2018 Performance Results Press Release
UPSTREAM
PetroKazakhstan Inc. is a group of energy companies, owned by CNPC E&D (67%) and KMG E&P (33%), engaged in the acquisition, exploration, development and production of oil and gas and sale of oil and refined products. All of the Group’s exploration and production operations are located in the South Turgai basin in South and Central Kazakhstan. The Group has interests in fields at different stage of development. The Group supplies major portion of its production in domestic market and also export crude oil from a variety of loading points mainly to China and Uzbekistan.
The Principal subsidiaries are: PetroKazakhstan Kumkol Resources (100%), Kolzhan LLP (100%), PetroKazakhstan Overseas Services Inc.(100%), Turgai Petroleum JSC (50%), Kazgermunai LLP (50%) and other entities. The Group also has interests in the license 1057 (a joint arrangement between Kolzhan LLP and SSM Oil LLP) and in the license 951D (a Joint arrangement with PetroKazakhstan Ventures Inc. And Orient Petroleum (Central Asia) Ltd.
88 wells were drilled during 2018 out of which 67 wells were drilled in operated upstream and 21 wells were drilled in KGM LLP. Out of 88, 21 were exploration and appraisal wells, while 67 were pilot and development wells.
The PKI Group met the production target approved by PKI shareholders for the year 2018. Total gross production of the group was 4,836 thousand tons which is 142 thousand tons more than the approved budget of 4, 694 thousand tons. The group supplies around 84% of crude oil in domestic market which yields less netback comparing with exports. However due to better control on operating costs, corporate governance improvement , better production and average sales price, the profit of the group increased in 2018 comparing to 2017. Being a responsible corporate citizen, PKI Upstream (including Joint Ventures) contributed US$ 6.6 mln gross for various social projects.
As the PKI upstream is facing challenges, decline in production, high watercut, high operating costs, and sales volume in domestic market, PKI Management is optimistic to secure smooth supply of energy resources ensuring successful exploration by increasing reserves and sustained operations & production in compliance with laws, and industrial best practices. The core and long term objective is to increase reserves through, acquiring new blocks, obtaining approval to explore new zones, extensions of existing blocks and successful exploration drilling.
DOWNSTREAM
PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located near Shymkent in Turkestan region. Built in 1985 the refinery is the newest one among the three Kazakhstani refineries. The refinery accounts for around 30% of the total volume of oil products produced in the RK.
The refinery is managed on a parity basis by National Company KazMunaiGas JSC and China National Petroleum Corporation (CNPC).
Large-scale Shymkent Refinery Modernization and Reconstruction Project was completed in 2018. It aimed to enhance the produced fuel quality to meet K4 and K5 emission standards, upgrade the target capacity up to 6 mln. tons annually, as well as boost light oil products output to meet the demand of Kazakhstan’s domestic market. Shymkent Refinery Modernization and Reconstruction was implemented according to Kazakhstan Government’s industrial and innovation development strategy. The project investment totaled USD 1.8 billion. The Project completion has been one of the milestones in Kazakhstan’s industrial development in 2018.
In 2018, PKOP processed 4, 732,000 tons of crude oil and refined products output totaled 4, 301,000 tons including the following:
1,331,000 tons of gasoline
1,243,000 tons of diesel
270,000 tons of aviation kerosene
168,700 tons of liquefied gas
461,100 tons of vacuum gasoil
825,800 tons of fuel-oil residue, and
1,127,000 tons of technical sulfur.
HSE
Corporate HSE Department developed and implemented a pilot project named Visualization Organization and Management Procedure at Kumkol Central Gas Facility in 2018 upon shareholders request. An HSE induction briefing video was released. The department developed a “Corporate standard of protective clothing, shoes and personal protective equipment for PetroKazakhstan Group of Companies.” The following was manufactured and communicated: “HSE Personal Liability Cards” and “12 Life-Saving Rules” posters. Commemorative medals “For Fire Prevention!” were issued and awarded to 19 Company employees on the day of the 100-th anniversary of the fire protection service. 99 PetroKazakhstan employees received awards under the Employee Award Program for Reported Near Misses, Unsafe Conditions and Acts. A paper recycling campaign was launched in the office. Internal training of the Company’s employees was conducted on the following topics: “The main actions of employees in case of emergency,” “Visualization Organization and Management Procedure,” “HSE Management System,” and “HSE Risk Assessment.”
PKKR conducted HSE risk assessment in 2018, during which 693 technological processes were considered, 1,472 hazardous production factors were identified and their consequences were assessed. 2,224 behavioral safety audits, 10 internal audits and 98 HSE audits were conducted. An independent Road Traffic Safety Audit was conducted on the PKKR roads in June 2018. Its results are used to develop a “Road Map for Road Safety Management System Improvement in PetroKazakhstan in 2019-2021.”
During the HSE month the “Safety First” competition was held, and another competition named “It’s easier to prevent a fire, than to fight it” was held in commemoration of the 100-th anniversary of fire-fighting service. The production shops of PKKR together with the teams of Kolzhan, PKOP, JV KazGerMunai, and Turgai Petroleum took part in this competition. PKKR was awarded with a “Certificate for the right to conduct fire-prevention and extinguishing operations, ensure fire safety and conduct rescue operations using the mobile equipment at organizations, populated localities and facilities” which is valid until 2021.
PKKR won the first place in the nomination “The Best HSE Service” in SENIM National HSE Contest for Employers. PKKR won the third place in the First Annual Environmental Responsibility Rating of Oil and Gas Companies of Kazakhstan, organized by the World Wildlife Fund (WWF) of Russia and CREON Group with the support of the United Nations Environment Program in Central Asia (UNEP CA) and the Kazakh Ministry of Environment.
The additional certification of 75 new jobs was conducted at PKOP in 2018 in connection with the launch of new installations. Also, behavioral safety observations for drivers were launched at the refinery with the aim to develop a safe driving culture and reveal and prevent unsafe actions of drivers. As part of AMAN integrated safety system project the following nominations were awarded in 2018: The Team of the HSE Classic Status to 3 shops at the refinery, Most Active Participants of Sub-Committee to 12 employees, The Best HSE Employees to 12 employees, and Learn to Teach to 6 employees.
The refinery’s sewage treatment plant repair project was completed. Now, it uses onshore closed-loop cycle equipment that prevents atmospheric emissions and soil contamination and allows saving up to 1.5 million m3 of fresh water annually. Atmospheric emissions of hydrocarbons and other pollutants were reduced by 90%, and saturated and unsaturated hydrocarbons by 21%. Containers for waste power source collection and waste paper bins were installed on the refinery premises in compliance with the requirements of Article 288 of the Kazakh Environmental Code and Industrial and Household Waste Collection, Storage, Recycling and Disposal Practices. 1000 tons of oil sludge were shipped for recycling and disposal. Various shrubs and trees were planted on the refinery area as part of a landscaping campaign.
The Labour Inspection Department of the South Kazakhstan province awarded PKOP with a diploma of “Distinguished Safe Enterprise” on the Global Labor Protection Day. PKOP took part in the IV-th Annual Forum of the General Directors of NC KMG Group named “100% Safety: Health and Safety Is a Matter of Everyone’s Personal Priority.” PKOP was awarded with a certificate in the nomination “20 Years of Zero Fatality Rate.”
CORPORATE SOCIAL RESPONSIBILITY
The corporate social responsibility policy of PetroKazakhstan relies upon the principles of efficiency, viability and consistency.
The Company fulfilled all its CSR commitments in 2018.
In general, PKKR and PKOP have spent about 176 million tenge on social projects over the past year. The company continues implementing its long-term projects for social infrastructure development, support of disadvantaged people, orphans, people with disabilities, veterans of the Great Patriotic War and Afghanistan campaign, and in projects for the development of healthcare, sports, culture and art.
Below is brief description the Company’s basic sponsorship and charity projects in Kyzylorda and Turkestan regions and the city of Almaty implemented in 2018: support of Shapagat rehabilitation center for disabled children, Atameken children’s village, “Present Children with Life” project of the Dobrovolnoye Obshestvo Miloserdiye (DOM) (“Mercy” Voluntary Society) Public Fund, support of the International Vocalist Competition established by Bibigul Tulegenova, Altyn Zhurek (Golden heart) National Philanthropy and Charity Award, support for war and labor veterans, participation in the Burabike charity bike race as part of corporate healthy lifestyle support programs that aim to raise funds for equipping children’s hospitals in Kazakhstan with vital medical equipment, organizing free vacations for 1,290 low-income families and Company workers in Arai Sunrise children’s camp, support of mass sports, holding various sport events in the regions of Company’s operations, and other projects.
Special attention is paid to social support of the Company employees. For example, the employees were able to receive 39 higher education scholarships under the Financial Assistance Program. The employees’ dependent children received 29 scholarships under the PKOP scholarship program.
PKKR and Kolzhan management has awarded 102 scholarships during 2018-2019 as part of the education program for dependent children.
ACHIEVEMENTS AND AWARDS
The Company’s contribution to the development of regions and the merits of PKKR and PKOP employees are recognized at the republican and local levels every year. 97% out of the total amount of employees are Kazakhstan nationals.
PetroKazakhstan Oil Products was awarded with a special diploma and a winner’s mug for high performance in creation of safe work environment for the company’s employees in a competition “Distinguished Safe Enterprise” organized in commemoration of the Global Labor Protection Day. PKOP’s management and workers received governmental awards, medals and certificates of merit for their contribution to industrial development and Shymkent Refinery Modernization and Reconstruction Project implementation.
PKKR won the Third Place in the Environmental Responsibility Rating of Oil and Gas Companies among 16 leading oil and natural gas producers in 2018. The main participants were compared by the following criteria: environmental management, environmental impact and information disclosure/transparency.