Caspian Energy

OIL OUTPUT IN KAZAKHSTAN KEEPS GROWING

Kazakhstan intends to produce 52 mln tons of oil and condensed gas in 2003, Vladimir Shkolnik, minister for Energy and Mineral Resources reported. He said by 2015 oil production in Kazakhstan would make about 150 mln tons. He also stated that in 2002 Kazakhstan had recovered more than 14 bln c/m of gas and intends to recover 70 bln c/m by 2015.
The State Statistic Agency of Kazakhstan reported that oil and gas exports from the country reached the mark of 39.27 mln tons in 2002. It means, approximately up to 800,000 barrels of oil was exported a day, compared with 650,000 bpd of oil and gas in previous 2001. In 2002 Kazakhsatn exported 1.11 mln tons of oil products. State
Revenues compared with the previous year grew up by 18%. Revenues from the sale of oil products, on the contrary, reduced by 18% and made $119 mln. The State Statistic Agency of Kazakhstan confirmed that the country was planning to increase oil recovery in 2003 by 10%.
KazMunayGaz National Company, established by the Presidential Decree "On Measures for Further Provision of the State Interests in Oil and Gas sector of the Country" as a closed stock company with 100% production share of the state by means of merging the Kazakhoil NOC and Oil and Gas Transport NC (OGT NC) has been a key champion of the national policy in the country's oil and gas industry since February 20, 2002. As the KazMunayGaz NC press service reported, the Company that has united the assets of the KazakhOil and OGT NC had been set rather a hard strategic task by the country leadership, i.e. to become the national operator in oil and gas industry, representing the state interests in Kazakhstan's oil industry, as well as a plenipotentiary body in prospecting, developing , refining and transportation of the hydrocarbons. It would mean that, henceforth, the newly established CSC (Closed Stock Company) was to be not simply engaged in production and transportation of the oil, but also to pursue the country's oil policy .
KazMunayGaz is currently a vertically integrated oil and gas operator, realizing full production cycle. The Company now owns stocks and production shares in 52 enterprises of various destinations.
The Company carried out consolidation of the assets within a year and started to realize optimization of its structure. New enterprises have been formed on promising directions of the activity, in particular, export of Kazakh hydrocarbons have been realized through the KazRosGaz JV to Eastern Europe for the first time.
Growth has been achieved on all basic production indices, both in regard of the results of the previous year and in regard of the plans as well. Cost per unit reduction has been ensured in production of the oil. A number of important projects of strategic significance have also been realized. Grounds have been laid for successful development of the new projects and integration of the Company into world oil community.

OUTCOME OF 2002

Output
Oil output by subsidiaries made 7,430,000 tons, which is more by 6% and surpasses the previous year level by 13%. Output growth was achieved owing to investments into the industrial construction, drilling the wells and applying new methods for the reservoir recovery increase.
The volume of oil refining at Aktau Oil Refinery (AOR) has been 2,271,000 tons which is less than the plan but by 4% higher of the level of previous year output. In 2003 the Company will continue the reconstruction of the AOR aimed at modernizing and renewal of the refinery's existing capacities.

Transportation
Total oil transportation volume on KazTransOil system has been 30,317,000 tons last year, which is 10% higher of the plan and 5.3% less compared with 2001 ( when it was 32,023,000 tons). Curtail in transportation is linked with putting into operation the CPC pipeline and diverting substantial volumes of Tengiz oil from KazTransOil CSC system.
In January 2003 the oil transportation volume has been 2,712,000 tons which is 2.2% more than planned and by 14.2% more compared with the same period of last year (2,375,000 tons).
Total gas transportation volume on Intergaz Central Asia CSC gas mains surpassed 109.5 bln c/m in 2002 against 108.9 bln c/m of the planned volumes, but lower of the last year level by 2.2%. The fall was caused by the reduction of Russian transit. Simultaneously, the growth of Turkmen gas transportation is marked along the Central Asia- Center (CAC) gas main during the period under report. A distinguishing feature of 2002, compared with the previous year, is the growth of Kazakh gas exports, i.e. 5.9 bln c/m, which was caused by additional export gas supplies from Karachaganak gas field that failed to exist in 2001. In January 2003 gas transportation volumes made 10,3 bln c/m, or 100% of the plan and higher of the level of the previous year by 10.6%.
The total water supply volume along the water lines made 14,373,000 c/m which is by 60% less than in 2001. Reduction of this figure is related to transfer of the Ural's Akimatu water supply to Atyrau. Besides, some of the communal enterprises were limited in water supplies in connection of non-payments.
The KazMorTransFlot (shipping company) rendered services on shipment and transportation of oil by tankers in the volume of 3,221,000 tons which is 3% ahead the plan.The gas transportation on gas mains prevailed 109 bln c/m which is lower of the previous year by 2%. The gas transportation volume decrease is related to the curtail of Russian transit volume. The most substantial achievement of 2002 is the 6-fold growth of Kazakh gas exports that has reached up to 5.9 bln c/m.

Basic Financial results
The income increased by 31% compared with the previous year and made 371.8 bln tenge. Total net profit has been 56.8 bln tenge. The subsidiaries and dependent organization of KazMunayGaz paid to the country budget taxes and duties amounting 66.407 mln tenge.

The Kenkiyak-Atyrau oil pipeline
The construction of the first phase of Kenkiyak-Atyrau pipeline became most significant project of last year for the country. The commercial operation of the pipeline is to start in the second half of 2003. The preliminary carrying capacity of the pipeline is to be 6 mln tons of oil a year.

Rehabilitation of the Uzen Field
KazMunayGaz has continued the realization of the project of rehabilitation of the Uzen field. All necessary equipment and materials have been purchased, all key contracts have been signed to supply the technical and consultation services on the project.
Work is continued to restore physically the work of the wells applying new technologies to increase the reservoir recovery and reconstruct the surface buildings. 422,000 tons of oil was planned to recover in 2002, but in fact they managed to recover 508,000 tons.

The Kurmagazi Project
Last year the Company started mastering the offshore Kurmangazi project in the Caspian shelf. Documents have been signed that clarify the basic terms of joint activities with Rosneft (Russian company). Preliminary Environmental Impact Assessment has been made and the autumn ecological studies have been realized.

Amangeldi Field
In 2002 the development of the Amangeldi gas field was continued. During realization of the said project drilling 4 wells was completed, and drilling of the fifth has taken start. All construction and assembly work is over and 38 km long gas-line has been laid.
About the Accomplishment of the Functions of Plenipotentiary Body of the Government of Republic of Kazakhstan on Tengiz, Karachaganak and North Caspian Projects.

TChO JV
Oil output at TengizChevrOil (TChO) has been 13.1 mln tons last year. The working programs for 2002 were realized in the frame planned budget. The project of the second generation refinery and crude gas injection back into the reservoir is currently at the stage of consideration of the problems of financing details.
Karachaganak PSA 5,119,000 tons of condensed gas and 4,725,000 c/m of gas has been recovered at Karachaganak gas condensate field. At present the second phase of the field mastering is underway which is aimed at increasing the output of liquid hydrocarbons up to 8 mln tons and export of the product by means of CPC system. The total expected investments into the project in 2002 were $1,212 mln.

The North Caspian Project
For The North Caspian Project last year has been of historic significance. On June 28, 2002 the largest for the last dozens of years discovery of the commercial Kashagan field was declared.
Its recoverable reserves are estimated in 13 bln barrels. Last September they also announced the discovery of hydrocarbons in Kalamkas structure. Work has started at the Kayran and Aktoty structures.

Import Substitution
The KazMunaygaz Company has declared the support of internal producers to be one of its priorities. The production plan of her MunayMas subsidiary has been fulfilled in 2002 by 100%. In 2002 KazMunayGaz put into operation the pipeline bases on repair and production of the pump and compressor pipes at UzenMunayGaz and EmbaMunayGaz.
Lately the plants of the Republic of Kazakhstan has mastered the production of more than 200 denominations of oil and gas equipment, spare parts and materials. The qualities of the country producers meet the necessary parameters and technical conditions. In 2002 the subsidiaries of KazMunayGaz have bought equipment and materials from the domestic manufactures to the amount of $26 mln.

Priorities for 2003
In 2003 the KazMunayGaz Company intends to reach new heights. The Company's priorities are:

* Development of the crude base and enhancement of high output rates;
* Increasing the efficiency of the use of crude resources;
* Development of the oil refining industry, oil and gas transportation system and the infrastructure for the support of oil operations;
* Imports substitution and development of the domestic machine-building industry;
* Training national personnel for oil and gas industry;
* Ensuring the safety in production and protection of the environment;
Crude base development is realized by KazMunayGaz on the account of carrying out exploration at the new promising territories mainly at offshore structures and fields in the north-eastern coast of the Caspian shelf.
Growing of the reserves in the field under development and adjoining territories is to be realized by means of revealing and re-appraisal of the existing reserves.
In 2003 the oil output is planned in 7.5 mln tons. To reach the commitments some organizational-technical actions are to be undertaken that envisage a greater volume of drilling work and constructing the wells, over-haul and underground repair of the wells, transfer of more than 200 wells to automated operation system.
Commercial oil recovery is planned to start at Alibekmola field.
The first launching system is to be put into operation at Amangeldi field in midst of 2003. 12 wells a plant of complex gas treatment, infrastructure units and 195 km long pipeline is to be put into operation in the frame of project. Gas production is planned in the volume of 365 mln c/m a year.
On the Kurmangazi Project the company has planned to sign a contract for the use of earth bowels with the Competent Body of the Republic of Kazakhstan, as well as carrying out spring and summer ecological studies and drilling one or two prospecting wells.
In 2003 the first part of the Kenkiyak-Atyrau pipeline is to be put into operation, the Kumkol-Jusali pipeline is to be started, the carrying capacity of the Central Asia-Center (Russia) gas main is to be extended. Preparations are to be continued to substantiate the investments into the projects to increase the carrying capacity of the existing Atyrau-Samara (Russia) export system (up to 30 mln tons a year) and CPC as well as the projects on creating the new oil transporting systems KumKol-Aralsk-Kenkiyak and the pipelines to transport the Kashagan field oil.
As to the activities of the National Company as a Plenipotentiary Body to represent the interests of the state in largest projects with foreign participation, in 2003 the company is to focus her attention over the following tasks:
* On North-Caspian Project to realize complex work in drilling and testing three prospecting and one appraisal well; continuation of the work developing the offshore and onshore infrastructure in order to start the commercial oil output in 2005;
* On Tengiz Project to reach the stabilization of the oil output in the level of 12-13 mln tons a year.
* On Karachaganak Project - to increase the crude output from 5 to 9 mln tons of liquid hydrocarbons a year, as well as completion of the Greater Chagan -Atyrau pipeline construction and starting oil exports along the CPC pipeline.