2020 Performance Results Press Release

PRESS RELEASE ABOUT PERFORMANCE RESULTS OF THE COMPANY FOR 2020

UPSTREAM

PetroKazakhstan Inc. is a group of companies of the energy sector. Its shareholders are CNPC E&D (67%) and KazMunayGas EP (33%), engaged in acquisition, exploration, development and production of oil and gas and sales of oil products. All of the Group’s exploration and production operations are focused in the South Turgai oil basin and central part of the Republic of Kazakhstan. The Group holds stakes in fields at various stages of development. At present the majority of the output is supplied to the domestic market, with crude oil exports directed to China and Uzbekistan. 

Major subsidiaries are: JSC PetroKazakhstan Kumkol Resources (100%), Kolzhan LLP (100%), AB PetroKazakhstan Overseas Services Inc. (100%), JSC Turgai Petroleum (50%), JV Kazgermunai LLP (50%) and other legal entities. The Group holds interests in license 1057 (joint venture between Kolzhan LLP and SSM Oil LLP) and license 951D (joint venture between PetroKazakhstan Ventures Inc. and Orient Petroleum (Central Asia) Ltd.)

In 2020, 59 wells were drilled, of which 40 wells were drilled by the operated upstream division (OUS) and 19 wells were drilled by JV Kazgermunai LLP. Of 59 wells drilled, 17 were exploration and appraisal wells, 32 were advance production and development wells, and 10 were injection wells.

PKI Group achieved the production targets approved by its shareholders for 2020. Total production was 3, 133 thousand tons, which exceeded the budgeted level by 95 thousand tons (3, 039 thousand tons). The Group supplies about 91% of its crude oil to the domestic market, the price of which is lower compared to exports. As a socially responsible company, PKI’s Upstream division (including Joint Ventures) invested $3.6 million in various social projects, including USD 0.5 million that was allocated to local medical facilities to combat Covid-19.

And while PKI’s operated upstream division has faced challenges such as declining production, high water cut, high operating costs and high domestic sales, PKI management is optimistic about ensuring uninterrupted supply of energy resources through successful exploration, reserve growth and conducting all operations and production in accordance with legislation and best practices. Reserves growth, acquisition of new blocks, obtaining exploration permits for new sites, expansion of existing areas and successful exploration drilling are the company’s long-term priorities.

DOWNSTREAM

PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located in Shymkent, which was commissioned in 1985. The refinery is the newest one among the three Kazakhstani refineries and accounts for around 30 % of the total volume of oil products produced in the RK.

The management of PetroKazakhstan Oil Products LLP is carried out on a parity basis by National Company KazMunayGas (KMG) and China National Petroleum Corporation (CNPC).

After implementation of a large-scale modernization and revamping project in 2018, the Shymkent Refinery has upgraded the quality of produced fuel to meet the K-5 standards, raised the level of production environmental safety, expanded the refinery’s design capacity up to 6 million tons per annum, as well as increased the production of light oil products to meet the Kazakhstan market’s demands. The Shymkent Refinery modernization and revamping project was implemented within the State program of industrial and innovative development. The amount of the project implementation investments totaled 1.8 billion US dollars. The completion of the Shymkent Refinery modernization project has been one of the milestones in Kazakhstan’s industrial development. Upon completion of the modernization project at PKOP LLP, the international experience in the field of advanced new technologies of automation, digitalization, further improvement of production processes and expansion of the product slate is widely implemented that has been made possible primarily thanks to the effective and fruitful cooperation at the level of the leading national companies: NC KazMunayGas JSC and CNPC. 

The crude throughput of PKOP LLP for 2020 totaled 4 mln. 794 thousand tons and the indicators of oil product output amounted to 4 mln. 290 thousand tons, including the following oil products:

gasoline – 1, 958 thousand tons;

diesel fuel – 1, 411 thousand tons;

aviation kerosene – 244 thousand tons;

liquefied gas – 327 thousand tons;

technical sulfur– 6.0 thousand tons;

fuel oil (mazut)– 343 thousand tons.

Also, in 2020, PKOP LLP achieved the crude oil refining depth indicator of 90.14%, which is a record indicator not only for PKOP LLP, but also for other refineries of the Republic of Kazakhstan for the years of their production activities.  

In 2020, with the introduction of sanitary and quarantine measures for preventing COVID-19 coronavirus infection spread, all necessary measures and action algorithm  were taken for continuous production process at PKOP LLP in general. The processing units were operated in the standard operating mode.

PKOP LLP undertook the procedures aimed at protection of the production personnel in strict conformity with the sanitary and epidemiological standards.

HSE

In February 2020, the Almaty Branch of PetroKazakhstan Overseas Services Inc. (PKOSI) successfully passed HSE management system certification for compliance with ISO14001-2015 “Environmental Management System” and ISO45001-2018 “Occupational Health and Safety Management System” international standards. On February 25, 2020 certificates of conformity №229334 and №229335 from Bureau Veritas Certification Holding SAS – UK Branch were obtained, valid until February 24, 2023. Six videos on HSE were produced and distributed as part of the Safe Office project. There is a continued separate collection and transfer for recycling of paper, plastic bottles, batteries and food waste in the office. The “Employee Incentive Program for Reporting Potentially Hazardous Situations, Hazardous Conditions and Actions” was revised and extended through 2023. In 2020, more than 30 PetroKazakhstan employees were rewarded under this Program.

During 2020, a number of measures aimed at preventing the spread of COVID-19 coronavirus infection among PetroKazakhstan employees were implemented in all business units of the Company: Operational headquarters were created to combat the infection, the algorithms of emergency measures in case of detection of suspected COVID-19 infection / contamination were developed, action plans to prevent the spread of COVID-19 at the Company facilities, memos and instructions on compliance with quarantine measures were issued. Medical and disinfectant supplies: protective shields, medical masks, gloves, antiseptics, etc. were purchased. The Company conducts daily thermometry tests of employees and inspects compliance with sanitary and epidemiological norms in the offices and at the production facilities of the Company. Express testing of employees before going on shifts and PCR testing of employees going on business trips are being carried out. Compliance with legal requirements to prevent the spread of COVID-19 is regularly published and monitored. Activities to coordinate work with the sanitary and epidemiological control bodies are performed. 

During the year, 2,797 employees of the company underwent HSE training and knowledge testing. In 2020, implementation of the Program “Roadmap to improve the Road Safety Management System of PKKR” was started. The purpose of this Program is to reduce the number of traffic accidents on the Company’s roads, as well as to improve the transport safety in PKKR JSC and contractors. In the 1st quarter of 2020 PKKR JSC took part in national table-top exercises “Winter – 2020” and “Spring – 2020”, and during the year – in regional table-top exercises. Annual training of PKKR JSC personnel under the fire safety minimum program by specialists of the Fire Safety Department continues. Maintenance, repair and recharging of powder fire extinguishers are carried out at the Kumkol field fire station, where a workshop for their recharging is organized.

At the initiative of the RK Ministry of Ecology, Geology and Natural Resources, a comprehensive technological audit of PKKR JSC was conducted in order to determine the level of achievement of the best available technologies at the company. A preliminary conclusion of independent experts was obtained. Environmental permits for emissions into the environment were obtained for PKKR JSC and Kolzhan LLP for 2021, as well as a license for radioactive waste management activities issued by the Committee for Atomic and Energy Supervision and Control of the RK Ministry of Energy.

2020 has been declared the year of safety in KMG group of companies, subsidiaries and affiliates and for all contractors. On this occasion, an Agreement on Understanding and Commitment of the Parties to Compliance with Occupational Health and Safety, Fire and Industrial Safety Requirements at the Facilities of PKOP LLP was signed. A meeting was held with the participation of PKOP LLP management and the top managers of contractors and those responsible for HSE. Promotional items with Aman logo were purchased under the AMAN ISB project: T-shirts, windbreakers, baseball caps, pennants. 

In Q4 2020, PKOP LLP successfully passed an external re-certification audit of EMS for compliance with the requirements of ISO14001:2015. The documented EMS procedures were revised. A register of significant environmental aspects was compiled. Measures to reduce the negative impact on the environment and improve the environmental aspects of the company were identified. In 2020, OH&S management system of PKOP LLP was successfully certified under the new ISO 45001:2018 standard by the Certification Association “Russian Register – Eurasia”. The Manual for QMS, EMS and OH&S management system was revised and approved.

In 2020, PKOP LLP had no environmental incidents, no exceeding of the established standards of emissions, and no fines for violations of environmental legislation of the Republic of Kazakhstan. In February 2020, a comprehensive technological audit was conducted at the plant by NJSC International Center for Green Technologies and Investment Projects. A high assessment of the plant’s performance indicators and modernization facilities and their compliance with the European and Russian BAT Reference Lists were obtained. On March 28, 2020 PKOP LLP took part in the environmental action “Earth Hour”. Partial shutdown of exterior lighting of auxiliary facilities of the company for 1 hour was organized. Planting of 1,000 seedlings of trees and shrubs was carried out around Shymkent city as part of the Green Belt, and another 500 fruit and deciduous trees were planted in the nearby Karabastau settlement at the request of residents. On September 19, 2020, workers of PKOP LLP held a volunteer clean-up at the source of the city river Koshkar-ata and the adjacent public recreation area within the framework of the World Clean-up Day. This event was aimed at maintaining the cleanliness of the city, preserving the natural beauty of nature for future generations.

CORPORATE SOCIAL RESPONSIBILITY

The policy of the corporate social responsibility of PetroKazakhstan is based on principles of efficiency, expediency and consistency, as before. In 2020, the company carried out all assumed obligations within the corporate social responsibility.

The year 2020 has been important for PKOP LLP due to conclusion of the memorandum with the Shymkent akimat, within the limits of which 200 million KZT was allocated for support of the city social projects according to the business social responsibility program in pandemic period. PetroKazakhstan Oil Products LLP together with the social fund Shymkent – Kaiyrymdy kala has rendered humanitarian aid with handing over of 10 thousand medical masks and 1,000 protective suits to the provisional healthcare facility of city hospital No. 2. The Youth Council of PKOP LLP rendered assistance according to the city program Biz Birgemiz to 100 multiple- children and low-income families by targeted delivery of basic- needs food products for the Day of Unity of Nations of Kazakhstan, during the quarantine against pandemic. It should also be noted that in September 2020, the shareholders of PetroKazakhstan Oil Products LLP JSC NC KazMunayGas and China National Petroleum Corporation (CNPC) jointly handed over 50 units of oxygen equipment to the Shymkent Health Department as humanitarian aid for further distribution to medical centers in the city. As it was mentioned earlier, within the program on creation of “Green belt” around Shymkent, the employees of PKOP LLP planted 1,000 pieces of vegetation of fruit and broad-leaved trees in autumn period. By the request of Karabastau village community, located close to PKOP LLP, 500 seedlings were planted.  

Despite the industrial and financial crisis, PKKR JSC continued its patronage over the rehabilitation center for disabled children Shapagat in Kazaly district and the kindergarten Baldauren for children from low-income families in Zhanakorgan district.

Just as for many years, PKKR continues to provide financial support to the Atameken family-type children’s village, where orphans and children left without parental care live and are brought up. 

In order to prevent and combat the pandemic coronavirus infection, by the decision of the shareholders of JSC “NC “KazMunayGas” and China National Petroleum Corporation, JSC “PetroKazakhstan Kumkol Resources” provided financial support to Kazaly Interdistrict Hospital for the purchase of an oxygen station. This station is planned to produce 150 oxygen cylinders per day, which, in turn, will provide oxygen cylinders to medical facilities of Aral and Kazaly districts and Baikonur city.

ACHIEVEMENTS AND AWARDS

The companies’ contribution to the development of the regions and the merits of their employees are annually noted at the national and local levels. It should be noted that more than 90% of employees are citizens of Kazakhstan.

159 employees of PKKR JSC were awarded with various departmental, regional and city awards on the eve of the state holiday – the Independence Day of Kazakhstan, on professional holidays – the Day of Geologist, the Day of Oil and Gas Industry Workers, the Day of Power Engineer, on the remarkable dates of the 115th anniversary of trade union movement in the Republic of Kazakhstan and on behalf of the company’s management.

Salymov Yerbolat, the 5th category oil and gas production operator at Kumkol field, became the winner in the “Best oil and gas production operator” nomination of the industry competition for the title of “Munaigas ondirisinin ozaty-2019”, organized by the Branch Professional Union of Oil and Gas Industry Workers. 17 operators from different oil companies participated in this nomination.

JSC “PKKR” was awarded a diploma by the akim of Kazaly district of Kyzylorda region in the nomination “Zhyl demeushisi” for the sponsorship provided during the pandemic.

Special attention is paid to the social support of the company’s employees. For instance, 

within the frame of the Financial Assistance Program for getting the higher education by the employees, PKOP management granted 30 scholarships. Under the scholarship program for dependent children of the refinery’s employees, 33 scholarships were granted.

Aidar Amreyev, Process Shop No. 1  Operator of PKOP LLP was awarded with state medal “Eren enbegi ushin” for high performance in production and creation of safe working conditions. 4 employees were awarded for the Day of Oil and Gas Industry workers, as well as 5 employees were awarded for the Independence Day, received Letters of Gratitude from the Ministry of Energy of the Republic of Kazakhstan, Certificates of Merits and memorial signs from NC KMG JSC. 

The administration of PKOP LLP fulfilled in full all its obligations under the Collective Agreement in 2020. 

At the end of the year, the company received a Letter of Gratitude for participation in the Republican contest on business social responsibility “Paryz 2020” from the Minister of Labor and Social Protection of the Population of the Republic of Kazakhstan. The management of PetroKazakhstan Oil Products received the Letter of Gratitude from Akim of Shymkent city for the rendered assistance and support during quarantine on prevention of coronavirus infection, as well as on behalf of the deputies of Shymkent city. PKOP LLP was awarded with diploma of NWF Samruk-Kazyna JSC for active participation in “Uzdik volonterlik top” movement, and received the Certificate of Merit from NC “KazMunayGas JSC “For active participation of voluntary movement in implementation of social projects”. 

As has already been noted, a comprehensive technical audit was conducted at PKOP LLP with “International Green Technologies & Investment Projects Centre” NJSC jointly with independent experts. The production performance and modernization facilities of the enterprise were highly appraised in accordance with the European reference guide “Commission implementing decisions”. Also, a Letter of Gratitude was received from the International Green Technologies & Investment Projects Centre on high level of readiness of the enterprise to transition to the level of the best available technologies (BAT) and high qualification of specialists of the enterprise.  PKOP LLP took part in the online ceremony “Rating of environmental information transparency of oil and gas companies. Results of 2020”. The organizers of this rating are the “World Wildlife Fund for Nature (WWF)” with the support of the “Environment Program” of the United Nations. Summarizing of the environmental information transparency rating was carried out among oil and gas companies of Russia, Kazakhstan and Azerbaijan.  PKOP LLP took the 4th place among 17 companies of NC KMG JSC and the 1st place among oil refining companies of the Republic of Kazakhstan.

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