2017 EITI Report

THE 13th NATIONAL REPORT On the implementation of the Extractive Industries Transparency Initiative in the Republic of Kazakhstan for 2017 The work is performed by “UHY SAPA Consulting” LLP in accordance with the contract on public procurement of services № 75 dated June 22, 2018 entered into with the RSI “Committee of Geology and Subsoil Use of the Ministry of Investment and Development of the Republic of Kazakhstan” 1 CONTENT List of definitions and abbreviations 6 Report on the results of the implementation of the agreed 8 procedures Extractive Industries Transparency Initiative Report for the year 11 ended December 31, 2017 I. Report on the actual results of the assembly and verification of 11 cash flows, the implementation of agreed procedures 1.1. EITI in the Republic of Kazakhstan 11 II. APPROACH FOR DATA RECONCILIATION 13 2.1 Purpose 13 2.2. Scope of work 13 2.3. Approach to data reconciliation 13 III. OVERVIEW OF THE MINING INDUSTRY IN 2017 18 3.1. Licenses and contracts 18 3.1.1. Legal basis and fiscal regime 18 3.1.2. Licensing 46 3.1.3. Register of licenses / contracts 48 3.1.4. Contract Information and PSA 50 3.1.5. Information on beneficial ownership 73 3.1.6. State participation in the extractive industries 75 3.2. Extractive Industry Overview 89 3.2.1. Oil and gas sector: reserves, exploration, production and export 89 3.2.2. Mining Sector: Reserves, Mining and Export 106 3.3. Government revenues generated by the extractive industries 127 3.3.1. Taxes and other charges 127 3.3.2. Payments in kind 132 3.3.3. Shipping Income 132 Oil transportation 132 Gas transportation 137 Transportation by rail 140 3.3.4. Infrastructure presentation barter agreements 141 3.3.5. Transactions of public companies 142 3.4. Distribution of revenues from the extractive industries 145 3.5. Social expenses 148 3.6. Quasi-fiscal costs of state-owned companies 148 3.7. Information on Kazakhstan content 150 3.8. Contribution of the extractive sector to the economy 150 IV VERIFICATION OF ACCOUNTABLE PAYMENTS 152 4.1. Consolidated report on significant tax and non-tax 152 Payments/Revenues 4.1.1. Tax revenues 154 4.1.2. Income for the use of natural and other resources 172 4.1.3. Other non-tax revenues to the budget 177 4.1.4. Customs payments 190 4.2. Payments reflected in foreign currency (USD) 222 4.3. Total taxes and other obligatory payments to the budget 224 4.3.1. Tax payments to the budget from Payers of oil and gas sector 224 2 4.3.2. Tax payments to the budget from Payers of mining sector 224 4.4. The distribution of taxes and other obligatory payments in budgets 224 4.5. The level and percentage of unidentified discrepancy 225 4.6. Summary reports on payments aimed at the development of the 228 social sphere and local infrastructure 4.7. Summary report on Payments / Receipts on state shares in the 228 property of Payers for 2017, paid / received in 2018 and the results of their reconciliation V RECOMMENDATIONS 229 APPENDIXES Appendix 1-3 Report form on Payments / Receipts made in foreign currency Appendix 1-4 Summary form of the report on substantial tax and non-tax Payments / Cash receipts for each Payer of the Mining Sector for 2017 Appendix 1-5 Summary form of the report on substantial tax and non-tax Payments / Cash receipts for each Payer of the oil and gas sector for 2017 Appendix 1-6 Summary report on significant tax and non-tax Payments / Receipts of Payers of the oil and gas and mining sectors of the Republic of Kazakhstan for 2017 Appendix 2-2 Summary report on payments / receipts for state ownership shares Appendix 3-2 Summary report on social development and local infrastructure expenditures, excluding funds transferred to BCC 206114 Appendix 4 Quasi-Fiscal Expenditure Report Appendix 5 Funds allocated to treatment plants, monitoring of pollution of the subsoil, social sphere and training of specialists on the basis of reporting on LCU forms Appendix 6 Volumes of production and exports by types of minerals in the oil and gas and mining sectors Appendix 7 Information on transportation through KazTransOil JSC, KazTransGas JSC and IK Kazakhstan Temir Zholy JSC for 2017 Appendix 8 Extractive Industry Information Appendix 9 Information on the Kazakhstan content in the procurement of goods, works and services for 2017 of the subsoil users of the oil and gas sector Appendix 10 The list of companies in the oil and gas and mining sectors. Appendix 11 Statement of materiality (5 tables) Appendix 12 Information on clarified and unexplained discrepancies in Appendix 3-2 “Summary report on expenditures on social development and local infrastructure, except for funds transferred to BCC 206114” for 2017 3 LIST OF TABLES Table 1 List of payments and receipts to be reconciled 15 Table 2 Information on PSA: participants, their shares, country of origin, 68 data on contracts Table 3 Information on PSA: investment, social spending and taxes 70 Table 4 Shares of participation of Samruk-Kazyna National Welfare Fund 76 JSC in companies Table 5 Net asset value Samruk-Kazyna, 2017 76 Table 6 Shares of participation of “KazTransOil” JSC in 2016-2017 82 Table 7 The main oil fields (with initial recoverable reserves of categories 90 A + B + C1 more than 30 mln. tons (information on production from the reporting of subsoil users) Table 8 The volume of industrial production (goods, services), in value 97 terms, in 2016-2017, mln. tenge Table 9 The volume of industrial production (goods, services), in value 98 terms, by region, in 2016-2017 billion tenge Table 10 Export of coal by countries 101 Table 11 Export of oil and gas condensate by country 103 Table 12 Export of natural gas by country 106 Table 13 Large gold deposits of the Republic of Kazakhstan 111 Table 14 10 investment projects implemented in cooperation with foreign 114 investors Table 15 Amount of attracted investments 115 Table 16 Production activities of KAZMinerals in 2016-2017 121 Table 17 Production of copper and polymetals 121 Table 18 Report on receipts and use of the National Fund of the Republic of 128 Kazakhstan for 2016-2017 Table 19 Revenues to the National Fund of the Republic of Kazakhstan in 129 2017, their share in the state budget revenues Table 20 Information on the share of tax revenues of companies in the 131 extractive sector in tax revenues of the consolidated budget (GB + NF), republican and local budgets in 2017 Table 21 Volumes of oil transportation by destinations and consumers 133 through the system of “KazTransOil” JSC Table 22 Routes and volumes of oil transportation in 2017 135 Table 23 Data on income received in connection with the transportation of 136 oil of “KazTransOil” JSC for 2017 Table 24 Taxes of “KazTransOil” JSC in 2017 and payments to the budget 137 for transportation Table 25 Use of targeted transfers from the National Fund of the Republic of 145 Kazakhstan for 2017 Table 26 Mining industry in the industrial structure of Kazakhstan in 2016- 151 2017 Table 27 The number of workers in the mining industry and their share of 151 the total number of employees 4 LIST OF FIGURES Figure 1 Interactive map of subsoil use 49 Figure 2. Extraction of oil and gas condensate TCO 71 Figure 3 The structure of state participation in the “National Company 78 KazMunaiGas” JSC Figure 4 Ownership structure of NC KMG subsidiaries 79 Figure 5 Ownership structure of KMG EP 81 Figure 6 Subsidiaries and affiliates of NAC Kazatomprom JSC 83 Figure 7 Repayment of loans of JSC NC “KazMunayGas” 88 Figure 8 Distribution of balance recoverable oil reserves by regions of the 89 Republic of Kazakhstan Figure 9 Exploration projects of KMG EP 92 Figure 10 Gross FDI inflows to geological exploration and survey activities 93 Figure 11 Coal mining in the context of the regions in 2010-2017. 93 Figure 12 Dynamics of oil and gas condensate production in 2007–2017 94 Figure 13 The companies that provided the bulk of oil and gas condensate 94 production (data for December 2017 Figure 14 The volume of production and growth rates of oil and gas 95 condensate in the regions in 2017 Figure 15 Natural gas production 96 Figure 16 Companies that provided the bulk of production 96 Figure 17 The volume of production and growth rates of natural gas in the 97 regions in 2017 Figure 18 Top 10 countries importing oil and gas condensate in 2017 102 Figure 19 Exports of imports of natural gas in 2016-2017 104 Figure 20 Main gas sales schemes of “KazRosGaz” LLP 105 Figure 21 Kazakhstan's share in global proven reserves 111 Figure 22 Distribution of investment in subsoil use by region in 2017 112 Figure 23 Distribution of investment in minerals in 2017 113 Figure 24 Structure of investment in subsoil use in 2017 114 Figure 25 Gold mining by region in 2016-2017 117 Figure 26 Production of gold and silver in 2010-2017 120 Figure 27 Iron ore mining by region in 2010–1017 122 Figure 28 Mining of manganese, aluminum and chrome ores in 2010-2017 123 Figure 29 Average monthly prices for uranium in 2014-2017 124 Figure 30 Direct taxes from the oil and gas sector to the National Fund (with 128 the exception of taxes credited to local budgets) in 2016-2017. Figure 31 Trunk Pipeline 134 Figure 32 Gas pipeline network of the Republic of Kazakhstan 139 5 List of definitions and abbreviations EITI Extractive Industries Transparency Initiative BP British Petroleum CRIRSCO Committee for Mineral Reserves International Reporting Standards EIA Energy Information Administration (EIA) — independent agency within the US Federal Statistical System responsible for collecting, analyzing and disseminating energy and energy information.

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