SUSTAINABILITY REPORT 2019 STRIVING FOR PROGRESS CONTENTS | 2 Report Overview | 4 KMG Group Key Performance Indicators | 16 Message of the Chairman of the Board of Directors | 18 Message of the Chairman of the Management Board 20 34 48 56 88 102 Company Overview Sustainability Economic Environmental Social Appendices Management Performance Responsibility and Safety at the Workplace Responsibility Company’s Mission Sustainability Integration Generated and Distributed Our Approach to the Management Employment Appendix 1 and Strategic Intents | 34 Economic Value | 56 | 88 Reporting Limits, Changes, Notes | 24 | 49 | 102 Ethics and Integrity Workplace Safety Equal Opportunities Corporate Governance | 37 Implementation of Investment | 58 and Our Market Presence Appendix 2 | 25 Projects | 93 Environmental Indicators Mechanisms for Seeking Advice | 50 Occupational Health | 105 Key Corporate Events in 2019 on Unethical Conduct and Workplace Hygiene Observance of Human Rights | 31 | 37 Procurement Practices | 61 and Social Assistance Appendix 3 | 52 | 94 GRI Content Index Digital Transformation Stakeholder Engagement Industrial Safety | 108 | 32 | 39 Anti-Corruption Management | 62 Staff Development | 54 | 97 Appendix 4 Identification of Material Topics Environmental Performance Abbreviations and Acronyms of the Report | 64 Our Communities | 117 | 41 | 99 Transition to Low Carbon Contact details Initiatives and Memberships Development | 118 | 44 | 79 Compliance with Requirements | 85 HSE training | 86 1 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 United Nations REPORT OVERVIEW Global Compact GRI 102-1, 102-32, 102-46, 102-50, 102-52, 102-54 Businesses should support and respect the protection of the internationally Principle 1 proclaimed human rights. Human rights Principle 2 Businesses should not be complicit in human rights abuses. Businesses should uphold the freedom of association and the effective Principle 3 recognition of the right to collective bargaining. Businesses should uphold the elimination of all forms of forced Principle 4 and compulsory labour. Principle 5 Businesses should uphold the effective abolition of child labour. Labour relations Businesses should uphold the elimination of discrimination in respect In order to demonstrate its clear and transparent This Report has been compiled pursuant to the Global Principle 6 of employment and occupation. operations to its stakeholders, JSC NC “KazMunayGas” Reporting Initiative Sustainability Reporting Standards describes the Company’s approach to sustainable (GRI Standards, 2016) and the sector supplement for development, social, economic and environmental oil and gas companies called GRI G4 Oil and Gas Sector Principle 7 Businesses should support a precautionary approach to environmental challenges. responsibility on an annual basis. Disclosures. Businesses should undertake initiatives to promote greater environmental Principle 8 JSC NC “KazMunayGas” has been developing annual In order to enable benchmarking and comparability of data responsibility. reports in the field of sustainable development activities by specific indicators, the information is presented in since 2008, while since 2012, these reports have been the form of multi-year trends. Environment Businesses should encourage the development and diffusion of environmentally Principle 9 published in accordance with the GRI Sustainability friendly technologies. Reporting Standards (GRI Standards). All the KMG Sustainability Reports are available in electronic and on-line form This report has been prepared in accordance with the GRI in Kazakh, Russian and English at Standards: Core option. http://kmg.kz/eng/ustoichivoe_razvitie/ Businesses should work against corruption in all its forms, including reports/. Principle 10 The Report contains consolidated data about KMG, its extortion and bribery. subsidiaries and associated companies for 2019 calendar The KMG Sustainability Report is approved by a resolution Anti-corruption year (hereinafter referred to as KMG, the Company, of KMG’s Board of Directors and is communicated to the Group). the stakeholders by means of publication on the corporate website and distribution of the paper copy. The scope of the Report covers KMG’s subsidiaries and associated companies with fifty and more per cent of Since 2006, KMG has been a member and active voting shares (interest) directly or indirectly owned or participant of the United Nations Global Compact held in trust by KMG, as well as the legal entities whose (hereinafter — the UN GC) and is committed to the UN GC activities KMG is entitled to control (the detailed scope of Ten Principles and 17 Sustainable Development Goals reports by sections is presented in Appendix 1 hereto). (hereinafter — the SDG/SDGs). The Company’s Annual Sustainability Report is our message on The Company’s financial standing and production the progress under the United Nations performance are presented based on the Company’s Global Compact and is available at consolidated data with the organizational support of https://www.unglobalcompact.org/ the Company’s relevant Business Units. This Report has what-is-gc/participants/6810. been developed on the basis of KMG’s management and audited financial statements prepared in accordance with the International Financial Reporting Standards. 2 3 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 KMG GROUP KEY PERFORMANCE INDICATORS GRI 102-2, 102-7, OG1 Oil and Gas Production OIL AND CONDENSATE PRODUCTION NATURAL AND ASSOCIATED GAS CO2 EMISSION RATE PRMS RESERVES, PRODUCTION CATEGORY 2P 23,618 93 8,4553 thousand tonnes mln m tonne per 1,000 t of HCs 2019 2019 2019 2017 23,362 2017 7,996 2017 110 676 2018 23,606 2018 8,137 2018 101 mln tonnes of o.e. 2019 23,618 2019 8,455 2019 93 0 | 8,000 | 16,000 | 24,000 0 | 3,000 | 6,000 | 9,000 0 | 30 | 60 | 90 | 120 4 5 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 KMG GROUP KEY PERFORMANCE INDICATORS GRI 102-2, 102-7 Oil and Gas Transportation 57% OIL TRANSPORTATION VIA GAS TRANSPORTATION VIA OIL TRANSPORTATION BY SEA OF TOTAL OIL TRANSPORTATION THE TRUNK PIPELINES THE TRUNK PIPELINES IN KAZAKHSTAN 67,337 103,4943 10,729 thousand tonnes mln m thousand tonnes 2019 2019 2019 % 2017 67,864 2017 100,857 2017 6,951 79 2018 67,961 2018 111,567 2018 7,077 OF TOTAL GAS TRANSPORTATION 2019 67,337 2019 103,494 2019 10,729 IN KAZAKHSTAN 60,000 | 65,000 | 70,000 60,000 | 80,000 | 100,000 | 120,000 0 | 3,000 | 6,000 | 9,000 | 12,000 6 7 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 KMG GROUP KEY PERFORMANCE INDICATORS GRI 102-2, 102-7 Refining and Marketing Service LAND AND AIR OFFSHORE OPERATIONS DRILLING AND INTEGRATED OIL REFINING TRANSPORT SUPPORT SERVICES WHOLESALE OF OIL PRODUCTS PRODUCED IN KAZAKHSTAN 20,588 thousand tonnes , 3 136 PROCESS OIL SPILL OIL AND GAS EQUIPMENT 2019 thousand tonnes 2019 AUTOMATION RESPONSE SERVICES MANUFACTURE 2017 18,207 Domestic market 2,333 2018 19,715 Export 804 THOUSAND VEHICLES 2019 20,588 Total 3,136 MORE ARE ENGAGED AT OUR PRODUCTION 0 | 8,000 | 16,000 | 24,000 THAN 0 | 1,000 | 2,000 | 3,000 | 4,000 10.5 FACILITIES ON A DAILY BASIS 8 9 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 KMG GROUP KEY PERFORMANCE INDICATORS GRI 102-2, 102-7, 102-9 Financial Performance PROFIT TAXES PROCUREMENTS SHARE OF LOCAL CONTENT IN PROCUREMENTS 1,158 1,522 2,132 81 billion tenge billion tenge billion tenge % 2019 2019 2019 2019 2017 525 2017 2,553 2017 75 Taxes and other obligatory payments 2018 694 2018 2,428 2018 79 to the state revenue 5.4% higher 2019 1,158 2019 2,132 2019 81 than previous year 0 | 300 | 600 | 900 | 1,200 0 | 1,000 | 2,000 | 3,000 0 | 25 | 50 | 75 | 100 10 11 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 KMG GROUP KEY PERFORMANCE INDICATORS GRI 102-2, 102-7, 102-8 Social Responsibility and HSE Indicators EMPLOYEES* SOCIAL SUPPORT EXPENSES LOST TIME INJURY RATE (LTIR) FATAL ACCIDENT RATE (FAR) 70,938 22 0.31 1.28 people billion tenge 2019 2019 2019 2019 2017 80,406 2017 19 2017 0.42 2017 3.25 2018 76,229 2018 22 2018 0.32 2018 0.65 2019 70,938 2019 22 2019 0.31 2019 1.28 60,000 | 65,000 | 70,000 | 75,000 | 80,000 0 | 5 | 10 | 15 | 20 | 25 0 | 0.1 | 0.2 | 0.3 | 0.4 | 0.5 0 | 1 | 2 | 3 | 4 * Actual headcount, see Appendix 1 and p. 91 for details 12 13 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 KMG GROUP KEY PERFORMANCE INDICATORS GRI 102-2, 102-7 Environmental Performance WATER WITHDRAWAL CO2 EMISSIONS* ENERGY SAVING ASSOCIATED PETROLEUM GAS DISPOSAL PERCENTAGE 93.6 9.7 754.7 3 97 mln m mln tonnes thousand GJ % 2019 2019 2019 2019 2017 84.4 2017 8.4 2017 883.3 2017 85 2018 93.7 2018 9.3 2018 436.8 2018 93 2019 93.6 2019 9.7 2019 754.7 2019 97 50 | 60 | 70 | 80 | 90 | 100 5 | 6 | 7 | 8 | 9 | 10 0 | 300 | 600 | 900 50 | 60 | 70 | 80 | 90 | 100 * See more on calculation methods in Appendix 1 14 15 Report Company Sustainability Economic Environmental Liability Social Appendices Overview Overview Management Performance and Workplace Safety Responsibility Sustainability report 2019 MESSAGE OF THE CHAIRMAN OF THE BOARD OF DIRECTORS GRI 102-10, 102-14, 102-44 Dear readers, all business processes of the KMG Group, effectively we have been regularly reviewing the implementation liaise with stakeholders, and ensure that sustainability of the sustainability system throughout KMG.