19 March 2009 .
UPSTREAM PERFORMANCE REVIEW *
Exploration and Appraisal
In 2008 the company drilled 22 exploratory and appraisal wells. Well testing revealed a commercial inflow from 9 out of them, and 3 more wells are planned to be tested.
Exploration in East Doshan revealed a commercial inflow, which proves the presence of new oil deposits in the eastern part of Karatau intercontinental geosuture. At present, the company estimates the reserves of crude oil and solute gas in East Doshan.
In 2008, commercial inflow tests of wells in license block 1057 and well in Karaganda block were successful.
According to 2D and 3D seismic data the total scope of seismic exploration work completed in 2008 is 1700 line kilometers and 950km2 respectively.
In 2008 the company re-estimated its oil and gas reserves in Kumkol, Aryskum and Kyzylkia fields. Reports on re-estimation of the reserves in Kumkol and Kyzylkia fields were approved by the State Committee for Reserves (SCR). On the basis of approved reserves the company began revising its design documentation on Kumkol and Kyzylkia development.
Fields and Licensed Territories
In 2008 the company prepared a pilot project design for Tuzkol field operation and had it approved by regulatory authorities. The design documentation was approved by the Central Committee for Development (CCD) and will be implemented in 2009.
In 2008 the company carried out a current estimation of reserves in Doshan field and began exploratory work.
In 2008 the total production volume of PetroKazakhstan Inc. (including PKKR, 50% share in Kazgermunai JV and Turgai Petroleum JV) made up 6.392 mln. tons of oil (49.515 mln. barrels)
Gas Utilization Projects
In 2008 the company commissioned gas utilization facilities in Aryskum and Kyzylkia fields: completed work on gas injection in Kumkol, gas transportation system for transportation of gas from Kyzylkia to Aryskum, and gas injection system in Aryskum. The company also completed all construction and installation work under the Gas Utilization Project in Maibulak, and as early as the beginning of 2009 the facility was commissioned and accepted by the state.
Construction and installation work in two out of five areas of the gas gathering system in Kumkol are nearing completion. The remaining three areas are expected to be completed in the first quarter of this year.
Being one of the first to begin the gas utilization program, PetroKazakhstan is planning to complete its gas utilization work in the first half of 2009, to fully meet the undertaken obligations.
In 2008 the production level of Joint Ventures of the company achieved the budgeted level.
DOWNSTREAM PERFORMANCE REVIEW **
In 2008, in view of its liabilities to supply crude oil and oil products to the domestic market under the Memorandum of social partnership between state authorities and major oil and oil product resource holders and producers of oil products, the company supplied 2 million tons of crude oil from PKKR’s resources to the Shymkent Refinery. In total, last year the Shymkent Refinery processed 4.308 mln tons (33.37 mln. barrels) while 4.100 mln. tons (31.76 mln. barrels) were planned. As compared with 4.060 mln. tons (31.45 mln. barrels) in 2007, the output increased by 6.1%.
In 2008, in view of its liabilities to supply crude oil and oil products to the domestic market under the Memorandum of partnership between air companies, airports of the republic and major oil and oil product resource holders, and producers of oil products, the Shymkent Refinery produced a record volume of jet fuel reaching 275 thousand tons, which exceeded the jet fuel production in 2007 by 72%. The high-octane gasoline yield in the total gasoline output made up 59.32% as compared with 2007, when the high-octane gasoline yield made up 56.5% of the total gasoline volume.
From October 5 through November 5, 2008 the oil refinery had a turnaround shutdown during which all production facilities underwent a detailed inspection. Also, the refinery performed regeneration, discharge and dense loading of its diesel dewaxer catalyst, repaired the turbine of TsK-201 compressor, lining and coils of process pumps, as well as the protective coating of K-102 column. The diesel dewaxer catalyst has been used for 4 years without regeneration. The total service life of the catalyst is 10 years which is the record length of service.
All repair work and investment projects are aimed at improving the refinery performance and increasing the reliability of its equipment for the purpose of further high-quality output and uninterruptible operation of the refinery.
MARKETING AND TRANSPORTATION
In 2008 the company increased its crude oil supply from PKKR’s resources by Atasu-Alashankou pipeline to China by 3.1%. The income from export oil sales increased by 40% compared with 2007. The company continues to optimize supplies of crude oil and oil products, oil product export routes, and oil product sales pattern.
Last year PetroKazakhstan Trade House sold 1.3 mln. tons of oil products in the domestic market and 577 thousand tons of oil products for export.
Every year PetroKazakhstan takes part in the program on provision of cheap diesel fuel to agricultural producers during spring and autumn agricultural work. For the past two years only the agricultural sector of the country received 224 thousand tons of diesel fuel at fixed reduced price. During each heating season the company supplies mazut at a discount price to social and production facilities. For the past two years only the company supplied 72 thousand tons for the above mentioned purposes.
SAFETY AND ENVIRONMENTAL PROTECTION
A particular attention in 2008 was given to the employees’ safety awareness in the company. As a result, the number of MVAs reduced by 66.6% (from 48 to 16), and the lost time accidents reduced by 50% (from 16 to 8).
To strengthen fire safety system at the oil bases of PetroKazakhstan Trade House the company installed automatic foam fire suppression systems at Syntez oil base and UMR. The total volume of capital investments under these projects made up about 80 mln. tenge.
The company successfully completed the work on utilization of liquid low-radioactive wastes and reconstruction of the radioactive wastes temporary storage site of the company’s upstream business unit. In August 2008 the company completed its 3-year work on re-cultivation of 4.2 hectares and cleaned 20,000m3 of contaminated soil stored in the area of well 2079 in Kumkol field. As a result of introduction of an additional cleaning technology, PKKR performed environmental impact assessment that allowed to increase the volume of soil cleaning up to 15,000m3/y.
In 2008, the company’s downstream business unit received a certificate of conformance to the ecological management system in accordance with the standards requirements to refining, transportation and storage of oil and oil products as per ISO 14001:2004 “Ecological Management Systems”. In 2008 the environmental authorities registered no violations of environmental laws at PKOP.
PetroKazakhstan is one of the largest sponsors of social and charity projects in Kazakhstan. The company’s contributions into the social sphere in the last year only exceeded 7 mln. US dollars.
The President of Kazakhstan awarded the company’s upstream business unit with Paryz award as the best socially responsible enterprise in the country.
The downstream business unit of the company became the winner of Altyn Zhurek republican charity award.
Last year the company re-started its external web-site.
PetroKazakhstan is a vertically integrated company owned by China National Petroleum Corporation, as well as KazMunaiGas National Company, involved in acquisition, exploration, development and production of oil and gas, as well as in refining of oil and sale of oil and oil products.
* Contractual areas of PKKR, PKVI, Kolzhan have been included
** Services provided as per the Agreement on provision of technical financial services and logistics support
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