Annual Report 2014
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ANNUAL REPORT 2014 MUSIC OF KAZAKHSTAN OIL KAZTRANSOIL JSC TABLE OF CONTENTS MESSAGE FROM CHAIRMAN OF THE BOARD OF DIRECTORS //2 MESSAGE FROM CHAIRMAN OF THE MANAGEMENT BOARD //4 KEY FINANCIAL AND ECONOMIC PERFORMANCE INDICATORS //6 1. ABOUT THE COMPANY 4. CORPORATE GOVERNANCE 1.1. The Company’s history //12 4.1. General Meeting of Shareholders //45 1.2. The Company today //12 4.2. Board of Directors Report for 2014 //45 1.3. Key events in 2014 //14 4.2.1. Selection criteria of members of the Board of Directors //46 1.4. Business model //16 4.2.2. Composition of the Board of Directors //47 1.5. Organisational structure //18 4.2.3. Competence of the Board of Directors //50 1.6. Subsidiaries and jointly controlled entities //19 4.2.4. Responsibility of the Board of Directors //50 1.7. State regulation of the industry and tariffs //20 4.2.5. Information on meetings of the Board of Directors //50 1.8. Market review //21 4.2.6. Risk management and internal control //52 1.9. Development Strategy //22 4.2.7. Attendance at meetings of the Board of Directors //52 1.10. Information on securities //23 4.3. Information on activities of committees of the Board of Directors //52 4.3.1. Strategic Planning Committee //53 2. OPERATING ACTIVITIES 4.3.2. Nomination and Remuneration Committee //53 4.3.3. Internal Audit Committee //53 2.1. Oil transportation and water supply //26 4.4. Relationships with shareholders //54 2.2. Operation of main oil pipelines owned by third parties //26 4.4.1. Relationships with major shareholder //55 2.3. Investment activity //26 4.5. Remuneration of members of the Board of Directors //55 2.4. Innovation activity //28 4.6. Internal Audit Service //55 2.5. Assets security //28 4.7. Management Board Report for 2014 //56 2.6. Information security //29 4.7.1. Appointment of Chairman and members of the Management Board //56 2.7. Information on local content in procurement of goods, 4.7.2. Competence of the Management Board and General Director works and services //29 (Chairman of the Management Board) //56 4.7.3. Responsibility of the Management Board //57 3. SUSTAINABLE DEVELOPMENT 4.7.4. Composition of the Management Board //57 4.7.5. Information on meetings of the Management Board in 2014 //61 3.1. Stakeholder engagement //32 4.7.6. Risk Management Committee Report //62 3.2. Environmental protection //33 4.8. Corporate ethics //62 3.3. Ambient air pollution //33 4.9. Settlement of corporate conflicts and conflicts of interests //63 3.4. Water resources //34 4.10. List of interested–party transactions concluded by KazTransOil JSC in 3.5. Land resources and biodiversity //34 2014 //64 3.6. Energy consumption //34 4.11. Corporate risk management and internal control systems //66 3.7. Energy saving //35 4.11.1. Key risks of the Company and measures of their minimization //67 3.8. Occupational safety and health //35 4.12. Integrated management system //68 3.9. Fire safety //36 3.10. Industrial safety //36 5. MANAGEMENT REPORT ON FINANCIAL AND 3.11. Personnel //36 ECONOMIC PERFORMANCE RESULTS 3.11.1. Headcount and personnel composition //37 3.11.2. Education and training //39 6. ANNEXES 3.12. Social policy //40 3.12.1. Investments in personnel //40 6.1. About the Report //80 3.12.2. Charity //41 6.2. Contact information //80 6.3. Independent Verification Report //82 6.4. Table of GRI standard elements //84 6.5. Consolidated financial statements //88 www.kaztransoil.kz 1 ANNUAL REPORT 2014 MESSAGE MESSAGE FROM CHAIRMAN OF THE BOARD OF DIRECTORS 2 KAZTRANSOIL JSC Dear shareholders and employees of KazTransOil JSC! Summarizing the activities of KazTransOil JSC, I would like to focus on was 12% of the weighted average share price at the beginning of the some principal achievements and indicators. year. Today KazTransOil JSC is the national operator of Kazakhstan on During 2014, shares of KazTransOil JSC remained the most liquid the main pipeline. Our Company provides transportation of about securities on KASE. In 2014, the weighted average price for the 53% of the total oil production volume in the country. More than 80 oil Company’s shares was equal to 1,080 tenge. Decrease in the second enterprises use the Company’s services annually. half of 2014 of the Company’s shares quotations and general decrease in KASE index were due to influence of external factors on the stock KazTransOil JSC continues to adhere to the multi-vector principle with market of Kazakhstan. the transportation of energy resources for export. The most important event of 2014 was the beginning of transit of the Russian oil to the The Company pays special attention to activities aimed to ensure People’s Republic of China. The ground for this, as you remember, was sustainable development, where a set of actions to ensure safety of the Agreement between the Government of the Republic of Kazakhstan employees’ lives and health, environmental protection, creation of and the Government of the Russian Federation on cooperation in favourable working conditions were performed. the field of the Russian oil transportation through the territory of the Republic of Kazakhstan to the People’s Republic of China concluded KazTransOil JSC continues to prove its commitment to socially in December 2013. important matters. In 2014, the Company allocated 2 bln. tenge for sponsorship. Those means were used for construction of a secondary The agreement stipulates the supply of 7-10 mln. tons of oil per year school in the city of Kulsary, the kindergartens in the city of Pavlodar and was signed for five years with an option to extend it for the same and in the village of Sholakkorgan of Suzak region of South Kazakhstan period. In the medium term, the agreements will provide guaranteed oblast. volumes of oil transportation to China. The Company does not stop there, and a lot to be done in the An important direction of work was the reconstruction of sections of near future, according to the approved Development Strategy of Kalamkas – Karazhanbas – Aktau and Uzen – Zhetybai – Aktau main KazTransOil JSC till 2022. pipelines. This will allow increasing the capacity to transport Buzachi oil to Atyrau providing access to the export pipelines of Atyrau-Samara, I would like to assure our shareholders that the Board of Directors will CPC and in the future Kazakhstan-China. be fully committed to ensure further development and growth in the value of the Company taking into account the protection of rights and In 2014, 40 km of the pipeline in the Kazakh section of Tuimazy – Omsk – interests of all stakeholders. Novosibirsk-2 were overhauled. As a result of the work performed, reliability of that section was improved and an opportunity for increase I would like to express gratitude to the management and all employees in the volume of oil transportation in the future was provided. of KazTransOil JSC for their professionalism, efforts and daily work aimed at our joint success. The Company annually demonstrates the stability of dividend payment to shareholders. In 2014, the dividend yield on the Company’s share Ardak Kassymbek Chairman of the Board of Directors of KazTransOil JSC 3 ANNUAL REPORT 2014 MESSAGE MESSAGE FROM CHAIRMAN OF THE MANAGEMENT BOARD 4 KAZTRANSOIL JSC Dear shareholders, partners and colleagues! In 2014, KazTransOil JSC achieved positive results on operating and I would emphasize that the construction of Kazakhstan-China oil financial activities. By the end of the past year, the consolidated volume pipeline system is being implemented in order to diversify the directions of oil transportation amounted to 64 mln. tons and exceeded the plan of oil transportation, ensure the delivery of the West Kazakhstan oil to by 1%, consolidated oil freight turnover amounted to 44.2 bln. ton•km, the Pavlodar Petrochemical Plant and the refinery of PetroKazakhstan or 1% higher than the planned indicator. Oil Products LLP as well as to develop a transit potential of the Republic of Kazakhstan. Compared to the previous year, there was slight decrease in the volumes of oil transportation, which was caused by re-orientation of oil Thus, within the scope of the Agreement between the Government deliveries from exports to the domestic market. of the Republic of Kazakhstan and the Government of the Russian Federation for cooperation in the field of the Russian oil transportation In 2014, the volume of delivery of the Volga River water through to the People’s Republic of China through the territory of the Republic Astrakhan – Mangyshlak water main for 2014 amounted to of Kazakhstan, transit - transportation of the Russian oil to the People’s 24.8 mln. cub. m – exceeded the planned figure by 1% and the same Republic of China through our oil pipeline system was started on indicator of 2013 by 6%. January 1, 2014. As at the end of 2014, the net profit of KazTransOil JSC amounted to The Company performed reconstruction of Uzen-Zhetybai – Aktau 57.7 bln. tenge, which was by 1% higher than the planned indicator and Kalamkas – Karazhanbas – Aktau main oil pipelines. In 2014, the and by 11% higher than the same indicator of 2013. The growth of this Company completed an overhaul of 40 km of the Kazakh section of indicator is mainly influenced by increase in tariffs for oil transportation. Tuimazy – Omsk – Novosibirsk-2 oil pipeline. The Company’s consolidated profit amounted to 46.4 bln. tenge, which The works performed are aimed at increasing the production and was by 17% higher than the planned figure. At the same time, there financial performance indicators and will have a positive impact on has been a decline in the Company’s consolidated profit compared to reliability and quality of our services.