Oil & gas

Transforming commodity revenues

JSC “National Company “KazMunayGas” (hereinafter - KMG) is the leading vertically integrated oil and gas company in Kazakhstan. KMG manages assets throughout the entire production cycle from exploration and production of hydrocarbons to transportation, refinery and service provision in regions where it operates. The company founded in 2002 represents Kazakhstan interests in the country’s oil and gas industry and controls four of the largest oil refineries in Kazakhstan and two in Romania. When using natural resources, KMG recognizes its responsibility to society for the rational use of these resources and the preservation of a favorable environment.

Key performance results

2022 was a year full of significant and positive events for KMG.

Despite price volatility, geopolitical instability, “gray” imports from neighboring countries, increased competition and subjective problems, KMG managed to achieve positive dynamics of production indicators in all areas of business - from exploration and production to transportation and processing of hydrocarbons. 

The company made the initial public offering of shares in its history. The IPO was the most significant on Kazakhstan's stock exchanges KASE and AIX. On December 8, 2022, secondary trading in KMG shares started on the stock exchanges. Listing on stock exchanges opened a new stage of the Company’s corporate development.

An important strategic event was the acquisition of an 8.44% stake in the Kashagan project from Samruk-Kazyna JSC for USD3.8 billion. The transaction is one of the largest deals for KMG in the last decade.

A historically significant event was the launch of the integrated gas chemical complex of Kazakhstan Petrochemical Industries Inc. LLP, in which KMG acquired 49.5%. The project is designed to produce up to 500 thousand tonnes of polypropylene per year and is focused on creating its own cluster of petrochemical enterprises in Kazakhstan. At the end of 2022, the products of the new plant were exported. The raw material for production is dry gas supplied by Tengizchevroil.

In 2022, the company consistently followed the course of implementing social and environmental initiatives and reducing its carbon footprint. In this direction, cooperation was continued with major international partners - Total Eren S.A, Chevron, Eni and others.

Hydrocarbon reserves

In 2022, KMG achieved significant increase in hydrocarbon reserves, through actively conducted geological exploration activities.

According to an audit by an international independent company prepared in accordance with international PRMS standards, KMG proven and probable hydrocarbon reserves (2P) as of December 31, 2022 amounted to 707 million tonnes in oil equivalent (5 478 million barrels of oil equivalent). As compared to 2021, the level of 2P reserves increased by 9.8%.

Net hydrocarbon reserves by PRMS (as of December 31, 2022)

Production

KMG’s oil and gas condensate production for 2022 totalled 22 012 thousand tonnes of oil (456 thousand barrels per day), up 1.7% year-on-year. Production of associated and natural gas (before reinjection) increased by 2% to 8.2 billion m³.

Oil production at Tengiz increased by 10% to 5 836 thousand tonnes (128 thousand barrels per day). Associated gas production increased by 9% to 3.23 billion m³. The increase in production was due to restrictions on production under the OPEC+ agreement in 2021 and the absence of restrictions in 2022.

Total oil production at Kashagan decreased by 21.9% to 12 682 thousand tonnes. It was caused by two circumstances.

First, the scheduled overhaul of the marine and land complexes in mid-2022.

The second is the need for repair and restoration work after the detection of a gas leak at the Gas pre-Selection Plant.

At the same time, the KMG share of oil production increased by 4.3% to 1 402 thousand tonnes (34 thousand barrels per day), and crude gas production increased by 7.3% to 877 million m³ due to increase in the KMG share in the project from 8.44% to 16.88% from September 15, 2022.

Oil and condensate production at Karachaganak decreased by 2% to 1 013 thousand tonnes (22 thousand barrels per day) as compared to the previous year due to a reduction in the intake of crude gas for processing from the Orenburg Gas Processing Plant, and the extension of scheduled preventive maintenance at its processing facilities

Gas production increased by 2.4% to 1 944 million m³, due to increased re-injection of crude gas at integrated gas treatment plant No. 2, the commissioning of the fourth compressor and increased gas processing at the Karachaganak processing complex.

Oil and condensate production at operating assets decreased by 1.4% to 13 761 thousand tonnes (273 thousand barrels per day).

The decrease in oil and condensate production volumes was due to emergency power outages by the utility company servicing the production facilities of Ozenmunaigas JSC, as well as natural decline in production levels at some mature fields.

At the same time, decrease in oil production at operating assets was partially offset by increased production of 3.6% at the enterprises of Mangistaumunaigas JSC and 2.3% at Embamunaigas JSC.

Gas production decreased to 2 190 million m³ due to the decision of the managing holding Samruk-Kazyna JSC on the allocation of JSC NC QazaqGaz (former KazTransGas JSC) to the separate National Company in November 2021, to which the gas-producing asset Amangeldy Gas was also transferred.

Oil transportation

The total volume of trunk and sea oil transportation increased by 0.1% to 74.7 million tonnes as compared to 2021.

The volume of oil transportation via trunk pipelines increased by 0.9% and amounted to 65 316 thousand tonnes.

In 2022 there was a change in the volume of oil transportation by direction.

Firstly, the volume of transportation to Kazakhstan refineries through pipelines has increased to produce the required volume of petroleum products for the domestic market. At the same time, export volumes of oil transportation decreased due to natural decline in oil production at mature fields.

Secondly, the change occurred due to the redistribution of oil by shippers from the external to domestic market.

Thirdly, due to decrease in production volumes at Kashagan due to the repair work mentioned above.

By the end of 2022, there was also 3.3% decrease in transportation volumes at the Caspian Pipeline Consortium (CPC). The decrease was mainly due to repair work at Kashagan and repair of outriggers at the marine terminal of CPC itself.

The total volume of crude oil transportation by sea decreased by 5.2% to 9 343 thousand tonnes. The decline was mainly due to drop in oil volumes in the Mediterranean Sea due to decrease in export volumes of Kazakhstan shippers (due to increase in supplies to the domestic market).

Sales of hydrocarbons

Sales of oil and gas condensate produced directly by enterprises owned by the KMG group increased by 2.1% to 22 126 thousand tonnes. 62% of this volume was exported.

8 415 thousand tonnes of own produced oil and gas condensate were supplied to the domestic market of Kazakhstan. Including the supply of crude oil assets of Ozenmunaigas, Embamunaigas, Kazakhturkmunai and Urikhtau Operating in the amount of 4 907 thousand tonnes to Atyrau Refinery (AOR), Shymkent Refinery (PKOP) and Pavlodar Oil Chemistry Refinery (POCR) for further processing into petroleum products and their subsequent sale.

Refining

The total volume of hydrocarbon feedstock refining increased by 5.7% to 19 900 thousand tonnes compared to 2021.

At Kazakhstan refineries, the volume of hydrocarbon feedstock processed increased by 2.5% to 14 269 thousand tonnes (KMG's share). This is a record figure in the history of independent Kazakhstan.

Growth of refining volumes was due to increase in demand for petroleum products on the domestic market, the stable operation of PKOP in 2022 and the postponement of its scheduled preventive maintenance to 2023.

The volume of processing at the plants of KMG International (Petromidia, Vega) in Romania increased by 14.8% to 5 631 thousand tonnes. The increase in refining volumes was due to the stable operation of the plants in 2022 and the absence of shutdowns.

in total, the petroleum products production volume at Kazakhstan and Romanian refineries increased by 6.8% to 18 639 thousand tonnes.

Kazakhstan refineries produced 13 128 thousand tonnes of petroleum products, which is 4.1% more than in 2021, mainly due to the PKOP volume.

At the same time, the production of petroleum products at Atyrau Refinery was 4.5% lower due to scheduled maintenance in October 2022.

KMG International refineries (Petromidia, Vega) produced 5 512 thousand tonnes of petroleum products, which is 14.1% higher than in 2021. The increase in refining volumes was due to restrictive measures during the pandemic in 2021 resulting in lower demand for petroleum products, as well as due to the shutdown of the plant in July 2021 at the Petromidia refinery.

Финансовые результаты КМГ в 2022 году

Financial results of KMG in 2022

The increase in world oil prices and the positive dynamics of production results ensured the growth of almost all financial indicators of the Company by the end of 2022.

• Revenue increased by 34.5% to KZT8 686 billion (USD18 845 million) compared to KZT6 459 billion (USD15 161 million);
• EBITDA increased by 25.9% to KZT2 538 billion (USD5 505 million) compared to KZT2 015 billion (USD4 730 million);
• The Company’s net profit adjusted for share of profit in joint ventures and associates increased by 2.4% to KZT1 317 billion (USD2 858 million);
• Net profit adjusted for the share in profit in joint ventures and associates was KZT788 billion (USD1 710 million) compared to KZT1 022 billion (USD2 398 million);
• Free cash flow excluding the byout of KMG Kashagan B.V. stake was KZT1 116 billion (USD2 421 million) compared to KZT756 billion (USD1 774 million) for 2021;
• Free cash flow restated in accordance with the new dividend policy, given the stake redemption in KMG Kashagan B.V. was minus KZT82 billion compared to KZT756 billion for 2021;
• The total debt as of December 31, 2022 was KZT4 143 billion (USD8 956 million) compared to, KZT39 746 billion as of December 31, 2021 (USD89 676 million);
• The Company’s net debt as of December 31, 2022, was KZT2 143 billion (USD4 632 million) compared to as, at the level of KZT1 984 (USD4 594 million) billion of December 31, 2021.

Dividends from KMG Kashagan B.V.

In September 2022, KMG repurchased 50% of the shares of KMG Kashagan B.V. from the Fund, which owns a 16.88% stake in the North Caspian project.

As a result, dividends were paid in favor of the Shareholders for USD1 508 million, including USD941.5 million in favor of KMG.

IPO Entry

As already mentioned, the IPO of KMG was one of the most important events not only for the company, but also for the equity capital market of Kazakhstan.

KMG shares were offered on the trading platforms of the Astana International Financial Center (Astana International Exchange, AIX) and the Kazakhstan Stock Exchange (KASE).

The offering was the very first “digital” IPO in Kazakhstan - 99% of applications were submitted online via mobile applications of second-tier banks.

KMG IPO was the largest in the history of the stock market of Kazakhstan. Moreover, both in terms of the number of bids received - 129.9 thousand bids and the volume of offering - KZT153.9 billion. Citizens of Kazakhstan purchased securities of the company for KZT74.6 billion.

The volume of bids of legal entities is estimated at KZT72.7 billion.

The offering price per share was KZT8 406, implying a capitalization of KMG for about KZT5.1 trillion (USD11 billion, at December 2022 exchange rate).

The proceeds from the IPO were transferred to the National Fund of the Republic of Kazakhstan.

Life-Saving Rules – IOGP

Since 2022, KMG adopted the International Association of Oil and Gas Producers (IOGP) the Life-Saving Rules, which are uniform for all members.

IOGP analyzed two thousand fatal accidents that occurred in a hundreds IOGP member enterprises between 1991 to the present. As a result of the analysis, the association identified the most frequent safety violations. To prevent these violations, nine life-saving rules have been developed. These rules allow employees to be informed about the actions they can take to protect themselves and their colleagues from fatalities.

Plans for 2023

In 2023, KMG sets ambitious and large-scale tasks. Taking into account the discovery of new deposits in a number of fields, the Company intends to increase the pace of energy production in order to fulfill all obligations to the state and shareholders in a timely manner.

KMG oil production plan in 2023 is over 23 million tonnes per year.

The company has a long-term exploration strategy, with plans to increase reserves through organic and inorganic growth. In 2023, a total of 22 exploration and evaluation wells are planned to be drilled:

• completion of drilling of one exploration well at the Zhenis offshore site;
• commencement of drilling of one deep technologically complex well (more than 5 km) on Paleozoic deposits in the Karaton Podsolevoi and Turgai Paleozoic sites;
• Drilling of 19 appraisal wells is planned for all major operating companies (EMG, MMG, OMG, KGM) as part of the ongoing work on additional exploration of mature fields and previously discovered deposits.

In 2023, KMG intends to conduct 3D seismic exploration at the Al-Farabi site, start drilling at the Karaton Podsolevoi and Turgai Paleozoi sites.

Also, the implementation of the project on Geological Subsurface Exploration (GSE) is starting at five new promising regional sites within the main oil and gas basins of Kazakhstan.

Ozenmunaigas JSC has been instructed to accelerate the work planned for 2023 on the rehabilitation of the Uzen and Karamandybas fields. This project has not only economic, but also important social significance.