Interviews 2014

Posted in Interview

KAZMUNAYGAS: DYNAMIC DEVELOPMENT STRATEGY

(Sauat Mynbayev, Chairman of the Board, NC KazMunayGas JSC)

MynbayevThe Chairman of the Board of KazMunayGas NC JSC Sauat Mynbayev is talking about results of work, achievements and horizons of the national oil and gas operator.

- The main indicator of successful operation of any oil and gas company is the exploration rate. What is the dynamic of oil and gas recovery at the company headed by you?

- In 2013 and the first half of 2014 almost all key indicators, including oil and gas recovery, have a positive trend. Thus, as compared to 2012 in 2013 the consolidated volume of oil and gas condensate recovery by the KMG group of companies increased by 5.8%, making up 22.6 mln tons, and the volume of natural and associated gas recovery increased by 25.3% up to 6.9 bln cubic meters.

High production rates were demonstrated by our subsidiary KazMunayGas Exploration and Production JSC, and by Mangistaumunaigas and Tengizchevroil. On the whole, the total share of KazMunayGas NC JSC in the national production achieved 27.7%.

This year production growth tendency is maintained: the volume of oil and gas condensate production over eight months has reached 14.93 mln tons (1% plus to the same period in 2013), gas recovery has exceeded the expected volumes by 5%.

- Impressive figures. It is obvious that the company sets global goals for itself for the further effective development. Could you please describe the most important objectives of KazMunayGas NC JSC for the future?

- The main strategic goals of KMG are maximization of the shareholder value through increase of the long-term value of assets and promotion of modernization and diversification of the national economy. Our main objectives are to increase the scope and success rate of the exploration operations for the purpose of reserves increment, buildup of oil and gas recovery, improvement of hydrocarbon transportation system, refineries reconstruction, improvement of oil products quality, and internal market supply, service sector development with increase of the innovative-technological capacity, and setting up an effective and transparent asset management system.

According to the KMG Development Strategy, by the year 2022 we are planning to increase the oil and gas production to 35.4 mln tons per year.

- The main expectations in the oil and gas industry of the Republic are connected with the giant fields, the three "whales" – Tengiz, Karachaganak and Kashagan. KazMunayGas National Company has an interest in each of these projects. What is outlook of these activities?

- The plans for development of the said projects directly influence the long-term macroeconomic indicators of the Republic of Kazakhstan. Due to the Expansion Project implementation, as recommended by KMG, the annual rate of oil recovery at this field should increase to 38.6 mln tons by 2022, including 7.7 mln tons to be produced by KMG.

At Karachaganak the options of the Expansion Project implementation are under consideration, which suggests the annual stable production of over 10 mln tons of liquid hydrocarbons.

By the year 2022 production can increase to 61.7 bln m3 per annum, at that the main growth will come from Karachaganak and Kashagan.

- How does KazMunayGas NC JSC build up its international activities in the oil refining sector?

- Today KMG owns a large asset in Europe – it is a refining holding in Romania KMG International (former The Rompetrol Group). It includes Petromidia refinery located on the Black Sea (the oil refinery yield is 95%), which is the second large retail network in this country, and assets in Bulgaria, Georgia, Moldova, Ukraine, Spain, and France.

In recent years, due to the joint work of Kazakhstani and Romanian specialists, KMG International has become a strong brand with the national network known for its high quality fuel and unique filling system using Fill & Go cards.

The current strategy of KazMunayGas NC JSC consists in strengthening of the international positions of KMG International, besides, since recently the determined directions of the company's activity are also oriented towards the market of Kazakhstan.

- Is KazMunayGas interested in further development of its operations abroad?

- Kazakhstan is producing about 82 mln tons of oil and gas condensate a year (81.8 mln tons in 2013), of which over 80% are exported. With commissioning of the Kashagan field the oil export from Kazakhstan can grow significantly.

For the balanced export growth Kazakhstan is developing two main export routes – China and Europe. Therefore, we consider the possibilities of development of the international subdivision of KazMunayGas NC JSC in the sector of oil refining and marketing on the basis of KMG International.

- Recently, the Sovereign Wealth Fund "Samruk-Kazyna" JSC declared the start of a large-scale program on holding transformation. KMG is among first three companies, who will test the new corporate management methods. Has KazMunayGas NC JSC transformation program been created, and what transformation directions do you find most important?

- You know that the Head of the state has set a particular goal to join thirty most developed countries of the world by 2050. Within these strategic objectives we, together with our colleges from Samruk-Kazyna Fund, have started an active work on transformation of KMG group of companies. The Transformation Program has been developed, the Modernization and Transformation Board and a number of management committees have been set up. The key directions of the transformation program at KMG are exploration and production, refining, foreign asset management, and corporate centre. The purpose of operation of the Modernization and Transformation Board is management and coordination of the activity aimed at the Transformation Program implementation and introduction of the advanced effective management practices, technologies and standards in the Company.

I would like to underline the fact that KMG is constantly working on improvement of the corporate management system with a special emphasis on this process. In particular, the national company has introduced and applies a divisional management structure, which allowed transition to the centralized management based on uniform standards, unified business processes and common automation means ensuring upward data flow and control of execution of the decisions made.

- Recently KazMunayGas NC JSC published its regular annual social responsibility and sustainable development report. The company pays a notable attention to this issue.

- The issues of improving the quality of corporate social responsibility and sustainable development management for the largest international corporations become a norm of development. The corporate social responsibility and sustainable development strategy of KazMunayGas is connected with the long-term vision of the main activities of the Company, for implementation of which the planned works are performed annually.

The Company carries out its production operation in the regions with high social and economic risks. For the purpose of elaboration of KMG recommendations on social partnership development and strengthening, interaction of trade unions and labour collective representatives, and with respect to regulation of the labour disputes and conflicts at subsidiaries and affiliates, KMG has established a Social Partnership Development and Labour Disputes and Conflicts Settlement Council. Besides, KMG has developed standard documents regulating the social support issues for the whole group of companies.

We have considerably strengthened the sector of work with young people within the company having set up the Youth Council. Among 90 thousand people hired by the company there are around 17 thousand young employees under 29 years old. Representatives of 25 subsidiaries and affiliates are the members of the Council.

Absolute priorities for us are also compliance with the environmental law and health and safety requirements, protection and strengthening of health of our employees, development of the staff potential of the company. We can speak with certainty about infallible success in these areas.

- The social responsibility principles include charity and sponsorship. Please, tell us about KMG activities in this sphere?

- Social projects of KMG are carried out in accordance with the Corporate Social Responsibility Code of the company and the Sponsorship and Charity Policy of our Sole Shareholder. The company pays great attention to support sports and formation of the healthy lifestyles with annual support of such sports as professional and amateur boxing, judo, wrestling, taekwondo, weight-lifting, tennis, and others.

KMG group of companies provides annual financial assistance to the other social organizations: veteran organizations, including veterans of the Great Patriotic War and oil and gas industry, children's homes and boarding schools, specialized charity funds.

- To summarize our discussion, how would you define KazMunayGas as its head – at a height of the command bridge?

- Today KazMunayGas National Company involved in all most important projects of oil and gas industry development, from the Caspian shelf and pipeline networks to downstream and service sectors, is pardonably a locomotive of the national economy. This is an effective and competitive integrated company complying with all existing industrial safety standards and being able to ensure maximum growth of the shareholder value.

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