“National Company “KazMunayGas”: “Kazakhstan as the Main Driver of Oil Production Growth in Eurasia: Key Projects, Prospects And

Challenges”

Astana, October 2, 2012

Energy Market Situation

* If oil prices remain relatively stable and the world economic growth makes up 2%, then the hydrocarbon demand will have linear correlation with world GDP.

The relationship between world The relationship between world economic condition and oil priceseconomic condition and oil prices* *

Source: International Monetary Fund, International Energy Agency, Citi Research

Growth in oil demandGrowth in oil demand

Growth in world GDPGrowth in world GDP inin % %

Positive dynamics

IEA forecast for 2012

After the economic shocks

Indicators of different years

Source: BP Energy Outlook 2030

Approximation of energy intensity and a share of dominant Approximation of energy intensity and a share of dominant types of fuel up to 2030 (forecast)types of fuel up to 2030 (forecast)

Energy intensityEnergy intensityShares of dominant types of fuel Shares of dominant types of fuel Tons per thousand USD

dollars

China

USA

Rest of the world

India

Oil

Coal

Gas

Water sources

Nuclear power

Renewables

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The Republic of Kazakhstan: Key-takeaways, New Challenges and Development Goals

growth against the proceeding year; GDP in billion US dollars

Foreign Direct InvestmentsForeign Direct Investments ( (mlnmln..US dollarsUS dollars))

Development Strategy until Development Strategy until 2020 2020 Development Strategy until Development Strategy until 2020 2020 GDP growth – no less than 30% National Fund’s assets – no less than 30% of GDP Share of the small and medium enterprises in the GDP -

40% Growth of investments in non-resource sector of the

economy - 30% Population - 18 mln. people Life expectancy – over 72 year

GDP growth – no less than 30% National Fund’s assets – no less than 30% of GDP Share of the small and medium enterprises in the GDP -

40% Growth of investments in non-resource sector of the

economy - 30% Population - 18 mln. people Life expectancy – over 72 year

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Oil and Gas Industry of the Republic of Kazakhstan

• Kazakhstan holds 9th place in the world with regard to the proved oil reserves, with the 39,8 bln. barrels of oil

• Kazakhstan is the 2nd largest oil producer among the CIS countries

• Natural gas reserves make up 3 trln.cub.m , which is 1% of world’s gas reserves.

• Oil production in Kazakhstan is 1.76 mln.bbl/day or about 80 bln.tons

• Gas production in Kazakhstan makes up 25 bln.cub.m.

• Oil production is expected to Increase by 60% by 2020

• Caspian Sea Shelf Projects should become the main driver of oil production growth in Kazakhstan

• By 2035 the Caspian Sea region will provide about 9% of the world crude oil demand

21%of oil sector in Kazakhstan’s GDP

39.8

0 50 100 150 200 250 300

Saudi Arabia

Venezuela

Iran

Iraq

Kuwait

UAE

Russia

Libya

Kazakhstan

Nigeria

Proved oil reserves, MMbbl

47 5159 62 65 67 71 76 80

90

130

Oil production in Kazakhstan, mtoe

CAGR = 7%

World proved crude oil reservesWorld proved crude oil reserves, , blnbln..barrelsbarrels

Annual crude oil production in KazakhstanAnnual crude oil production in Kazakhstan,, mln. mln. tonstons ( (with forecast towith forecast to 2020) 2020)

72bln. US dollars

Investments in oil and gas sector

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JSC NC "KazMunayGas" in Kazakhstan's Oil-and-Gas Sector

Production of crude oil and gas condensate 21,1 mln. tons 26,4 % Gas production 4,9 bln. m3 13,1 % Oil refining 15,3 mln. tons 83,2 % Pipeline oil transportation 66,9 mln. tons 77,1 % Pipeline natural gas transportation 110,6 bln. m3 95,7 %

Key figures 2011 Share on the RoK's market, %

KazMunayGas is Kazakhstan's national operator for exploration, production, refining and transportation of hydrocarbons, representing the state in Kazakhstan's oil-and-gas sector. 100 percent of the company's shares are owned by the SWF “Samruk-Kazyna” JSC.

KazMunayGas is Kazakhstan's national operator for exploration, production, refining and transportation of hydrocarbons, representing the state in Kazakhstan's oil-and-gas sector. 100 percent of the company's shares are owned by the SWF “Samruk-Kazyna” JSC.

Layout of oil pipelines Layout of gas pipelines

Central Asia - CentreBukhara - UralOrenburg - NovopskovBGR - AlmatyKazakhstan-China

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The Development Strategy of KazMunayGas

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Description UnitPlan for

20122015 2022

(Long-term strategy)

Growth 2022/2012,

( %)

Oil and gas condensate reserves

mln. tons

779,0 817,0 1 413 1,8 times

Volume of oil and gas condensate

mln. tons

21,9 24,0 35,4 1,6 times

Volume of oil refining and gas condensate

mln. tons

16,4 19,0 19,0 115,9

ROACE % 9,3 > 10 >15 by 5,7 percentage point

EBITDA margin % 13,3 > 16 > 18by 4,7

percentage point

Strategic Targets of JSC NC “KazMunayGas” for 2022

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4 650 lin. km

Geological exploration costsTotal costs for geological exploration during 2012 – 2016 will make up 556 bln. KZT

556 bln. KZT

435 wells

11 970 km2

Prospecting and exploratory drilling 435 exploration and appraisal wells are planned to be drilled

2D Seismic survey2D seismic survey to the extent of 4 650 lin. kmis scheduled to be held for identifying new structures

3D Seismic survey3D seismic survey to the extent of 11 970 sq.km is scheduled to be held for specifying the composition of the identified structures

Short-term plan of geological exploration (2012-2015)

From 2015 the consolidated increment in raw

hydrocarbons reserves of KMG will be ensured through

geological exploration.

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Geological Exploration Performance

Exploration and Production Innovation Policy

• Improving the efficiency of geological exploration

• (muiltifocusing, digital geological modeling)

ADVANCED TECHNOLOGIES• Nonsteady (cyclic) waterflooding with reverse

filtration flow• Polymer-gel system injection• Alternating injection of oil and water• Sidetracking• Horizontal wells and horizontally branched wells

• Improvement of development efficiency of the fields with depleted deposit and challenged reserves in order to increase the oil recovery factor.

Ground tests in natural field

conditions

Ground tests in natural field

conditions

Development and transfer

of innovative technologies

Development and transfer

of innovative technologies

Large-scale introduction of

innovation on a turnkey basis in

existing fields

Large-scale introduction of

innovation on a turnkey basis in

existing fields

Laboratory testLaboratory test

15 low-margin deposits of JSC KMG E&P,

remaining recoverable reserves 6570 thousand tons

Innovative effect• Production tests of research and technology and development activities by Kazakh scientists and teams in the field , testing of new

domestic equipment and technologies• Introduction and experience of application of the new technologies by world service companies• Introduction of new technologies in the existing fields

Increment in the consolidated residual recoverable oil reserves by more than twice through geological exploration based on innovative technologies by 2022

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Kazakhstan Sector of Caspian Sea Onshore

Geological Prospecting Projects of JSC NC “KazMunayGas”

(50%)

-

Жамбыл

Центральная

Khvalynskoye(25%)

Tsentralnaya(50%)

Zhemchujiny(25%)

Kurmangazy(50%)

Zhambyl(73%)

Project N(51%)

Zhambay(50%)

North-Caspian Project

(16,81%)

Satpayev(75%)

1 - Liman2 - Uzen-Karamandybys3 - Karaton-Sarkamys4 - R-9

5 - Taysogan6 - Teresken7 -Temir

1

2

3

4

5

6

7

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Diversification of Oil Transportation Routes

“Caspian Oil Pipeline” Pipeline Consortium

• In April 1996 Agreement between Kazakhstan, Russia, Oman and International Oil Consortium on construction of CPC Pipeline was concluded.

• Oil pipeline length:1510 km• Commissioned: 2001 • July 1 2011 – commencement of

construction works on the CPC Expansion Project (up to 67 mln.tons of which 52,5 mln.tons of oil from the Republic of Kazakhstan)

• In April 1996 Agreement between Kazakhstan, Russia, Oman and International Oil Consortium on construction of CPC Pipeline was concluded.

• Oil pipeline length:1510 km• Commissioned: 2001 • July 1 2011 – commencement of

construction works on the CPC Expansion Project (up to 67 mln.tons of which 52,5 mln.tons of oil from the Republic of Kazakhstan)

Kazakhstan-China Oil Pipeline

Over 20 years of independence of the Republic of Kazakhstan: volume of oil export increased from 13 to 71 mln.tons annually approximately 4 000 km of oil pipelines constructed pipeline export capacities increased from 10 to 58 mln.tons annually

|

Implementation of the Kazakhstan-China Oil Pipeline Expansion Project (Stage II) will allow increasing the output capacity up to 20 mln.tn of oil a year.

Oil transportation, mln.tn 2011 CPC Oil Pipeline

28,2 “Atyrau-Samara” Oil Pipeline

15,4 Kazakhstan-China Oil Pipeline

10,9

Kazakhstan Caspian Transportation System Project The need in the KCTS export capacities will arise by the moment Phase II of the Kashagan field development is implemented

10

Existing routesPlanned routes

Gas-main Pipelines of Kazakhstan

11

Kyrgyzstan

China

Uzbekistan

Turkmenistan

Russian Federation

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Reconstruction and Modernization of Refineries in Kazakhstan

Implementation of the State Program on Industrial and Innovative Development Enforcement and the Program on Development of the Petroleum Industry in the Republic of Kazakhstan for 2010-2014 will allow:

increasing an average integrity index of the Kazakhstan refineries up to 10,2 global rate

increasing the depth of oil refining up to 89% enhancing the quality of motor fuels to Euro-4,5 standards

Implementation of the State Program on Industrial and Innovative Development Enforcement and the Program on Development of the Petroleum Industry in the Republic of Kazakhstan for 2010-2014 will allow:

increasing an average integrity index of the Kazakhstan refineries up to 10,2 global rate

increasing the depth of oil refining up to 89% enhancing the quality of motor fuels to Euro-4,5 standards

Investment projects: “Construction of Aromatic Hydrocarbon Production Complex at Atyrau Refinery” “Construction of Deep Oil Processing Complex at Atyrau Refinery” “Reconstruction and Modernization of Pavlodar Refinery” “Reconstruction and Modernization of PKOP Refinery (Shymkent Refinery) «Road Bitumen Production at Aktau Plastic Mass Plant”

thou,.tonsExpected Results:

DescriptionFact 2011

After reconstruction2016

Deviation (+/-) %

Oil refining 13 724 19 000 + 5 276 + 38Gasoline 2 764 6 774 + 4 010 2,5 timesJet fuel 388 957 + 569 2,5 timesDiesel fuel 4 093 5 875 +1 782 + 44Mazut 3 403 1 484 - 1 919 - 57Refining depth 67% 89% + 22Quality of oil products Euro - 2 Euro – 4,5

Kazakh Content (КС)

KC in procurement activities of KMG Group for the year 2011

KC in major petroleum projects for the year 2011

(USD mln.)

37%

62%

80%

38%63%

20%

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Total volume of procurement Kazakh content

Total, GWS Goods Works Services

Total procurement level

Kazakhstani content

Import

Kazakh Content

Service Sector- Investment Projects

Shipyard/dry dock construction

Purpose: development of the shipbuilding industry in the Republic of Kazakhstan Deadline: 2013 – 2016 Cost: 48 580 mln.tengeLocation: Kuryk settlement, Mangistau oblastStatus: feasibility study package produced, state expert review is carried out

Shipyard/dry dock construction

Purpose: development of the shipbuilding industry in the Republic of Kazakhstan Deadline: 2013 – 2016 Cost: 48 580 mln.tengeLocation: Kuryk settlement, Mangistau oblastStatus: feasibility study package produced, state expert review is carried out

Gas turbine station constructionPurpose: liquidation of energy emergency in the West –Kazakhstan oblast, security of RK energy supply Deadline : 2013-2015 (Phase 1); 2020-2021 (Phase 2)Cost: 34 113 mln.tengeLocation: West-Kazakhstan oblast Status: feasibility study package produced, state expert review is carried out

Gas turbine station constructionPurpose: liquidation of energy emergency in the West –Kazakhstan oblast, security of RK energy supply Deadline : 2013-2015 (Phase 1); 2020-2021 (Phase 2)Cost: 34 113 mln.tengeLocation: West-Kazakhstan oblast Status: feasibility study package produced, state expert review is carried out

Месторождение Кашаган

р.УралСКЭБР

Construction of the North-Caspian Environmental Response Base (NCERB)Purpose: to ensure oil spill response in case of Level 1 and 2, delivery of assistance in case of emergency situation, evacuation and rescue of people, deployment of equipment in case of Level 3 oil spill Deadline: 2012 Cost: 12,6 bln.tengeLocation: Damba settlement, Atyrau oblastStatus: NCERB is under construction.

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Service Sector – Innovative Cluster

СЗМС

Завод по ремонту малых судов

Завод буровых растворов

Полигон

Promotion of finished commodity to the market

Promotion of finished commodity to the market

JSC “KBTU": Institute of Chemical

Sciences named after Bekturov A.B.

Institute of Organic Catalysis and Electrochemistry named after Sokolsky D.V.

JSC “Kazakh Institute of Oil and Gas”:

Research-and-Development Center in the “Information Technology Park” SEZ

Polygon based on low-profit oil fields of JSC “Exploration and Production “KazMunayGas”

Special Laboratory JSC “Kazakh Institute of Oil and Gas” in the “Information Technology Park” SEZ

Industrial Engineering Industrial Engineering Experimental-industrial Studies Experimental-industrial Studies Research study and development Research study and development

Incorporation in full-scale production at domestic enterprises

Major petroleum projects:

TCO, KPO, NCP etc. Export

Innovative projects on the territory of the “Information Technology Park” SEZ

Implemented by: 2011-2014

Students: 2000

Creation of a showpiece complex using the latest results in the sphere of innovative technologies.

Development of domestic research-and-development as well as design and experimental in the petroleum industry

Researches and developments in the sphere of high-performance computing, automation, production processes, IT software application for petroleum and other fields

Creation of a showpiece complex using the latest results in the sphere of innovative technologies.

Development of domestic research-and-development as well as design and experimental in the petroleum industry

Researches and developments in the sphere of high-performance computing, automation, production processes, IT software application for petroleum and other fields

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ITP SEZ KIOG Research and Development Center KBTU Institute of Information Technologies KBTU Petroleum Engineering Institute

  

JSC “National Company “KazMunayGas”The Republic of Kazakhstan, 010000, Astana, Kabanbai-batyr str., 22

tel.: +7 (7172) 97-61-01fax: +7 (7172) 97-60-00, 97-60-01

e-mail: Astana@kmg.kz http://www.kmg.kz

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