Decommissioning and Reclamation of Work Sites

Asset disposal expenses

Oil and gas assets

Under the terms of certain contracts, the KMG is statutorily liable to dispose of fixed assets and restore the land at each of the fields in accordance with laws and regulations. In particular, KMG’s obligations include: the gradual shut-in of all unproductive wells and final shutting down of operations, such as the removal of pipelines, buildings and reclamation of the contract area; decommissioning and environmental liabilities at the production site. As the licences are not renewable at the discretion of the KMG, it is assumed that the estimated settlement date of the final shut-in liabilities at the field is the end of each licence period. The extent of the KMG liabilities to finance the well decommissioning and final shut-in costs depends on the terms of the respective contracts and applicable laws.

No liability is recognised where neither the contract nor the legislation implies a definite liability to fund such final decommissioning and shut-in costs at the end of the licence period. There is some uncertainty and significant judgement involved in making this determination. The assessment as to the existence or otherwise of such liability may change with changes in government policy and practice or local industry practice.

The KMG calculates asset disposal liability separately for each contract. The amount of the liability is the present value of the estimated costs expected to be required to settle the liability adjusted for expected inflation and discounted using average long-term risk-free interest rates for sovereign debt of countries with economies in transition adjusted for risks specific to the Kazakhstan market.

As at 31 December 2023, the carrying amount of KMG Group’s reserve for oil and gas asset disposal liability was KZT 123,785 million (as at 31 December 2022: KZT 88,207 million).

According to the Code of the Republic of Kazakhstan “On Subsoil and subsoil use”:

• Elimination of the consequences of subsurface use it is carried out in accordance with the approved subsoil user and received positive conclusions provided for by this Code and other laws The Republic of Kazakhstan expertise project for the elimination of consequences of subsurface use.
• The conservation of the subsurface area is carried out in accordance with the project of conservation of the subsurface area approved by the subsoil user and received positive conclusions provided for by this Code and other laws of the Republic of Kazakhstan.
• Technological facilities are liquidated or preserved in accordance with the project of liquidation or conservation of technological facilities, provided for by this Code and other laws of the Republic of Kazakhstan, approved by the subsoil user and received positive conclusions from the examinations provided for by this Code and other laws of the Republic of Kazakhstan, with the exception of certain categories of wells provided for in the rules of conservation and liquidation during exploration and production of hydrocarbons, approved by the authorized body in the field of hydrocarbons, liquidation or the conservation of which is carried out in accordance with the liquidation and conservation plan.

The requirements for well liquidation are set out in the rules of conservation and liquidation during exploration and production of hydrocarbons and uranium extraction, approved by Order No. 200 of the Minister of Energy of the Republic of Kazakhstan dated May 22, 2018. Registered with the Ministry of Justice of the Republic of Kazakhstan on June 19, 2018 No. 17094 (Chapter 4. Liquidation of oil, gas and injection wells for various purposes in the exploration and production of hydrocarbons).

Guided by the current legislation of the Republic of Kazakhstan, in 2023 the Company approved a Policy in the field of closure of facilities and land reclamation at KMG exploration sites and fields.

Trunk Oil and Gas Pipelines

In accordance with the Trunk Pipeline Act of the Republic of Kazakhstan, which came into force on 4 July 2012, KazTransOil JSC has a statutory liability to decommission the trunk pipeline upon termination of operation and then carry out environment remediation actions, including land reclamation. The reserve for pipeline decommissioning and land reclamation liability is estimated on the basis of the cost of dismantling and reclamation calculated by KMG. As at 31 December 2023, the carrying value of KMG reserve for pipeline decommissioning and land reclamation liability was KZT 45.649 million (as at 31 December 2020: KZT 40.665 million).