The Gas Utilization Program solves a number of major environmental problems: eliminates gas flaring, gas emissions and evaporation of light ends into the air, reduces the risk of oil spills and soil contamination, as well as improves substantially the industrial fire safety.

Environmentally safe utilization of associated gas is of high priority for PetroKazakhstan. On June 15, 2006, the RK Ministry of Energy and Mineral Resources approved PKKR’s Gas Utilization Program whereat the Company was among the first to implement projects aimed at efficient utilization of associated gas.

For the past five years PetroKazakhstan implemented a number of major projects on collection, transportation and reinjection of associated gas. The Company has invested over 150 million US dollars in implementation of the gas utilization program. It is expected that by the end of this year the program will allow 100% utilization of associated gas in the Company’s fields.

Projects Implemented Under the Gas Utilization Program

In 2004 the Company commissioned a 55MW gas utilization and power generation plant in Kumkol. The plant utilizes 177 million cubic meters of associated gas annually from Kumkol South, South Kumkol and Kumkol North. Also, the Company was among the first to commission a compression unit in Aryskum used to re-inject gas into the gas cap for its conservation and maintenance of the required reservoir pressure.

In 2005, as part of Kyzylorda gasification project, PetroKazakhstan allocated 12 million US dollars to the oblast administration for construction of a gas distribution network and a gas distribution plant in Kyzylorda. Being a partner of KazGerMunai and a holder of interest in Akshabulak field, the Company implemented a project aimed at provision of Kyzylorda region with natural gas and recovery of liquefied petroleum gas (LPG). As part of the project, in 2005 the Company commissioned an LPG and condensate recovery unit.

In 2006-2007 the Company successfully completed the construction of full gas utilization facilities in Kyzylkiya, Aryskum and Kumkol South. Gas injection in these fields allows maintaining the reservoir pressure, increasing the reservoir recovery, and ensuring a substantial reduction of environmental emissions. In particular, the gas utilization in Kyzylkiya is ensured by the field facilities that pump the associated gas from Kyzylkiya to Aryskum for further reinjection into the reservoir. Under this project the Company installed a booster compressor station and constructed a 27 km gas pipeline from Kyzylkiya to Aryskum.

The gas injection into the gas cap in the Aryskum project provides for injection of associated gas into a large gas cap located above the horizons of Jurassic and Cretaceous periods of the field. Construction of injection facilities and wells in this field was successful. The project made it possible to inject annually up to 250 million cubic meters of gas into the reservoir in Aryskum.

In 2008 the Company successfully completed the construction of full gas utilization facilities in Aryskum and Kyzylkiya. Gas injection in these fields allows maintaining the required reservoir pressure, increasing the reservoir recovery, and ensuring a substantial reduction of environmental emissions. The Company has also completed all construction and installation operations under the gas utilization project in Maibulak field, which were then accepted for operation by a state committee early in 2009.

Generally, PKKR’s facilities allow utilization of associated gas through:

- power generation;

- reinjection of gas into a reservoir (gas cap);

- use of gas for own needs, i.e. for oil treatment facilities (heaters, two-component gas generators allowing utilization and partial use of associated gas).

In Kumkol the project has been divided into two phases:

Phase 1. Construction of gas injection stations, installation of booster and injection compressors.

Phase 2. Integration of all gas infrastructure facilities into one system, construction of pipelines from all group stations in Kumkol to the main gas line with further transportation of associated gas to the existing gas utilization facilities in Kumkol. At present, all operations are close to completion and the facilities are expected to be state accepted for operation in the near future.

Investments Made by PKKR into the Gas Utilization Program:

- Construction of a gas turbine unit (GTU) in Kumkol – 54 million US dollars;

- Gas utilization facilities in KAM fields (Kyzylkiya, Aryskum, Maibulak) – 65.3 million US dollars.

- Gas collection and utilization facilities in Kumkol – 31 million US dollars.

In its operation PetroKazakhstan holds to the principle that the gas utilization capacity must keep up with the development of the general infrastructure of fields, and that the gas utilization facilities must be developed with consideration for future development of neighboring assets (new fields) that will allow an overall reduction in gas utilization costs in potentially less productive fields.

Commissioning of gas utilization facilities is a role model of the social responsibility of the Company and its solicitous attitude to natural resources. Being among the first to launch a gas utilization program PetroKazakhstan intends to complete the gas utilization operations in the first half of 2009, thereby fulfilling its obligations. Completion of the gas utilization program will allow putting out over 200 flares.