The goal — to become financially stable, economically effective and dynamically developing company

PETROLEUM #5, October 2011

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— Kenzhebek Niyazovich, at one time you were at the origins of the state company “Kazakhstancaspishelf ”, which as a part of the same name international consortium conducted a seismic survey in the Kazakh sector of the Caspian Sea (hereinafter — KSCS). Today you are heading “KazMunayTeniz.” What is the potential of the KMT in order to achieve this goal — to become the leading Kazakh Company in offshore exploration and production of hydrocarbon resources?

— The company “Kazakhstancaspishelf ”, created in 1993, fulfilled the tasks assigned to her by the State Government to conduct a large-scale study of the Kazakhstan sector of Caspian Sea on seismic operations. On the base of the obtained information and new data the level of prospectivity of contract territories has being determined. The first result of researches of those years was the discovery of the unique oil field Kashagan, and the discovery of hydrocarbons on such structures as Kairan, Aktoty, Kalamkas-Sea, Khazar, Auezov, and Rakushechnoe-Sea.

JSC OOC “KazMunayTeniz”, created for the full cycle of petroleum operations at sea sets as one of its priorities to become financially stable, economically effective and dynamically developing company, meeting the environmental standards and equipped with advanced technology and highly qualified personnel.

It is well known that the activities of major companies operating in oil and gas business in a competitive environment, carried out in accordance with strategic plans developed by the company management and approved by the shareholders. The main problem solved in the framework of the strategy of a company consists in the definition and subsequent conquest of the specific position in the global oil and gas market.

Our company adheres to the basic principles of the implementation of offshore oil and gas projects, such as:

• ensuring safe working conditions of employees, as well as rational use of natural resources at the highest international standards of environmental protection and safety;
• human capital development as a driver of development and competitiveness of the company;
• Aggressive exploration as a basis for long-term growth of the company towards our goal of increased resource base;
• consolidation of offshore oil and gas assets;
• Development experience in the management of offshore projects at the stage of development and construction;
• Establishment long-term partnerships with leading oil and gas companies to gain access to advanced technologies and innovation.

As you know, oil and gas business, aiming at the realization of large expensive projects to develop oil and gas fields requires significant investments and capital stock and thus entails significant risks.

We carry out projects in the KSCS in close cooperation with strategic partners - the leading foreign oil companies.

Today, there is every reason to believe that the experience gained in the implementation of oil operations in the KSCS, participation as Managing Director of “KMG Kashagan BV”, the presence of highly qualified professionals allows KMT to be a leader in offshore exploration and production of hydrocarbon resources.

— What is the current situation on the exploration projects that involved “KazMunayTeniz”?

— The company has been carrying out oil operations in exploration and evaluation in the contract territories of Zhambai, Kurmangazy, Tub-Karagan and Pearls, which are at different stages of development. All contract territories with the total area of 17000 square km. are located in the northern sector of the Caspian Sea. Exploration work on those areas KMT holds since 2003.

Over the past period as a whole geologic prospective works (hereinafter - GPW) held in volume: Seismic 2D - 6762 linear km, Seismic 3D - 900 square km (Pearls), electrical exploring - 2295 linear km, geochemical studies - 903 FT (Kurmangazy), the gravitational magnio exploring-5700 linear km, drilling - 12 wells total sinking 23 435 m and other related types of geological and geophysical researches.

Currently available in the company's assets total probable reserves of hydrocarbons are 867.65 million tones.

Recent results of the company projects the following:

• In 2009-2010, the project Pearls completed exploration of wells Tulpar-1 and Auezov-1, as well as appraisal wells Khazar-2, Khazar-3. The gushing oil flow of 650 m3/ day was received. The complex of geological and geophysical studies needed to assess the field was carried out, the reserves of the Khazar oil field are expected to be transited to the state balance with the transition to the stage of development and production fields. Constructions of an exploration well on the structure of the Naryn and an appraisal well on the structure of the Auezov have been planned.
• Currently, the Khazar oil field is underway to define the concept of development.
• In April-May 2011 Tub-Karagan's exploratory well №2 was drilled to a depth of 2150 m. As a result of drilling oil and gas formations were not found.
• In July 2011, JSC NC “KazMunai- Gas” transferred the right to appointment members of the operating committee of the “Zhambyl”, “Satpayev” and “H” projects to the company.  It is planned to begin Seismic 3D operations in the volume of 920 sq. km on the structure Rakushechnoye- sea for the project N.
• Seismic 2D works in the volume of 1200 linear km in the Satpayev area were carried out. The processing / interpretation of the data have begun.
• Engineering-geological surveys for construction of exploratory wells in Zhambyl and Zhetysu areas for the “Zhambyl” project being held, and the construction of the Rig at “Ersai Caspian Contractors” facilities is at the full swing.
• The project “Kurmangazy” and “Zhambai” carried out to complete the project in connection with the expiration of the period of exploration and preparatory work for the return of the contract area.

— In August of this year branch manager of the “LUKoil Overseas” in Astana, Andrey Kirillov said that “Lukoil” plans to abandon the project “Tub-Karagan,” in which he participates with the KMT because of its unpromising. What was the fate of the contract area?

— The exploration work obligations have been fully performed. Two exploration wells have been drilled; the data obtained while drilling the second exploration well in this year are analyzed. Today the work in processing and analyzing the data obtained while drilling the second exploration well in the year is going on.

The next necessary step is the analysis and synthesis of all the received geological and geophysical data, the results of which will decide on the further realization or closure of the project.

— Marine geological survey and oil production is relatively new case for Kazakhstan. How do you organize training for offshore oil and gas industry?

— Education and training of the employees of the Company and its subsidiaries, affiliates (hereinafter - SAC) is one of the main challenges to achieve the ambitious goals of the Company.

For these purposes, in November 2006, the Board of JSC “NC” KazMunaiGas “approved the Program of Kazakh personnel for offshore oil operations. The program provides for the implementation of complex measures on the training of Kazakhstan personnel for offshore oil operations, including in the composition of the foreign oil companies and contractors.

Interns funded by the Company receive training and training on individual programs around the world with the support of companies, such as Eni, ConocoPhillips, Shell, ExxonMobil, Keppel, Total, KBR, WorleyParsons, Aker Solutions, Baker Hughes and others.

During the period from November 2006 to June 2011 58 engineers and interns were sent for training and education in the international oil companies. Trained engineers are working on offshore projects of JSC “OOC” KazMunayTeniz”, JSC” NC “KazMunaiGaz”. The training is financed by the Company as a part of the ongoing offshore projects. Currently on probation and training in the partner companies are another 18 engineers and interns. The total cost of training of Kazakhstan personnel accounted for more than 18 million U.S. dollars.

Within the terms of subsoil use contracts, students undergo training in specialties related to oil and gas industry in Kazakhstan and foreign higher education institutions.

In the period of 2005-2010 the Company funded training of over 1300 Kazakhstan students in the amount of more than $ 5.1 million.

— The issue of increasing Kazakhstan content in the procurement of goods, works and services is problematic for the oil sector enterprises. Could you please tell us how KazMunayTeniz solves this problem and what social obligations the company undertakes?

— The minimum obligations of subsoil users on securing Kazakhstan content in the procurement are stipulated in the contracts on subsoil use and vary within the range of 15-30% of the purchase amount subject to specific offshore oil projects.

In 2011, Kazakhstan content in the procurement of goods, works and services in the framework of KMT projects reached 48%. Taking into account the great importance of this issue for Kazakhstan economy in general, KMT is planning to increase Kazakhstan content in the procurement of goods up to 50%, and in the procurement of works and services up to 90%, in 2020.

Taking social responsibility in the operations areas is one of the basic principles of oil and gas companies operation in Kazakhstan. Since its establishment, KMT and its partners spent more than $10 millions on social projects.

Throughout these years, the company took equity participation in financing the construction of a kindergarten for 120 children in Kuryk village, pipeline construction in Kzyl Uzen village, Tupkaragansky district; construction of a municipal residential building with 50 apartments in Munaylinsky district; construction and equipment of Aktau City Perinatal Center; construction of a kindergarten in Akshukur village, Tupkaragansky district.

In 2011, KMT took equity participation in financing of a medical center (ambulatory) construction in Mangystau village, Munaylinsky district; construction of a Public Service Center in Shetpe village; purchase of equipment for water rescue service and transport means for an emergency medical assistance station in Mangistau oblast.