2019 Performance Results Press Release
UPSTREAM
PetroKazakhstan Inc. is an group of energy companies with shareholders being CNPC E&D (67%) and KazMunayGaz EP (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 and in Central Kazakhstan. The Group has interests in fields at different stage of development. The Group supplies most of its production to domestic market and also exports crude oil 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 License 1057 (a joint venture between Kolzhan LLP and SSM Oil LLP) and in License 951D (a joint venture with PetroKazakhstan Ventures Inc. and Orient Petroleum (Central Asia) Ltd.
The 2019 budget allowed for 80 wells to be drilled, out of which 61 wells were drilled in operated upstream and 19 wells were drilled in Kazgermunai LLP. Out of 80 wells, 37 were exploration and appraisal wells, while 43 were pilot and development wells.
The PKI Group met the production target approved by PKI shareholders for 2019. Total gross production of the Group was 4,048 thousand tons which is 100 thousand tons more than budget of 3,948 thousand tons. The Group supplies around 89% of crude oil to domestic market which yields less netback comparing with exports. Being a responsible corporate citizen, PKI Upstream together with its joint ventures contributed USD 5.4 mln gross for various social projects.
As the PKI Upstream is facing challenges, decline in production, high watercut, operating expenses, and sales volume in domestic market, PKI Management is to secure smooth supply of energy resources by ensuring successful exploration by increasing reserves and sustained operations and production in compliance with laws and industrial best practices. During 2019, approximately 853 thousand tones of recoverable reserves were discovered due to significant investments in exploration activities. Reserves increment, acquisition of new blocks, getting exploration permits for new fields, expanding the existing areas and successful exploratory drilling are a priority long-term task of the company.
DOWNSTREAM
PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located in Shymkent, commissioned in 1985. The Refinery is the newest one among the three Kazakhstani refineries. The Refinery provides about 30% of the total volume of oil products produced in the RK.
PetroKazakhstan Oil Products LLP is managed on a parity basis by National Company KazMunayGas JSC (KMG) and China National Petroleum Corporation (CNPC).
After implementation of the large-scale Shymkent Refinery Modernization and Revamping Project in 2018, PKOP achieved the production program on improving the produced fuel quality to meet К-5 standards of production environmental safety, upgrading the design capacity of the Refinery up to 6 mln. tons per year, as well as increasing the light oil products output to meet the demand of Kazakhstan’s domestic market.
Upon completion of the modernization project and since 2019, PKOP LLP has been widely introducing and applying the international experience in advanced new technologies of automation, digitalization, further improvement of production processes and expansion of the range of output products in the Refinery, which was made possible, first of all, thanks to effective and fruitful cooperation at the level of leading National Companies KazMunayGas JSC and CNPC.
It is to be reminded that the Shymkent Refinery modernization and revamping was implemented according to the State program of industrial and innovation development. The investment in the project implementation totaled USD 1.8 billion. The Shymkent Refinery modernization project completion has been one of the milestones in industrial development of Kazakhstan.
In 2019, PKOP LLP processed 5,401,000 tons of crude oil, and refined products output totaled 4,955,000 tons, including the following oil products:
1, 908 kt of gasoline;
1, 518 kt of diesel fuel;
335 kt of aviation kerosene;
295 kt of liquefied gas;
236 kt of vacuum gasoil;
659 kt of mazut;
3,353 kt of technical sulfur.
HSE
In 2019, the Almaty Branch of PetroKazakhstan Overseas Services Inc. (AB PKOSI) brought its Health, Safety and Environment Management System (HSEMS) into compliance with ISO 14001-2015 and ISO 45001-2018 international standards and conducted the first stage of certification audit. A practical training on the use of fire extinguishers was conducted for the first time with the employees of PKOSI AB. Fire and Earthquake drills have been successfully carried out. Implementation of the “Green Office” project continued, involving separate collection and transfer of paper, plastic bottles, batteries and food waste for recycling. 50 PetroKazakhstan employees received awards under the Employee Award Program for Reported Near Misses, Unsafe Conditions and Acts. In addition, AB PKOSI has successfully passed certification of the HSE management system for compliance with ISO14001-2015 “Environmental Management System” and ISO45001-2018 “Occupational Health and Safety Management System” international standards. On 25 February 2020 Certificates of Conformity №229334 and №229335 were received from Bureau Veritas Certification Holding SAS – UK Branch, valid until 24 February 2023.
In 2019 PKKR JSC carried out certification of production facilities for working conditions. 632 workplaces were certified, 452 of which correspond to the established labor safety requirements. An additional payment and additional days of vacation were set for 181 professions. The HS Department of PKKR JSC has created electronic databases of average HSE risks, issuance and accounting of PPE, accounting and control of technical inspections and repair of process equipment. Kick-off meetings with new contractors have started and inspections of contractors have been carried out prior to work using process monitoring checklists (check-lists). Competition “It’s easier to prevent a fire, than to fight it” was organized among the production shops of the Company including the teams from Kolzhan LLP, KazGerMunai JV JSC, Turgai-Petroleum LLP and KuatAmlonMunai JSC. Under the Basics of Fire Safety Program, 1224 employees of the Company have been trained, and 347 fire extinguishers have been repaired, maintained and recharged independently. An emergency notification system was installed in the shift camp in Kyzylorda. The Environmental Protection Department of PKKR JSC has timely received a permit for emissions into the environment for 2020. Requirements for separate collection and transfer of paper and plastic waste for disposal are being implemented, the issue of removal and disposal of written off office equipment, electronic and household appliances and furniture has been resolved.
In 2019, there were no environmental incidents at PKOP LLP, no emissions exceeding the established norms, no fines for violation of the environmental legislation of the Republic of Kazakhstan. No fires or ignitions were registered. The IMS of PKOP LLP has been audited for compliance with ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007 and ST RK ISO 50001-2012. Validity of the certificates has been confirmed. Complex technological audit of NCJSC International Centre for Green Technologies and Investment Projects according to the European reference book “Commission implementing decision” was carried out. PKOP LLP received a permit for environmental emissions for 2019-2023. Volume of reused treated industrial effluents increased. A meeting was held with residents of nearby settlements, the Council of Elders and representatives of the Assembly of the People of Kazakhstan on the ongoing program to reduce environmental impact in the region. As part of AMAN project, the following nominations were awarded: The Team of the HSE Classic Status to 9 shops at the refinery, Most Active Participants of Sub-Committee to 14 employees, The Best HSE Employees to 9 employees, and Learn to Teach to 3 employees. A competition was held among the children of the refinery’s employees – “Safe labor of parents – happiness of children”, dedicated to the “World Labor Safety Day”.
CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility policy of PetroKazakhstan relies upon the principles of efficiency, viability and consistency. The Company fulfilled all its CSR commitments in 2019.
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 health care, sports, culture and art.
Here we tried to briefly describe the Company’s basic sponsorship and charity projects in Kyzylorda and Turkestan regions and the city of Almaty implemented in 2019: support of Shapagat rehabilitation center for disabled children, Atameken children’s village, “Present Children with Live” project of the Dobrovolnoye Obshestvo Miloserdiye (DOM) (“Mercy” Voluntary Society”) Public Fund, support of the International Vocalist Competition established by Bibigul Tulegenova, Almaty choreographic school named after Seleznyov, support of war and labor veterans, participation in a charity bicycle race Burabike, fund-raising from which is sent to equip children’s hospitals in Kazakhstan with vital medical equipment, organization of free vacation for 1080 children from low-income families and employees of the company in the children’s camp “Arai Sunrise”.
Speaking about the corporate social responsibility of the Upstream Business Unit, it is worth noting that social payments under subsoil use contracts sent by JSC PetroKazakhstan Kumkol Resources to the local budget amounted to KZT 625.4 million, with the amount of KZT 131.6 million for sponsorship and charity aid.
Charitable projects for low-income families and pensioners have become traditional for the PKKR. These include holding festive events and distributing food kits for Nauryz and New Year holidays and school supplies as part of the national “Road to school” campaign for 100 children. In addition, students of Kyzylorda region are pleased to participate in basketball, football, taekwondo tournaments among schoolchildren of the region for the Cup of PetroKazakhstan.
In 2019 PKOP LLP concluded a memorandum with the Shymkent Akimat, within which 200 million tenge was allocated to implement the city’s socially significant projects.
PKOP LLP has a Youth Council, which took an active part in supporting the affected community of Arys, and actively initiates and participates in various social projects. For instance, the Council organizes concerts and contests among refinery workers for the holidays, participates and involves other employees to participate in sports competitions of the city, namely the largest and mass sports event of Shymkent “Shymkent Marathon”. It is engaged in youth and social volunteering by helping children from orphanages, supports ecological campaigns for garbage collection and tree planting.
Special attention is paid to social support of company employees. For example, under the Financial Aid Program for higher education, 43 scholarships have been awarded by the PKOP management. The employees’ dependent children received 34 scholarships under the PKOP scholarship program. Under the Road to School Program, a lump-sum payment of 100 thousand tenge was made for each child of school age of PKOP employees. In total, 932 children were financed. In the Year of Youth, negotiations were held with a microfinance organization on mortgage loans for young employees of PKOP LLP to purchase housing.
In 2019, a Collective Agreement was signed for 2019-2022 between PetroKazakhstan Oil Products LLP and the labor collective, under which all previous terms and conditions of the agreement were preserved in full and a number of articles were added to improve the situation of PKOP employees.
ACHIEVEMENTS AND AWARDS
The Company’s contribution to the development of regions is recognized at the republican and local levels every year. It should be noted that over 90% of employees are citizens of Kazakhstan.
In 2019, JSC PKKR was awarded with letters of gratitude from the Akimat and the Department of Emergency Situations of Kyzylorda region for participation in flood control activities on Syrdarya River.
Firefighting service of PKKR JSC is awarded by the gratitude letter of the Department of Emergency Situations of Kyzylorda region as the best non-governmental firefighting service of the region. To celebrate 120th anniversary of Kazakhstan’s oil, 6 employees of the HSE Department of PKKR JSC were awarded with the anniversary medal of the Ministry of Energy of the Republic of Kazakhstan “Kazakhstan munaiyna 120 zhyl”, 4 employees were awarded with the Certificate of Honor of JSC KazMunayGasProfsoyuz and 1 employee received a letter of appreciation from the regional maslikhat.
PetroKazakhstan Oil Products LLP was awarded a special diploma and a prize-winner’s cup in the competition “Uzdik kauipsis kasiporyn” (“Distinguished Safe Enterprise”), organized in commemoration of the Global Labor Protection Day. State awards, medals and certificates of honor were awarded to the management and employees of PetroKazakhstan Oil Products LLP for their achievements in production activities on the occasion of the 120th anniversary of Kazakhstan oil. Employees of PetroKazakhstan Oil Products LLP won first places in the Uzdik Maman professional contest held in the Russian Federation.
For the World Labor Safety Day, PKOP LLP was awarded first place in the nomination: “Best Occupational Health and Safety Service” organized among companies of Shymkent. At the V Forum of General Directors of NC KMG JSC, PKOP LLP was awarded the “Award for the high level of safety” and the certificate “For the high level of safety at work” for achieving exceptional safety performance in 2018.
In honor of the 120th anniversary of Kazakhstan’s oil and on the occasion of the professional holiday – Oil and Gas Employee’s Day – management and employees were awarded with various awards and badges of honor.
Mr. Huang Xianxiong, President of PetroKazakhstan Kumkol Resources and PetroKazakhstan Inc. was awarded an honorary jubilee medal of the Ministry of Energy of the RK “Kazakhstan munaiyna 120 zhyl” for his contribution to the development of the energy industry. The awarding took place in Nur-Sultan in the framework of Kazakhstan Energy Week-2019.
In addition, over 500 veterans of production and distinguished employees of PKOP LLP, PetroKazakhstan Kumkol Resources JSC and Kolzhan LLP received various awards for their work contribution, including anniversary medals, certificates of honor, letters of gratitude from the Ministry of Energy of the RK, “NC KazMunayGas JSC, Association KAZENERGY, Samruk Kazyna JSC, Akim of Kyzylorda region, Akim of Kyzylorda and Shymkent, maslikhats of the region and the city, Kazakhstan oil and gas industry trade union, etc.