undertaking new social projects to improve the living and working conditions of its employees that are unprecedented in scale at its Uzen facilities. We are building a new plant for the diagnosis and repair of underground drilling equipment, which will be the most modern and best equipped of any in the 12 Commonwealth of Independent States (CIS) nations. It will employ 300-350 workers of Uzenmunaygas (UMG).

UMG is also constructing a complex of oil storage tanks, two factories to make fluids for killing spent oil wells, a complex to service and repair oilfield equipment and a maintenance centre for 1,000 vehicles operating there. UMG is also investing in the replacement of water injection and liquid transportation systems.

Our Embamunaygas (EMG) subsidiary will build a refinery to remove sulfur from sour gas pumped from the Prorvinsky group of oil fields, and will reconstruct the DSP Prorva-NPC Tengiz pipeline.

The construction of refineries to process gas from the Balgimbayev and Zhana Makat oil fields will soon be completed and a 61 kilometre (36 mile), high pressure pipeline is being built from Akingen to Akkuduk.

A new network of roads will be built to speed up the transportation of personnel and cargos in the region and boost production efficiency. The company’s new programmes are designed to improve working conditions and environmental and industrial safety.

In 2012, KMG EP assessed more than 10 new potential oil and gas development projects in the country. Our robust financial condition gives us a wide range of choice of assets that we can buy.

Our experts study potential oil and gas fields in every province in the country. We have experience in the production of both light and heavy oil.

In 2011, we found a new partner for the Karpovsky North exploration project. The Hungarian oil company MOL bought a 49 percent share in it, paying KMG $8.75 million. They will share in the exploration and investment in future oil fields.

This deal allowed KMG to gain access to the Hungarian company’s experience and technologies. We still experience a shortage of qualified personnel within our country. Therefore this partnership is another opportunity for us to raise the level of professionalism of our specialists and introduce the tools of modern management and principles of corporate governance.

KMG did a great deal of work in 2012 to streamline its structure and to improve its control of its subsidiaries. Our operating subsidiaries UMG and EMG were transformed into joint stock companies. This has expanded their opportunities to address industrial and social issues.

After the December 2011 events in the city of Zhanaozen, President Nursultan Nazarbayev instructed KMG to employ previously dismissed workers and improve the working conditions of its current employees.

In January 2012, KazMunayGas created two new subsidiary companies to handle workers issues and improve their conditions. A management body to handle drilling operations was created in Zhanaozen and another one to run transportation and logistics and the servicing of oil wells was set up in the city of Aktau.

A new residential camp to house 400 UTTiOS workers at a time was constructed at the Karazhanbas heavy oil field. It includes a cafeteria, a baths and laundry complex and a gym. Another complex of residential camps was built at the Kalamkas oil field. More than 300 units of new machinery were purchased for the industrial needs of these fields: These new KMG subsidiary companies will provide services not only to the KMG EP, but also to other oil producing enterprises.

In accordance with KMG EP’s ongoing strategy, we continue to reduce our non-core activities. Therefore in 2012, the company sold a 51 percent share in Kazakhstan Petrochemical Industries for $32.4 million.

Social policy is a key component of our activity. We pay special attention to the development of regions and to the social and living conditions of our workers and their families. We also recognize our direct responsibility to the state and our moral obligation to the people of the areas where we operate.

In 2012, our company spent 907.4 million tenge ($6.04 million) to build new social projects in the Mangistau region. Another 200 million tenge ($1.33 million) was provided to the Mangistau regional administration during the year to create 800 new jobs for people in Zhanaozen city.

In the Atyrau region, KMG spent 286.6 million tenge ($1.91 million) on social infrastructure and we provided another 350 million tenge ($2.33 million) to run social projects there. Another 5.4 billion tenge ($40 million) was spent to relocate residents from two villages to the regional centre.

KMG plans to continue funding projects to improve social conditions in the regions where it operates and to promote the training and professional growth of the younger generation of oil workers, while addressing the issues of ecology and safety.

Our company has already proved itself as a responsible extractor of mineral resources, a reliable partner and a profitable enterprise. Our task today is to maintain these standards and this reputation.

The strategic objectives of KMG EP remain the same: We are steadily increasing our capacity to operate as one of the leading oil and gas companies in Kazakhstan. Our key goals are to increase our annual production of oil and gas and increase the volume of our proven hydrocarbon reserves through the acquisition of new assets, geological exploration and optimization of production in our main oil and gas fields.

The author is Director General of KazMunayGas Exploration Production

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