The investment portfolio is represented by a number of projects in the areas of oil exploration, transportation and refining that are traditional for KMG. The Company is also working on evaluating new projects in alternative energy and reducing the carbon footprint of KMG’s existing operating assets.

The total value of the investment portfolio for 2022 amounts to 51,311.6 billion tenge, including 18,516.1 billion tenge²³ falling to share of KMG.

Tengiz, Kashagan, Karachaganak megaprojects

KMG participates in projects on large fields: Tengiz (20 %), Kashagan (16.87 %) and Karachaganak (10 %), together with the strategic investors.

• The Wellhead Pressure Management / Future Growth Project is being implemented at Tengiz. Completion of the main construction works and start of commissioning are planned for 2023. The commissioning of the WPMP facilities is scheduled for December 2023. The project will allow increasing the oil production by 12 million tons per year.
• On Karachaganak field, the projects are being actively implemented to maintain the production plateau. In 2021, the Gas Debottlenecking Project (KGDBN) at Karachaganak Processing Complex and the 4^th Injection Compressor (4IC) Installation Project were successfully completed. Currently, the “5^th Injection Compressor Installation Project” is under active construction, according to which it is planned to reach 85 % in the overall progress of work by the end of 2023.
• Also, in 2022, an investment decision (FID) was made on the implementation of the “6^th Injection Compressor Installation Project”.
• At Kashagan field, in September 2022, the “Project for upgrading the existing sour gas injection (SGI) compressors” was put into operation. The expected additional oil production from upgrading the SGI compressors by 2041 will be about 8.5 million tons.
• The field is currently being produced as part of Stage 1 of the development. Stage 2 is considered within three separate projects, the most studied of which are Stage 2 ‘A’ and Stage 2 ‘B’ that are aimed at increasing the level of oil and condensate production over the next 10 years to ~710 thousand barrel per day (~89.5 thousand tons / day). The final decision on investment in these projects is expected to be made in 2023–2024.

Exploration and oil and gas production

In 2022, in order to improve the investment attractiveness of the oil and gas industry in the Republic of Kazakhstan, the Government, with the participation of foreign investors and KMG, developed a mechanism of Improved Model Contract (hereinafter – the IMC), which provides a number of regulatory and fiscal preferences for complex projects that require additional incentives (new complex onshore projects, offshore projects and gas projects). In December 2022, the relevant Package of Amendments to the Code of Subsoil and Subsoil Use and the Tax Code was signed by the Head of the State of the Republic of Kazakhstan. These amendments affect a number of KMG’s projects and will make it possible to intensify work both on the shelf of the Caspian Sea and on a number of complex and gas onshore projects.

At the beginning of December 2022, mobilization and prospecting drilling of a well with a depth of 3,300 m were launched at Zhenis site in the Kazakhstan sector of the Caspian Sea. It is planned to complete drilling of the exploration well in 2023.

In 2023, it is planned to sign a Subsoil Use Contract for Kalamkas More – Khazar section. The reserves for this field have been confirmed, the next step is to select a development concept together with the strategic partner – LUKOIL PJSC.

KMG also actively carries out onshore exploration. In 2022, preparatory work was performed for drilling exploration wells in Turgay Paleozoic and Karaton Podsolevoy sections. In 2023, it is planned to drill wells with a depth of 5.5 thousand meters in these sections.

In December 2022, the Contracts for exploration and production on Taisoigan-1 and 2 sections in Atyrau Oblast were signed. Earlier in 2019, a large-scale high-resolution 3D seismic survey, which was unique for Kazakhstan, was conducted in these sections, which made it possible to identify more than 300 million tons of geological resources.

In 2022, licenses were obtained for Geological Study of Subsoil (GSS) for 5 sections (Mugodzhary, Berezovsky, Zharkyn, Bolashak and Northern Ozen). As part of the analytical work on modelling the main sedimentary basins, 5 most promising areas have been identified that require further study. Thus, in 2023, it is planned to conduct a “outrunning” seismic survey as part of the program for the geological survey of the subsoil.

The work continues to increase reserves through additional exploration of existing onshore fields. In particular, in 2022, the fields S. Nurzhanov, Nothern Uaz and South-Eastern Novobogat of Embamunaigas JSC, after completion of additional exploration, were transferred to the production stage. At another field – Western Karasor – the work continues and it is expected to be transferred to the production stage in 2024. Under Eastern Urikhtau and Development of Rozhkovskoye field projects, the work continues on pilot production, it is planned to start the production in 2023–2024.

Oil transportation

In 2021, the “First stage of the reverse of a section of Kenkiyak-Atyrau oil pipeline” project was completed with the possibility of transporting oil in reverse mode up to 6 million tons per year. In 2022, 4.3 million tons of oil were transported in the reverse direction.

Work is performed to increase the capacity of the CPC pipeline to 80 million tons per year. In addition, the issue of increasing the export potential along an alternative route through the Caspian Sea from Aktau port is being worked out.

Oil refining and oil products marketing

One of the main tasks for KMG in the coming years is to address the issue of supplying the domestic market of Kazakhstan with domestic oil products due to the predicted growth in consumption.

In order to ensure the security of energy supply to the northern and eastern regions of the Republic of Kazakhstan, the PPCP is already implementing the projects for the purification of LHGG and the production of winter diesel fuel. The launch of the units is planned for 2024–2025, respectively.

In addition, the issues are currently being studied to expand the capacities of domestic refineries – PKOP LLP and CASPI BITUM JV LLP. In 2023, the results of the pre-feasibility study are expected, following which further decisions will be made.

Within the framework of the Kazakh-Romanian investment fund, in 2021, KMG International N.V. completed the implementation of the first stage of expanding the retail network for the sale of oil products in Romania: the construction of 25 filling stations. In 2023, it is planned to continue the construction of filling stations as part of the next stage of expanding the retail network of filling stations in Romania through the phased construction of 44 filling stations.

Petroleum and gas chemistry

“Petroleum and gas chemistry is a new priority direction of our Company. We intend to actively develop production in the field of oil and gas processing to create a wide range of value-added products.”

Chairman of the Management Board
of KMG NC JSC Magzum Mirzagaliyev

On 8 November 2022, a large-scale integrated gas chemical complex of Kazakhstan Petrochemical Industries Inc (hereinafter – KPI) was launched with a capacity of up to 500 thousand tons of polypropylene per year. The work of the enterprise was started by the Head of the State Kassym-Zhomart Tokayev during his visit to Atyrau Oblast.

Production at the enterprise fully complies with all environmental requirements. The raw material for the complex is propane purified from harmful impurities, which is converted into propylene through the production chain, and then into polypropylene. The process eliminates the formation of dangerous harmful substances such as hydrogen sulphide, sulphur dioxide, aromatic hydrocarbons, etc.

The complex is also environmentally friendly in terms of external water consumption – a closed cycle of circulating water supply for the needs of technological processes allows solving the problem of minimizing water consumption due to almost one hundred percent disposal of wastewater and reuse thereof in the form of greywater (integration with the complex of treatment facilities of Karabatan Utility Solutions LLP (hereinafter – KUS)). The effluent treatment process at KUS includes a Zero Liquid Discharge (ZLD) facility. This process makes it possible to avoid the discharge of liquid waste into the environment.

The production uses a waste heat boiler manufactured by Hamon Deltak to recover the heat generated during the combustion of gases and combustion products. The waste heat boiler is equipped with a catalytic system that allows reducing NOx emissions by supplying ammonia. The system is controlled by an in-line flue gas analyser that measures the level of NOx, CO, HC, NH3 and O2 emissions on a real time basis. The principle of operation of the waste heat boiler is environmentally friendly: when burning, no dangerous emissions into the atmosphere are formed.

The furnaces for regeneration air and raw materials heating are equipped with an online flue gas analyser that determines the content of O2, CO, HC, NOx, CO₂, which allows controlling the composition of the gases emitted.

The main raw material for the propane dehydrogenation plant is propane, which is separated from the associated gas of the oil field of Tengizchevroil LLP. Propane is supplied by rail from Tengiz field. Each propane storage tank is sealed and equipped with monitoring and blocking systems.

This project offered a great opportunity for the Kazakhstan companies: 43 Kazakhstan companies took part in the project implementation, over 4,300 jobs were created for the construction period.

Currently, KPI has 628 employees in the staff who are provided with social support from the company. Also, a housing program is being implemented for employees. 98 employees have already received apartments under the program. The housing program was launched to attract and motivate promising employees from among the production staff.

The KPI project uses the state-of-the-art technologies, which will enable the enterprise to become completely digital, specialized IT solutions and corporate accounting systems will allow keeping high-precision record of all data from operations planning to the sale of finished products to an end consumer.

KPI will be the first completely digital plant in the country. An important step towards digitalization of the enterprise is the comprehensive implementation of the SAP S/4HANA system. The experience of integrated implementation of SAP S/4HANA at KPI can be considered for replication in other companies of KazMunayGas Group.

Effect of the project implementation:

• Covering the internal needs of Kazakhstan (import substitution) for polypropylene (the capacity of Kazakhstan market is about 50 thousand tons per year).
• Ability to manufacture products used in various industries (construction, medicine, automotive, food and textile industries, etc.).
• Creation of additional jobs in related industries.
• Contribution to the country’s GDP will be up to 1 %.

Polyethylene

The second important project is the project of construction of a plant of KMGPetroChem LLP for the production of polyethylene with a capacity of 1.25 million tons per year (hereinafter – the Polyethylene Project); in 2023, the FEED stage begins.

The polyethylene project is being implemented as part of the National Project “Sustainable economic growth to improve the welfare of the Kazakhstan people” and is in line with KMG’s long-term strategic goals, which, among other things, include improving the efficiency of the added-value chain, diversifying business and expanding the portfolio of products produced of raw hydrocarbons. Finished products are planned to be sold both in the domestic market and for export. The capacity of Kazakhstan domestic market is estimated at about 180 thousand tons of polyethylene per year, with an expected annual growth of 4 % on average. The target export markets include the CIS countries, China, Turkey and the European countries, where polyethylene consumption is also expected to grow, including through imports. The license agreements have been signed with the world leaders in this field – Chevron Phillips Chemical and Univation Technologies – for the use of MarTECH® ADL and UNIPOL™ PE Process technologies. The implementation of the Polyethylene Project brings significant social and economic benefits to the country.

Polyethylene in a stable state does not pose a danger to the environment, since it does not have the ability to form toxic substances in the air and wastewater in the presence of other substances or factors at ambient temperature. Polyethylene and its additives are not ozone depleting substances.

The plant will promote the maintenance of social stability in the region and creation of new jobs. In particular, about 8,000 jobs will be created during the construction phase, and 875 permanent jobs will be created during the operation period. The contribution to the country’s GDP is estimated at 1.2 %.

Terephthalic acid

In addition, a decision was made to study the possibility of constructing a plant for the production of polyethylene terephthalate.

The project will be implemented using private investments. It is expected that the capacity of the enterprise will be 600 thousand tons of terephthalic acid per year and 430 thousand tons of polyethylene terephthalate per year. The construction of the plant is planned to start in 2023–2024. It is expected that the plant will start to operate in 2026–2027.

It is planned to create 812 permanent jobs during the operation period and about 1,300 jobs – at the construction stage.

Projects aimed at development of the regions of presence

Solving water supply issues in the regions of presence: “Reconstruction of the water pipeline Astrakhan – Mangyshlak”, “Construction of a sea water desalination plant in Kenderly with a capacity of 50,000 m³/day”.

Under the project “Reconstruction of the water pipeline Astrakhan – Mangyshlak”, construction and installation work began, and also, an agreement was concluded with a second-tier bank to finance the project. It is planned to complete the project by the end of 2023.

The project feasibility study was adjusted for the project “Construction of a sea water desalination plant in Kenderli with a capacity of 50,000 m³/day” (according to the recommendations of the PMC consultant), work is currently performed to select an EPC contractor. It is planned to complete the project by the end of 2024.

Ensuring uninterrupted gas processing, including to cover the gas needs of the population of the region, a project is being implemented to construct a new GPP in Zhanaozen City.

Pre-FEED and feasibility study have been developed for the project of construction of a new GPP in Zhanaozen City, there is an agreement with the second-tier banks to finance the project. Currently, the procedure for the preliminary qualification selection of suppliers for the construction of facilities is being performed. Commissioning is planned for 2025.

To improve the environment by eliminating the impact on the atmospheric air of Atyrau City from the treatment facilities and evaporation fields of Atyrau Refinery, Tazalyq project is being implemented.

In 2022, the 1^st stage of the reconstruction of mechanical treatment facilities (MTF) was completed, 2 sectors from 4 evaporation fields were dried. Full completion of work on the 2^nd stage of the MTF and the reclamation of evaporation fields is scheduled for the end of 2023.