PetroKazakhstan reports on its 2017 performance results

UPSTREAM

PetroKazakhstan Inc. is a group of 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 thirteen 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.
Further PKKR has a consortium with Turgai petroleum on (i) crude oil pipeline (ii) gas processing and power generation facility.
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 . During 2017, PetroKazakhstan Operated Upstream (PKKR, Kolzhan, Joint Ventures in licenses in 1057(50%) and 951D(75%) added around 1.5 mln tons reserves under SEC rules and also planning to register around 1.4 mln reserves addition with Reserves Committee of Kazakhstan.
 77 wells were drilled during 2017 out of which 55 wells were drilled in operated upstream and 22 wells were drilled in Kazgermunai LLP. Out of 77, 17 were exploration and appraisal wells, while 60 were pilot and development wells. The success rate to discover oil in exploration and development wells were 64% and 95% respectively.
The PKI Group met the production target approved by PKI shareholders for the year 2017. Total gross production of the group was 5,186 thousand tons which is 58 thousand tons more than budget of 5, 092 thousand tons. The Group supplies around 78% of crude oil in domestic market which yields less netback comparing with exports. However due to better control on operating costs, improvement in corporate governance, better production and sales price, the profitability of the Group is getting better during 2017 comparing to 2016. Being a responsible corporate citizen, PKI Upstream contributed 5.4 mln gross for various social projects.
 As the PKI Upstream is facing challenges, decline in production, high watercut, operating costs, and sales volume in domestic market, PKI Management is optimistic to secure smooth supply of energy resources by ensuring successful exploration by increasing reserves and sustained operations & production in compliance with laws, and industrial best practices.

DOWNSTREAM

PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located in Shymkent in the South Kazakhstan Oblast. Built in 1985 the refinery is the newest one among three Kazakhstani refineries.
Refining output of PKOP LLP for 2017 amounts to 4,686,000 tonnes that is 107.47% of the plan approved by the Ministry of Energy of the Republic of Kazakhstan in excess of the plan 326 thousand tonnes. The indicators of oil products manufacturing amounted to 4,388,000 tonnes or 107.5% of the plan, of which the following oil products have been manufactured:
 gasoline – 1,027.45 thousand tonnes, the plan was fulfilled for 107.47%, in such a case, the share of high octane gasoline with planned 69.02% amounted to 85.82% of the total volume of the motor gasoline that was 124.3% of the plan fulfillment;
 diesel – 1,209.36 thousand tonnes, the plan was completed for 104.67%;
 aviation kerosene – 279.7 thousand tonnes, the plan was completed for 126.97%;
 liquid gas – 96.9 thousand tonnes, the plan was completed for 92.47%;
 vacuum gasoil – 818.1 thousand tonnes, the plan was completed for 103.95%;
 fuel-oil residue – 955.9 thousand tonnes, the plan was completed for 111.47%;
 technical sulfur – with planned 457 tonnes – about 554 tonnes were produced, the plan was fulfilled for 121.23%.

The light naphtha isomerization unit including the preliminary raw materials hydrotreating unit enabling to increase the production of high octane gasoline of K-4 and K-5 emission standards was commissioned in June 30, 2017. Declaration of the quality conformance was received.
Diesel fuel of K-4 and K-5 emission standards was received in December, 2017. Declaration of the quality conformance was received.
Thus, stage 1 of Shymkent Refinery Modernization and Reconstruction Project has been completed.
PetroKazakhstan Oil Products LLP implements a large-scale project on Shymkent Refinery Modernization and Reconstruction according to Kazakhstan Government’s industrial and innovation development strategy that determines the development of local refineries.
The Project implementation advantages include: capacity upgrade to increase light oil products output for import substitution and supply to the Kazakhstan’s domestic market, new jobs in the city of Shymkent, and green production facilitation. Shymkent Refinery Modernization and Reconstruction Project is implemented in two stages.
Stage 1 is completed
• The Diesel Hydrotreater with a capacity of 1.5 mln tonnes per year has been commissioned;
• The Sulfur Plant with a capacity of 4 mln tonnes per year has been commissioned;
• The automated single point loading of oil products with a capacity of 2.5 mln tonnes per year has been commissioned, 251.4 thousand tonnes of gasoline were loaded within the period from July to December, 2017.
• The Isomerization Unit with a capacity of 600 thousand tonnes per year has been commissioned, 570.7 thousand tonnes of high octane gasoline of K-4 emission standard were produced within the period from July to December, 2017.
Stage 2 is being completed
92% of the project was implemented, including:
– 26,700 shop drawings and more or 100% were developed;
– orders for 1,408 of 1,408 items of equipment were placed, of them 1,237 items or 87.8% were supplied, 1,171 items or 83.2% were assembled;
– 56,851 of 56,876 m3 of concrete or 99.9 % were poured;
– 20,852 of 2,875 m3 or 99.9 % of reinforced concrete structures were assembled;
– 20,310 of 20,379 tons or 99.7 % of metal structures were assembled;
– 501 of 524 km or 95.6 % of process pipelines were assembled;
– 750 of 960 km or 78.1 % of electric cables were assembled;
– 1,045 of 1,318 km or 79.3 % of the Instrument cables were assembled, etc.

Mechanical completion of the off-plot facilities of Stage 2 was made, a mechanical completion certificate was signed and commissioning work was started in December 29, 2017.

Key dates
 March 15, 2018 – Mechanical completion of the refinery process units;
 July 1, 2018 – Raw materials acceptance (light vacuum gasoil circulation).
 September 30, 2018 – Reaching the guarantee indices and putting into service.

HSE

In 2017 the Corporate HSSE Department updated the Corporate Safe Land Vehicle Operation Procedure at the request of the shareholders. Memorandum of Understanding and Cooperation was signed between the companies using PKKR JSC’s motor roads in March. The road raids were carried out on the roads of Kumkol and KAM oil fields to inspect the speed enforcement and meeting the road safety requirements.
Internal training of the Company’s employees was carried out on the following topics: “SAP: HSE Incidents Management Module”, “Behavioural Safety Audits Performance”, “Objectives, Tasks and Plans on HSE Management” and “HSE Risks Assessment”. Interactive training of the Company’s employees was held for their knowledge of the HSE management system. HSE information materials were prepared and distributed: “First Aid Guide”, “Rules and Methodology for Behavioural Safety Supervision”, “Behavioural Safety Supervision Sheets”, “HSE Personal Liability Cards”, “10 Steps to Recovery” brochures.
An independent audit on health care, industrial sanitation and hygiene was held in all business units of PetroKazakhstan. Safety and Health Certificate for industrial facilities and rotational camps of Kumkol, Aryskum and Kyzylkiya field was received. A new ambulance car was procured for casualty evacuation of the patients from the field to Kyzyl-Orda city. The lectures were conducted on topics: “Caution! The Flu”, “Smoking is Bad for Your Organism”, “Traumatism”, “Intestinal Infections Hazard”, “Essential Factor for the Health”, “Tick Bite”.
In June, 2017, during the HSE month under the slogan “Be the Best in Performing Your HSE Obligations” there were the competitions “The Best Contractor for HSE and Social and Living Conditions according to the Results of the First Six Months of 2017”, “The Best Business Unit for Emergency Preparedness”, “The Best Workshop in the HSE Area”, and a competition titled “It’s easier to prevent a fire, then to fight it” was held prior to the Fire Safety Day.  24 employees of PetroKazakhstan received awards under the Employee Award Program for Reported Near Misses, Unsafe Conditions and Acts.
In February, 2017, PKOP LLP started implementation of Stage 3 of AMAN Project where the heads and employees were trained on the following topics: “Working at Height”; “Line Management – Roles and Responsibility in management and implementation of the Safety Management Projects”; “Learn to teach” as well as a practical seminar with the HSE specialists. In December, 2017, the employees of the plant were awarded by single cash bonus, commemorative prizes and letters of recognition in the following nominations: “The Team of the HSE Classic Status”, “Most Active Participants of Sub-Committee” and “The Best HSE Employees”.
The plant facilities inspections as well as instrumental measurements of the environmental components condition are held in PKOP LLP according to the Programme of Industrial Environmental Monitoring to monitor compliance with the specified standards of the maximum allowable emissions (MAE) and discharges (MAD) and soil quality within the plant buffer zone. There were no facts of exceedance of the specified standards as a result of the conducted measurements. In 2017, the environmental emissions were carried out within the specified standards.


CORPORATE SOCIAL RESPONSIBILITY

As before, PetroKazakhstan is implementing a multipurpose sponsorship program in all regions of its operation. The company actively participates in projects for social infrastructure development, paying special attention to long-term programs for the support of vulnerable segments of population, orphans, veterans of the Great Patriotic War and workers of the labor front, veterans of the Afghanistan war and disabled persons, and in projects for the development of health care, mass sports, culture and art.

Since 2011 the Company has been actively collaborating with Bauyrzhan Public Foundation, which once again organized and held an anniversary national award Altyn Zhurek (Golden Heart). Traditionally this project aims to identify and award individuals and companies, whose charity efforts make an invaluable contribution to the society development. In such a way the company contributes to the development and promotion of philanthropy in the country, creating a dialogue space for good doers and socially vulnerable community.

PetroKazakhstan is a permanent sponsor of the International Vocalist Competition established by a USSR People’s Artist, a hero of socialist labor, academician Bibigul Tulegenova.
For a long time the company continues its cooperation with DOM Public Foundation; the funds are allocated to support the veterans of the Great Patriotic War and workers of the labor front on an annual basis.

In 2017 the Downstream Unit of the Company (PetroKazakhstan Oil Products LLP) allocated KZT 75 million for traditional social projects and the support of sponsored organizations, including sports development projects in the oblast and rehabilitative support of children with disabilities, and labor veterans of South Kazakhstan Oblast.

PKOP LLP performs the work on social support of Shymkent Refinery’s employees. 35 educational allowances were given to the employees to go into higher education under the Financial Aid Program. Also, 39 educational allowances were given to dependent children of the employees of PKOP LLP under the Scholarship Program.

The funds allocated by the Upstream Unit (PetroKazakhstan Kumkol Resources JSC) for social projects amounted to KZT 45 million. Also, the Company keeps on implementation of the social projects on support of the Rehabilitation Center for disabled children and child care center for the disadvantaged children. In 2017, PKKR JSC arranged for free-of-charge rest for 1,080 children of the company’s employees and disadvantaged children in Arai Sunrise children’s camp.

ACHIEVEMENTS AND AWARDS

In celebration of the 20-th anniversary of cooperation of Kazakhstan and China in the oil and gas sector, the management of China National Petroleum Corporation (CNPC) awarded the medals of honor and letters of gratitude “For Contribution to the Development of Cooperation in the Oil and Gas Sector Development between Kazakhstan and China” to the distinguished employees of all business units.

The Company’s contribution to the development of regions and the merits of PKKR and PKOP employees is recognized at the republican and local levels every year. Therefore, KAZENERGY Association, the Kyzylorda Oblast and Kyzylorda City Akimats, the Chamber of Entrepreneurs of the Kyzylorda Oblast awarded medals For Contribution to Oil and Gas Sector Development, Veteran Worker medals, Honored Worker of Oil and Gas Industry award pins, certificates of merit and letters of gratitude to more than 50 PKKR employees.

PetroKazakhstan Oil Products LLP was awarded with special diploma and winner’s mug for high performance in creation of the safe labor conditions for the company’s employees in a competition “Distinguished Safe Enterprise” organized in honor of Global Labor Protection Day – April 28 by the Labour Inspection Department of the South Kazakhstan Oblast.

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