welcome address KULIBAYEv T.A. KABYLDIN К.M. Chairman of the Management Chairman of Board of Directors Board of JSC NC «KazMunayGas» JSC NC “KazMunayGas” Dear Ladies and Gentlemen! Allow us to bring to your attention Annual Report of JSC “National Company “KazMunayGas” for 2008 The Annual Report has been prepared as re- responding work on the shelf of the Caspian aromatics production complex, which will quired by the Charter of JSC NC “KazMunayGas” Sea. In conformity with the instructions the create a synergetic effect for development of the and in accordance with the principles of good country’s President, “KazMunayGas” is working respective economic sectors in our republic. corporate governance in respect of transparency at diversification of hydrocarbons transportation “KazMunayGas” pay special attention to and impartiality of disclosure of information. routes, expansion of the CPC project, construc- development of Kazakhstan content and local In the current conditions of the global finan- tion of oil-and-gas pipelines to the East, as well oil-and-gas engineering industry. This will create cial downturn, “KazMunayGas” is actively as formation of a multimodal hydrocarbons jobs for the citizens, high level of social respon- implementing anti-crisis measures and doing transportation system in the Caspian region. sibility of the petroleum business and increased its utmost to minimize negative effects for Kaza- “KazMunayGas” is studying the best practices of revenues to the state budget. khstan’s economy. oil-and-gas operations of foreign companies. It On the whole, the set of tasks of the National During a relatively short period of its activities, continues systematic work at developing corpo- Company is quite comprehensive and “KazMu- the National Company made a considerable rate governance targeted at sustainable growth nayGas” will do its best for efficient execution breakthrough in the development of the oil-and- of capitalization and satisfaction of the interests of the instructions of the Head of State, the gas sector of the country. of the Sole Shareholder and the key stakehold- Government and the Sovereign Wellfare Fund National Company “KazMunayGas” is taking ers – the state, strategic partners and employees. “Samruk-Kazyna”. part in realization of a number of major projects Today, “KazMunayGas” takes the leading on production, processing and transportation of positions in the country’s oil-and-gas sector, hydrocarbons that enter the number of the larg- providing a quarter of oil production, 80% of est world-class projects. Acquisition of a number oil transportation, practically entire volume strategic assets in the RoK, including ownership of gas transportation and 50% of oil refining. interests in such companies as “KazGerMunai”, Investment in social sphere over the Group of “Karazhanbasmunay” and “PetroKazakhstan”, Companies amount to 100 mln USD, being one and also a purchase of a block of shares in example of corporate social responsibility. “Rompetrol” have considerably enhance KMG’s Implementing the message the RoK’s President significance in the international business com- of 6 March 2009, the National Company is munity. actively engaged in implementation of a number Being perfectly aware that developing the of breakthrough projects, including those on Caspian shelf will become a powerful stimulus development of petrochemistry in Kazakhstan to development of Kazakhstan’s economy, – creation of the first integrated gas and chemi- the National Company is carrying out the cor- cal complex, road bitumens production and Chairman of Board of Directors Chairman of the Management Board JSC NC “KazMunayGas” of JSC NC «KazMunayGas» T.A.Kulibayev К.М.Kabyldin 7 7 8 11 11 12 13 contents . OIL AND GAS UPSTREAM Reserves . 16 ecember 31, 2008 Oil production . 16 D . Gas. production. 18 . as” G as” as of as” Participation in major oil and gas G G projects . 19 unay M unay unay . M az Tengiz project . 19 M K az . az “ K North -Caspian project . 19 K “ “ NC . NC Karachaganak project . 20 NC JSC JSC JSC . .Geologic . .exploration . projects on the Caspian shelf . 20 Service infrastructure . 21 ABOUT THE COMPANY Main financial indicators Main industrial indicators Structure of assets Strategic objectives Integrated management system Board of directors Management board of MARKETING AND SELLING Petroleum and oil products . 32 Gas . 33 REFINING Oil refining . 24 Atyrau OR. 24 Shimkent OR . 26 Iinternational activity in oil refining sector. 26 Activity in gas refining . 28 Petrochemistry projects . 28 The first integrated gas chemical complex . 28 Petrochemical complex on the basis of benzene and paraxylene. 29 Manufacture of road bitumen on Aktau plant of plastics . 29 Complex on manufacture of aromatic hydrocarbons on base of Atyrau OR . 29 contents TRANSPORTATION CORPORATE OF OIL AND GAS GOVERNANCE Oil transportation by main oil Bodies of corporate pipelines . 36 governance. 60 Development of basic routes of Cooperation with shareholders. 62 Kazakhstan oil export. 37 Cooperation with the affiliated and The Kazakhstan Caspian transporta- dependent organizations . 62 tion system (KCTS – Transcaspian project). 37 The project of the Caspian Pipeline Consortium . 38 Kazakhstan - China Oil Pipeline . 38 Offshore oil transportation. 39 Gas transportation through main gas pipelines . 39 The project of Beineu –Bosoi –Akbulak Main Gas Pipeline. 40 Projects of export gas pipelines. 41 Kazakhstan - China Gas pipeline . 41 Precaspian Gas pipeline. 41 MAIN EVENTS 2008 Assets acquisition and disposal . 70 CORPORATE SOCIAL Independent auditors’ report . 71 RESPONSIBILITY Consolidated financial statements . 73 Social partnership and sponsorship. 49 Consolidated balance sheet. 73 Development of personnel Consolidated income statement. 75 potential . 50 Consolidated cash flow Environment protection. 52 statement . 76 Comprehensive Enviromental program . 55 Consolidated statement of changes The Corporate system of industrial in equity. 78 ecological monitoring . 55 Liquidation of oil pollution . 55 Other directions of activity in the field of environment protection . 55 Labour safety and industrial safety . 56 RISK MANAGEMENT APPENDICES Management board of joint-stock company NC “KazMunayGas” short summary for 2008. 82 Decisions on major transactions in 2008. 82 Information on financial LOCAL CONTENT support . 83 DEVELOPMENT List of interest-party transactions JSC NC “KazMunayGas” closed in 2008. 84 about the company ABOUT THE COMPANY MISSION THE FOllOWIng WERE DETErmINED as Ensuring of the maximal THE maIN SUBJEct OF KMG’S actIVITY: benefits for the Republic of Kazakhstan from participa- PartICIPatION IN IMPLEMEntatION OF tion in development of national oil and gas sector THE UNIFOrm statE POLICY IN THE OIL and gas SEctOR EnsURIng OF EFFEctIVE and ratIOnal DEVELOPMEnt OF OIL and gas RESOUrcES OF THE REPUBLIC vISION PartICIPatION IN THE DEVELOPMEnt OF THE stratEGY OF USE, REHABILItatION «KazMunayGas» is a highly effective oil-and-gas com- and FUrtHER IncrEasE OF RESOUrcES pany of the international OF OIL and gas class REPRESEntatION OF THE statE IntEREsts IN COntracts WITH THE COntractOrs carrYIng OUT OIL and gas OPEratIOns, BY MEans OF OBLIgatORY IndIVIDUal PartICIPatION IN COntracts PartICIPatION IN OrganIZatION OF TEndErs FOR OIL and gas OPEratIOns ON THE TErrITORY OF THE REPUBLIC OF KAZakHstan CORPOratE managEMEnt and MONITORIng ON IssUES OF EXPLOratION, DEVELOPMEnt, PRODUctION, PROCEssIng, IMPLEMEntatION, transPOrtatION OF HYdrOcarBOns, DESIgnIng, BUIldIng, OPEratIng OF OIL and gas PIPELINES and INFrastrUctURE PartICIPatION IN IntErnal and IntErnatIOnal PROJEcts OF THE REPUBLIC OF KAZakHstan IN IMPLEMEntatION OF OIL and gas OPEratIOns accOrdIng TO THE PROCEDURE EstaBLISHED BY THE LEGIslatION ABOUT THE COMPANY National Company “KazMunayGas” (KMG) is a Kazakhstan national operator in exploration, production, processing and transportation of hydrocarbons representing the interests of the State in the oil-and-gas sector of Kazakhstan. 100 percent of shares belong to the JSC “National Welfare Fund “Samruk-Kazyna”. Mission subject of KMG’s activity: processing, sales, transportation of hydrocar- Ensuring of the maximal benefits for the – participation in implementation of the uniform bons, designing, building, operating of oil and Republic of Kazakhstan from participation in state policy in the oil and gas sector; gas pipelines and infrastructure; development of national oil and gas sector – ensuring of effective and rational development – participation in internal and international of oil and gas resources of the republic; projects of the Republic of Kazakhstan in imple- Vision mentation of oil and gas operations according to – participation in the development of the strat- JSC “KazMunayGas” is a highly effective oil-and- the procedure established by the legislation. egy of use, rehabilitation and further increase of gas company of the international class. resources of oil and gas; NC “KazMunayGas” is a vertically integrated oil and gas company which carries out exploration, JSC NC “KazMunayGas” was created by the – representation of the state interests in production, transportation, refining of hydro- merger of the National oil and gas company contracts with the contractors carrying out oil carbon raw material, marketing and sale opera- “Kazakhoil” and National company “Transport and gas operations, by means of obligatory tions, services. KMG takes the leading positions of oil and gas” on the basis of the Decree of the individual participation