Message from the Chairman of the Management Board

Dear readers

Over the past few years, we have faced a number of events that have affected us both financially and operationally. In 2021, we did not allow the business to stop as we continued to deal with COVID-19 pandemic.

Since the beginning of 2022, the Company has faced a number of domestic and geopolitical challenges. These events had a significant impact on both the Company’s operations and global energy market .²

In 2021, in response to new challenges, we approved a new ten-year KMG Development Strategy, one of the strategic goals being Sustainable Development and Progressive Reduction of Carbon Intensity of Operations. We have also developed a 2022-2031 Low-Carbon Development Programme in order to systematise our main approaches and efforts to reduce the Company’s carbon footprint.

By 2031, we aim to reduce direct and indirect СО₂ emissions by 15% versus 2019, carbon and energy intensity of operations by at least 10% and to implement RES projects with KMG accounting for a total capacity of at least 300 MW.

We continued to integrate ESG criteria into our operations to improve our sustainability management system and our understanding of key ESG risks. The international agency Sustainalytics has upgraded the risk rating of JSC NC “KazMunayGas” in sustainable development from 34.5 to 28.4 points, which indicates KMG’s strong positions in managing the material ESG risks in the global oil and gas market.

Timely 2020-2021 Anti-Crisis Measures taken in response to external challenges have enabled the Company to gradually maintain financial sustainability and return to pre-pandemic financial levels. The Company netted 1,197 billion tenges in profit in the reporting period. Being one of the largest taxpayers, KMG paid 787 billion tenge in taxes and other obligatory payments to the national budget in 2021.

Another priority for KMG is supporting the domestic producers and increasing the local content in procurements of goods and services. The total amount of goods, works and services procured by KMG Group from Kazakh companies was 1,216 billion tenges with the local content share of 78%.

Systematic efforts are ongoing to prevent the incidence and to minimise the spread of COVID-19 at work with all the necessary organisational arrangements to counteract the epidemic and appropriate comprehensive measures being implemented across the group. At the end of the reporting year, 76% of the total number of employees in the group had been vaccinated.

Protecting the lives and health of employees and ensuring safe working conditions are top priorities for the company. The Company pays particular attention to high occupational safety.

At the end of the reporting year, the number of work-related accidents in the Company decreased by 7% versus the previous year. It is regrettable to report that there has been one fatal accident, with three our employees dying as a result of fire at the Petromidia Refinery in Romania. Following the investigation, we took appropriate measures to prevent similar incidents and developed a detailed corrective action plan to enhance the safety of our employees.

It should be noted that despite the crisis, we have maintained all jobs for the production personnel and continued improving their working conditions.

We place special emphasis on implementation of in-house socially-oriented programmes. In promoting them, the emphasis is placed primarily on creating favourable conditions for the Company’s employees. These are the financial incentives, retention and professional development, and workplace safety. KMG provides its employees with a guaranteed social package. Collective agreements of KMG’s companies provide for more than 35 forms of social assistance for employees and their family members as well as retirees.

Prevention of social tensions, labour disputes and conflicts is a particular area of focus. The Company cooperates with the trade unions through social partnership. KMG Group has 28 trade union committees including local trade unions protecting the interests of KMG’s employees. All KMG’s companies have conciliation committees in place. All KMG’s companies allow each employee to address questions to the company’s management and receive a timely response, there are regular biannual reporting meetings between CEOs and employees and meetings between managers and trade unions.

KMG annually supports the local development initiatives in the regions of its operations. More than 5 billion tenges were allocated in 2021 to finance social projects in the regions, including Zhanaozen Integrated Development Plan.

Strict observance of the rights of the employees, continuous improvement of working conditions, transparency of procurement procedures, high requirements for industrial safety, environmental protection and improvement of corporate governance continue to be our top development priorities. By choosing New Kazakhstan, we are choosing new standards and approaches in dealing with these issues.