Operational and financial performance indicators of KMG NC for 2016
Consolidated oil and gas condensate produced by KMG Group in 2016 was 22,639 Kt. Total production of brown fields was 15,981 Kt.
Production of natural gas and associated gas is 7,384 Mm3.
Oil transportation. Oil transported by pipelines came to 56,600 Kt. Oil transported by sea for the reporting period came to 7,082 Kt.
Gas transportation by main pipelines is 88.1 Bm3. This includes 58.3 Bm3 of international transit, 16.5 Bm3 of internal transportation and 13.3 Bm3 of transportation for export.
Start of commercial production was scheduled for November 1, 2016. Commissioning of onshore and offshore equipment is currently under way. Over 2 Mt of oil and more than 1 Bm3 of gas was produced from the moment production was restarted. In order to ramp up daily oil production to 370 K barrels two reinjection compressors are planned to start in 2017. Gas reinjection facilities will be expanded to enhance further oil production. Currently, the best suitable project concept is under selection process.
TCO together with its partners declared that the final investment decision about the Wellhead Pressure Management/Future Growth Project was made. The project is intended to keep stable oil production at the existing TCO facilities and further raise annual oil production by 12 Mt as the new plant will be constructed. During construction of WPMP/FGP more than 20,000 new jobs in Kazakhstan are planned to be provided, educational and training activities are included and about 700 permanent jobs to operate new production facilities will be provided. Projected local content in the Future Growth Project is 32% (11.8 billion doll.).
Step 2M of commercial development, which includes the annual production of about 11 Mt of liquid hydrocarbons and about 18 Bm3 of gas, is under implementation. The main objective of the project is to keep the achieved production level by drilling new wells, gas facilities expansion and modernization of hydrocarbons pre-treatment plants. After 2M Step projects are completed, Karachaganak Growth Project is planned to further keep liquid hydrocarbon production level. The first phase of the project includes drilling of the new and repair of existing wells, construction of gas treatment facilities and installation of additional compressors to enhance gas reinjection, construction of ancillary facilities.
As of January 1, 2017, consolidated proven recoverable reserves of KMG liquid hydrocarbons were 785.8 Mt, while a total growth of oil reserves and gas condensate in 2016 was 7.2 Mt. ROIP raised as the promising blocks have been explored, reserves in the existing fields have been additionally explored and revaluated and reserves reduced in the course of hydrocarbon production. The five-year KMG exploration program 2015-2019 is still under way. Follow-Up Exploration Program 2017-2021, which includes enhancement of the existing fields reserves driven by expansion of the oil pool outline and deep undiscovered and missed horizons emergence, was developed.
The volume of oil refining in 2016 was 16602 Kt. The Company's share in the Kazakh retail market of petroleum products as of January 1, 2017 was 16%.
KMG as a national oil and petroleum products operator sells socially essential petroleum products at a reduced price in accordance with the charts of the Ministry of Energy. Every year, during the plantation and harvesting seasons and start of heating season, diesel fuel for farmers and fuel oil for heating needs of social and industrial facilities and institutions of the Republic of Kazakhstan are delivered at a reduced price. In 2016, total shipment of petroleum products was 284 Kt.
Revenue from core activities in 2016 was KZT 3,553 bln (USD 10.54 billion). Net income was KZT 360,171 mln (USD 1,063mln).
Taxes and other RK budget payments, including those from the main subsidiaries, were KZT 456,987 million (1,337 million US dollars), which is 14% lower than the same period in 2015. The main reason of decline is revenue gained in 2015 from positive exchange rate differences resulted from KZT devaluation. In addition, budget payments reduced because of the average oil price reduction by 17%.
Share of local content in goods, works and services procurement over the KMG Group for the reporting period was KZT 1,871 tln, which is 76%. As of December 31, 2016, there were effective 1,808 long-term goods, works and services procurement contracts with domestic companies for a total KZT 1,465 tln.
As part of Transformation Program implemented together with Samruk-Kazyna, activities are implemented to enhance oil production (e.g., "Digital Oil Field").
In 2016, sub-holdings liquidation started to avoid duplication of administrative functions and ensure operational control over production assets.
Currently, takeover of KazMunayGas – Refining and Marketing is under way. Existing JSCs are planned to be transformed into LLPs, so that powers will be transferred directly to the owners as the indirect control by the boards of directors of subsidiaries will be dropped.
Practically, about 70 projects within the transformation program have been implemented, are in the implementation process or planned to be implemented to introduce organizational and structural changes across the KMG Group and enhance operational, managerial and supporting business processes.
To comply with the Decree of the Government of the Republic of Kazakhstan № 1141 dated 30.12.2015, KazMunayGas undertakes activities to transfer its SDEs to the competitive environment. Totally, 73 SDCs fall within the Decree.
In this context, transfer of 23 companies have already been completed (Rompetrol Ukraine LTD, Trade and Production Company). The rest of the companies are planned to be transferred to the competitive environment during the 2017-2018 period. Currently, sale of the 51% share in KMG International N.V. is on the completion stage. Privatization Program activities will be continued.
Uniform labour standards are in the introduction process. A single system of feedback between managers and employees implemented in many of KMG SDEs has been adopted. Implementation of a unified Youth Policy, which includes annual meetings, workshops, trainings, as well as best innovative ideas competitions, is under way. Currently, the Youth Councils operate in 28 KMG companies. Vacant positions are taken on a competitive basis, the project started last year in the KMG Corporate Centre. Based on competition results, 41 person have been recruited from the date the project started in KMG.
Unified Skill Pool build-up activities are currently held. Standard KMG SDEs Internal Communications Regulation have been developed. Currently, the Regulation is introduced in 40 KMG SDEs. Social Partnership & Labour Disputes and Conflicts Settlement Council, membered by the heads, trade unions chairmen, representatives of KMG SDEs employees, is operating. The main objective of the Council is to give recommendations regarding unified social policy and to develop activity plan to prevent social and labour disputes.