Mr. Yerbolat Kozhabayev as the President and the Head of the Executive Board of the Partnership

Mr. Jian Riyuan as the First Vice President and the Member of the Executive Board of the Partnership.

FOR REFERENCE: PetroKazakhstan Oil Products LLP is managed on a parity basis by the National Company KazMunaiGaz (KMG) and China National Petroleum Corporation (CNPC).

UPSTREAM

PetroKazakhstan Inc. is a group of companies of the energy sector. Its shareholders are CNPC E&D (67%) and KazMunayGas EP (33%), engaged in acquisition, exploration, development and production of oil and gas and sales of oil products. All of the Group’s exploration and production operations are focused in the South Turgai oil basin and central part of the Republic of Kazakhstan. The Group holds stakes in fields at various stages of development. At present the majority of the output is supplied to the domestic market, with crude oil exports directed to China and Uzbekistan. 

Major subsidiaries are: JSC PetroKazakhstan Kumkol Resources (100%), Kolzhan LLP (100%), AB PetroKazakhstan Overseas Services Inc. (100%), JSC Turgai Petroleum (50%), JV Kazgermunai LLP (50%) and other legal entities. The Group holds interests in license 1057 (joint venture between Kolzhan LLP and SSM Oil LLP) and license 951D (joint venture between PetroKazakhstan Ventures Inc. and Orient Petroleum (Central Asia) Ltd.)

In 2020, 59 wells were drilled, of which 40 wells were drilled by the operated upstream division (OUS) and 19 wells were drilled by JV Kazgermunai LLP. Of 59 wells drilled, 17 were exploration and appraisal wells, 32 were advance production and development wells, and 10 were injection wells.

PKI Group achieved the production targets approved by its shareholders for 2020. Total production was 3, 133 thousand tons, which exceeded the budgeted level by 95 thousand tons (3, 039 thousand tons). The Group supplies about 91% of its crude oil to the domestic market, the price of which is lower compared to exports. As a socially responsible company, PKI’s Upstream division (including Joint Ventures) invested $3.6 million in various social projects, including USD 0.5 million that was allocated to local medical facilities to combat Covid-19.

And while PKI’s operated upstream division has faced challenges such as declining production, high water cut, high operating costs and high domestic sales, PKI management is optimistic about ensuring uninterrupted supply of energy resources through successful exploration, reserve growth and conducting all operations and production in accordance with legislation and best practices. Reserves growth, acquisition of new blocks, obtaining exploration permits for new sites, expansion of existing areas and successful exploration drilling are the company’s long-term priorities.

DOWNSTREAM

PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located in Shymkent, which was commissioned in 1985. The refinery is the newest one among the three Kazakhstani refineries and accounts for around 30 % of the total volume of oil products produced in the RK.

The management of PetroKazakhstan Oil Products LLP is carried out on a parity basis by National Company KazMunayGas (KMG) and China National Petroleum Corporation (CNPC).

After implementation of a large-scale modernization and revamping project in 2018, the Shymkent Refinery has upgraded the quality of produced fuel to meet the K-5 standards, raised the level of production environmental safety, expanded the refinery’s design capacity up to 6 million tons per annum, as well as increased the production of light oil products to meet the Kazakhstan market’s demands. The Shymkent Refinery modernization and revamping project was implemented within the State program of industrial and innovative development. The amount of the project implementation investments totaled 1.8 billion US dollars. The completion of the Shymkent Refinery modernization project has been one of the milestones in Kazakhstan’s industrial development. Upon completion of the modernization project at PKOP LLP, the international experience in the field of advanced new technologies of automation, digitalization, further improvement of production processes and expansion of the product slate is widely implemented that has been made possible primarily thanks to the effective and fruitful cooperation at the level of the leading national companies: NC KazMunayGas JSC and CNPC. 

The crude throughput of PKOP LLP for 2020 totaled 4 mln. 794 thousand tons and the indicators of oil product output amounted to 4 mln. 290 thousand tons, including the following oil products:

gasoline – 1, 958 thousand tons;

diesel fuel – 1, 411 thousand tons;

aviation kerosene – 244 thousand tons;

liquefied gas – 327 thousand tons;

technical sulfur– 6.0 thousand tons;

fuel oil (mazut)– 343 thousand tons.

Also, in 2020, PKOP LLP achieved the crude oil refining depth indicator of 90.14%, which is a record indicator not only for PKOP LLP, but also for other refineries of the Republic of Kazakhstan for the years of their production activities.  

In 2020, with the introduction of sanitary and quarantine measures for preventing COVID-19 coronavirus infection spread, all necessary measures and action algorithm  were taken for continuous production process at PKOP LLP in general. The processing units were operated in the standard operating mode.

PKOP LLP undertook the procedures aimed at protection of the production personnel in strict conformity with the sanitary and epidemiological standards.

HSE

In February 2020, the Almaty Branch of PetroKazakhstan Overseas Services Inc. (PKOSI) successfully passed HSE management system certification for compliance with ISO14001-2015 “Environmental Management System” and ISO45001-2018 “Occupational Health and Safety Management System” international standards. On February 25, 2020 certificates of conformity №229334 and №229335 from Bureau Veritas Certification Holding SAS – UK Branch were obtained, valid until February 24, 2023. Six videos on HSE were produced and distributed as part of the Safe Office project. There is a continued separate collection and transfer for recycling of paper, plastic bottles, batteries and food waste in the office. The “Employee Incentive Program for Reporting Potentially Hazardous Situations, Hazardous Conditions and Actions” was revised and extended through 2023. In 2020, more than 30 PetroKazakhstan employees were rewarded under this Program.

During 2020, a number of measures aimed at preventing the spread of COVID-19 coronavirus infection among PetroKazakhstan employees were implemented in all business units of the Company: Operational headquarters were created to combat the infection, the algorithms of emergency measures in case of detection of suspected COVID-19 infection / contamination were developed, action plans to prevent the spread of COVID-19 at the Company facilities, memos and instructions on compliance with quarantine measures were issued. Medical and disinfectant supplies: protective shields, medical masks, gloves, antiseptics, etc. were purchased. The Company conducts daily thermometry tests of employees and inspects compliance with sanitary and epidemiological norms in the offices and at the production facilities of the Company. Express testing of employees before going on shifts and PCR testing of employees going on business trips are being carried out. Compliance with legal requirements to prevent the spread of COVID-19 is regularly published and monitored. Activities to coordinate work with the sanitary and epidemiological control bodies are performed. 

During the year, 2,797 employees of the company underwent HSE training and knowledge testing. In 2020, implementation of the Program “Roadmap to improve the Road Safety Management System of PKKR” was started. The purpose of this Program is to reduce the number of traffic accidents on the Company’s roads, as well as to improve the transport safety in PKKR JSC and contractors. In the 1st quarter of 2020 PKKR JSC took part in national table-top exercises “Winter – 2020” and “Spring – 2020”, and during the year – in regional table-top exercises. Annual training of PKKR JSC personnel under the fire safety minimum program by specialists of the Fire Safety Department continues. Maintenance, repair and recharging of powder fire extinguishers are carried out at the Kumkol field fire station, where a workshop for their recharging is organized.

At the initiative of the RK Ministry of Ecology, Geology and Natural Resources, a comprehensive technological audit of PKKR JSC was conducted in order to determine the level of achievement of the best available technologies at the company. A preliminary conclusion of independent experts was obtained. Environmental permits for emissions into the environment were obtained for PKKR JSC and Kolzhan LLP for 2021, as well as a license for radioactive waste management activities issued by the Committee for Atomic and Energy Supervision and Control of the RK Ministry of Energy.

2020 has been declared the year of safety in KMG group of companies, subsidiaries and affiliates and for all contractors. On this occasion, an Agreement on Understanding and Commitment of the Parties to Compliance with Occupational Health and Safety, Fire and Industrial Safety Requirements at the Facilities of PKOP LLP was signed. A meeting was held with the participation of PKOP LLP management and the top managers of contractors and those responsible for HSE. Promotional items with Aman logo were purchased under the AMAN ISB project: T-shirts, windbreakers, baseball caps, pennants. 

In Q4 2020, PKOP LLP successfully passed an external re-certification audit of EMS for compliance with the requirements of ISO14001:2015. The documented EMS procedures were revised. A register of significant environmental aspects was compiled. Measures to reduce the negative impact on the environment and improve the environmental aspects of the company were identified. In 2020, OH&S management system of PKOP LLP was successfully certified under the new ISO 45001:2018 standard by the Certification Association “Russian Register – Eurasia”. The Manual for QMS, EMS and OH&S management system was revised and approved.

In 2020, PKOP LLP had no environmental incidents, no exceeding of the established standards of emissions, and no fines for violations of environmental legislation of the Republic of Kazakhstan. In February 2020, a comprehensive technological audit was conducted at the plant by NJSC International Center for Green Technologies and Investment Projects. A high assessment of the plant’s performance indicators and modernization facilities and their compliance with the European and Russian BAT Reference Lists were obtained. On March 28, 2020 PKOP LLP took part in the environmental action “Earth Hour”. Partial shutdown of exterior lighting of auxiliary facilities of the company for 1 hour was organized. Planting of 1,000 seedlings of trees and shrubs was carried out around Shymkent city as part of the Green Belt, and another 500 fruit and deciduous trees were planted in the nearby Karabastau settlement at the request of residents. On September 19, 2020, workers of PKOP LLP held a volunteer clean-up at the source of the city river Koshkar-ata and the adjacent public recreation area within the framework of the World Clean-up Day. This event was aimed at maintaining the cleanliness of the city, preserving the natural beauty of nature for future generations.

CORPORATE SOCIAL RESPONSIBILITY

The policy of the corporate social responsibility of PetroKazakhstan is based on principles of efficiency, expediency and consistency, as before. In 2020, the company carried out all assumed obligations within the corporate social responsibility.

The year 2020 has been important for PKOP LLP due to conclusion of the memorandum with the Shymkent akimat, within the limits of which 200 million KZT was allocated for support of the city social projects according to the business social responsibility program in pandemic period. PetroKazakhstan Oil Products LLP together with the social fund Shymkent – Kaiyrymdy kala has rendered humanitarian aid with handing over of 10 thousand medical masks and 1,000 protective suits to the provisional healthcare facility of city hospital No. 2. The Youth Council of PKOP LLP rendered assistance according to the city program Biz Birgemiz to 100 multiple- children and low-income families by targeted delivery of basic- needs food products for the Day of Unity of Nations of Kazakhstan, during the quarantine against pandemic. It should also be noted that in September 2020, the shareholders of PetroKazakhstan Oil Products LLP JSC NC KazMunayGas and China National Petroleum Corporation (CNPC) jointly handed over 50 units of oxygen equipment to the Shymkent Health Department as humanitarian aid for further distribution to medical centers in the city. As it was mentioned earlier, within the program on creation of “Green belt” around Shymkent, the employees of PKOP LLP planted 1,000 pieces of vegetation of fruit and broad-leaved trees in autumn period. By the request of Karabastau village community, located close to PKOP LLP, 500 seedlings were planted.  

Despite the industrial and financial crisis, PKKR JSC continued its patronage over the rehabilitation center for disabled children Shapagat in Kazaly district and the kindergarten Baldauren for children from low-income families in Zhanakorgan district.

Just as for many years, PKKR continues to provide financial support to the Atameken family-type children’s village, where orphans and children left without parental care live and are brought up. 

In order to prevent and combat the pandemic coronavirus infection, by the decision of the shareholders of JSC “NC “KazMunayGas” and China National Petroleum Corporation, JSC “PetroKazakhstan Kumkol Resources” provided financial support to Kazaly Interdistrict Hospital for the purchase of an oxygen station. This station is planned to produce 150 oxygen cylinders per day, which, in turn, will provide oxygen cylinders to medical facilities of Aral and Kazaly districts and Baikonur city.

ACHIEVEMENTS AND AWARDS

The companies’ contribution to the development of the regions and the merits of their employees are annually noted at the national and local levels. It should be noted that more than 90% of employees are citizens of Kazakhstan.

159 employees of PKKR JSC were awarded with various departmental, regional and city awards on the eve of the state holiday – the Independence Day of Kazakhstan, on professional holidays – the Day of Geologist, the Day of Oil and Gas Industry Workers, the Day of Power Engineer, on the remarkable dates of the 115th anniversary of trade union movement in the Republic of Kazakhstan and on behalf of the company’s management.

Salymov Yerbolat, the 5th category oil and gas production operator at Kumkol field, became the winner in the “Best oil and gas production operator” nomination of the industry competition for the title of “Munaigas ondirisinin ozaty-2019”, organized by the Branch Professional Union of Oil and Gas Industry Workers. 17 operators from different oil companies participated in this nomination.

JSC “PKKR” was awarded a diploma by the akim of Kazaly district of Kyzylorda region in the nomination “Zhyl demeushisi” for the sponsorship provided during the pandemic.

Special attention is paid to the social support of the company’s employees. For instance, 

within the frame of the Financial Assistance Program for getting the higher education by the employees, PKOP management granted 30 scholarships. Under the scholarship program for dependent children of the refinery’s employees, 33 scholarships were granted.

Aidar Amreyev, Process Shop No. 1  Operator of PKOP LLP was awarded with state medal “Eren enbegi ushin” for high performance in production and creation of safe working conditions. 4 employees were awarded for the Day of Oil and Gas Industry workers, as well as 5 employees were awarded for the Independence Day, received Letters of Gratitude from the Ministry of Energy of the Republic of Kazakhstan, Certificates of Merits and memorial signs from NC KMG JSC. 

The administration of PKOP LLP fulfilled in full all its obligations under the Collective Agreement in 2020. 

At the end of the year, the company received a Letter of Gratitude for participation in the Republican contest on business social responsibility “Paryz 2020” from the Minister of Labor and Social Protection of the Population of the Republic of Kazakhstan. The management of PetroKazakhstan Oil Products received the Letter of Gratitude from Akim of Shymkent city for the rendered assistance and support during quarantine on prevention of coronavirus infection, as well as on behalf of the deputies of Shymkent city. PKOP LLP was awarded with diploma of NWF Samruk-Kazyna JSC for active participation in “Uzdik volonterlik top” movement, and received the Certificate of Merit from NC “KazMunayGas JSC “For active participation of voluntary movement in implementation of social projects”. 

As has already been noted, a comprehensive technical audit was conducted at PKOP LLP with “International Green Technologies & Investment Projects Centre” NJSC jointly with independent experts. The production performance and modernization facilities of the enterprise were highly appraised in accordance with the European reference guide “Commission implementing decisions”. Also, a Letter of Gratitude was received from the International Green Technologies & Investment Projects Centre on high level of readiness of the enterprise to transition to the level of the best available technologies (BAT) and high qualification of specialists of the enterprise.  PKOP LLP took part in the online ceremony “Rating of environmental information transparency of oil and gas companies. Results of 2020”. The organizers of this rating are the “World Wildlife Fund for Nature (WWF)” with the support of the “Environment Program” of the United Nations. Summarizing of the environmental information transparency rating was carried out among oil and gas companies of Russia, Kazakhstan and Azerbaijan.  PKOP LLP took the 4th place among 17 companies of NC KMG JSC and the 1st place among oil refining companies of the Republic of Kazakhstan.

During the pandemic in the Republic of Kazakhstan, PetroKazakhstan Oil Products LLP provided support to the Akimat of Shymkent by allocating 100 million tenge for the purchase of lung ventilators for medical facilities of the city. Moreover, the company provided 4000 medical masks and 300 protective suits during the quarantine period.

Provisional hospital of city hospital No.2, which is on the front line in the fight against Covid-19, received humanitarian aid which included 10 thousand medical masks and 1000 protective suits. Representative of the company Rinat Akberdiyev extended his gratitude to all doctors who perform with honor their professional duty in combating coronavirus infection and noted that the company’s support will continue in the future.

PKOP LLP together with the Youth Resource Centre of Shymkent once again held a charity event “Zhanga Zhylu” to support low-income families during the pandemic. Young employees of the Company took an active part in the charity event, while complying with all sanitary and hygienic safety measures. This initiative was held as part of the support for the “Biz Birgemiz” campaign.

UPSTREAM

PetroKazakhstan Inc. is an group of energy companies with shareholders being CNPC E&D (67%) and KazMunayGaz EP (33%), engaged in the acquisition, exploration, development and production of oil and gas and sale of oil and refined products. All of the Group’s exploration and production operations are located in the South Turgai basin and in Central Kazakhstan. The Group has interests in fields at different stage of development. The Group supplies most of its production to domestic market and also exports crude oil to China and Uzbekistan.

The principal subsidiaries are: PetroKazakhstan Kumkol Resources (100%), Kolzhan LLP (100%), PetroKazakhstan Overseas Services Inc. (100%), Turgai Petroleum JSC (50%), Kazgermunai LLP (50%) and other entities. The Group also has interests in License 1057 (a joint venture between Kolzhan LLP and SSM Oil LLP) and in License 951D (a joint venture with PetroKazakhstan Ventures Inc. and Orient Petroleum (Central Asia) Ltd. 

The 2019 budget allowed for 80 wells to be drilled, out of which 61 wells were drilled in operated upstream and 19 wells were drilled in Kazgermunai LLP. Out of 80 wells, 37 were exploration and appraisal wells, while 43 were pilot and development wells. 

The PKI Group met the production target approved by PKI shareholders for 2019. Total gross production of the Group was 4,048 thousand tons which is 100 thousand tons more than budget of 3,948 thousand tons. The Group supplies around 89% of crude oil to domestic market which yields less netback comparing with exports. Being a responsible corporate citizen, PKI Upstream together with its joint ventures contributed USD 5.4 mln gross for various social projects. 

As the PKI Upstream is facing challenges, decline in production, high watercut, operating expenses, and sales volume in domestic market, PKI Management is to secure smooth supply of energy resources by ensuring successful exploration by increasing reserves and sustained operations and production in compliance with laws and industrial best practices. During 2019, approximately 853 thousand tones of recoverable reserves were discovered due to significant investments in exploration activities. Reserves increment, acquisition of new blocks, getting exploration permits for new fields, expanding the existing areas and successful exploratory drilling are a priority long-term task of the company.

DOWNSTREAM

PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located in Shymkent, commissioned in 1985. The Refinery is the newest one among the three Kazakhstani refineries. The Refinery provides about 30% of the total volume of oil products produced in the RK. 

PetroKazakhstan Oil Products LLP is managed on a parity basis by National Company KazMunayGas JSC (KMG) and China National Petroleum Corporation (CNPC).

 After implementation of the large-scale Shymkent Refinery Modernization and Revamping Project in 2018, PKOP achieved the production program on improving the produced fuel quality to meet К-5 standards of production environmental safety, upgrading the design capacity of the Refinery up to 6 mln. tons per year, as well as increasing the light oil products output to meet the demand of Kazakhstan’s domestic market.

Upon completion of the modernization project and since 2019, PKOP LLP has been widely introducing and applying the international experience in advanced new technologies of automation, digitalization, further improvement of production processes and expansion of the range of output products in the Refinery, which was made possible, first of all, thanks to effective and fruitful cooperation at the level of leading National Companies KazMunayGas JSC and CNPC. 

It is to be reminded that the Shymkent Refinery modernization and revamping was implemented according to the State program of industrial and innovation development. The investment in the project implementation totaled USD 1.8 billion. The Shymkent Refinery modernization project completion has been one of the milestones in industrial development of Kazakhstan. 

In 2019, PKOP LLP processed 5,401,000 tons of crude oil, and refined products output totaled 4,955,000 tons, including the following oil products: 

1, 908 kt of gasoline;    

1, 518 kt of diesel fuel;

 335 kt of aviation kerosene; 

295 kt of liquefied gas; 

236 kt of vacuum gasoil; 

659 kt of mazut; 

3,353 kt of technical sulfur.

HSE

In 2019, the Almaty Branch of PetroKazakhstan Overseas Services Inc. (AB PKOSI) brought its Health, Safety and Environment Management System (HSEMS) into compliance with ISO 14001-2015 and ISO 45001-2018 international standards and conducted the first stage of certification audit. A practical training on the use of fire extinguishers was conducted for the first time with the employees of PKOSI AB. Fire and Earthquake drills have been successfully carried out. Implementation of the “Green Office” project continued, involving separate collection and transfer of paper, plastic bottles, batteries and food waste for recycling. 50 PetroKazakhstan employees received awards under the Employee Award Program for Reported Near Misses, Unsafe Conditions and Acts. In addition, AB PKOSI has successfully passed certification of the HSE management system for compliance with ISO14001-2015 “Environmental Management System” and ISO45001-2018 “Occupational Health and Safety Management System” international standards. On 25 February 2020 Certificates of Conformity №229334 and №229335 were received from Bureau Veritas Certification Holding SAS – UK Branch, valid until 24 February 2023.

In 2019 PKKR JSC carried out certification of production facilities for working conditions. 632 workplaces were certified, 452 of which correspond to the established labor safety requirements. An additional payment and additional days of vacation were set for 181 professions. The HS Department of PKKR JSC has created electronic databases of average HSE risks, issuance and accounting of PPE, accounting and control of technical inspections and repair of process equipment. Kick-off meetings with new contractors have started and inspections of contractors have been carried out prior to work using process monitoring checklists (check-lists). Competition “It’s easier to prevent a fire, than to fight it” was organized among the production shops of the Company including the teams from Kolzhan LLP, KazGerMunai JV JSC, Turgai-Petroleum LLP and KuatAmlonMunai JSC. Under the Basics of Fire Safety Program, 1224 employees of the Company have been trained, and 347 fire extinguishers have been repaired, maintained and recharged independently. An emergency notification system was installed in the shift camp in Kyzylorda. The Environmental Protection Department of PKKR JSC has timely received a permit for emissions into the environment for 2020. Requirements for separate collection and transfer of paper and plastic waste for disposal are being implemented, the issue of removal and disposal of written off office equipment, electronic and household appliances and furniture has been resolved. 

In 2019, there were no environmental incidents at PKOP LLP, no emissions exceeding the established norms, no fines for violation of the environmental legislation of the Republic of Kazakhstan. No fires or ignitions were registered. The IMS of PKOP LLP has been audited for compliance with ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007 and ST RK ISO 50001-2012. Validity of the certificates has been confirmed. Complex technological audit of NCJSC International Centre for Green Technologies and Investment Projects according to the European reference book “Commission implementing decision” was carried out. PKOP LLP received a permit for environmental emissions for 2019-2023. Volume of reused treated industrial effluents increased. A meeting was held with residents of nearby settlements, the Council of Elders and representatives of the Assembly of the People of Kazakhstan on the ongoing program to reduce environmental impact in the region. As part of AMAN project, the following nominations were awarded: The Team of the HSE Classic Status to 9 shops at the refinery, Most Active Participants of Sub-Committee to 14 employees, The Best HSE Employees to 9 employees, and Learn to Teach to 3 employees. A competition was held among the children of the refinery’s employees – “Safe labor of parents – happiness of children”, dedicated to the “World Labor Safety Day”.

CORPORATE SOCIAL RESPONSIBILITY

Corporate social responsibility policy of PetroKazakhstan relies upon the principles of efficiency, viability and consistency. The Company fulfilled all its CSR commitments in 2019.

The company continues implementing its long-term projects for social infrastructure development, support of disadvantaged people, orphans, people with disabilities, veterans of the Great Patriotic War and Afghanistan campaign, and in projects for the development of health care, sports, culture and art.

Here we tried to briefly describe the Company’s basic sponsorship and charity projects in Kyzylorda and Turkestan regions and the city of Almaty implemented in 2019: support of Shapagat rehabilitation center for disabled children, Atameken children’s village, “Present Children with Live” project of the Dobrovolnoye Obshestvo Miloserdiye (DOM) (“Mercy” Voluntary Society”) Public Fund, support of the International Vocalist Competition established by Bibigul Tulegenova, Almaty choreographic school named after Seleznyov, support of war and labor veterans, participation in a charity bicycle race Burabike, fund-raising from which is sent to equip children’s hospitals in Kazakhstan with vital medical equipment, organization of free vacation for 1080 children from low-income families and employees of the company in the children’s camp “Arai Sunrise”. 

Speaking about the corporate social responsibility of the Upstream Business Unit, it is worth noting that social payments under subsoil use contracts sent by JSC PetroKazakhstan Kumkol Resources to the local budget amounted to KZT 625.4 million, with the amount of KZT 131.6 million for sponsorship and charity aid. 

Charitable projects for low-income families and pensioners have become traditional for the PKKR. These include holding festive events and distributing food kits for Nauryz and New Year holidays and school supplies as part of the national “Road to school” campaign for 100 children. In addition, students of Kyzylorda region are pleased to participate in basketball, football, taekwondo tournaments among schoolchildren of the region for the Cup of PetroKazakhstan. 

In 2019 PKOP LLP concluded a memorandum with the Shymkent Akimat, within which 200 million tenge was allocated to implement the city’s socially significant projects.

PKOP LLP has a Youth Council, which took an active part in supporting the affected community of Arys, and actively initiates and participates in various social projects. For instance, the Council organizes concerts and contests among refinery workers for the holidays, participates and involves other employees to participate in sports competitions of the city, namely the largest and mass sports event of Shymkent “Shymkent Marathon”. It is engaged in youth and social volunteering by helping children from orphanages, supports ecological campaigns for garbage collection and tree planting.

Special attention is paid to social support of company employees. For example, under the Financial Aid Program for higher education, 43 scholarships have been awarded by the PKOP management. The employees’ dependent children received 34 scholarships under the PKOP scholarship program. Under the Road to School Program, a lump-sum payment of 100 thousand tenge was made for each child of school age of PKOP employees. In total, 932 children were financed. In the Year of Youth, negotiations were held with a microfinance organization on mortgage loans for young employees of PKOP LLP to purchase housing.

In 2019, a Collective Agreement was signed for 2019-2022 between PetroKazakhstan Oil Products LLP and the labor collective, under which all previous terms and conditions of the agreement were preserved in full and a number of articles were added to improve the situation of PKOP employees.

ACHIEVEMENTS AND AWARDS

The Company’s contribution to the development of regions is recognized at the republican and local levels every year. It should be noted that over 90% of employees are citizens of Kazakhstan.

In 2019, JSC PKKR was awarded with letters of gratitude from the Akimat and the Department of Emergency Situations of Kyzylorda region for participation in flood control activities on Syrdarya River. 

Firefighting service of PKKR JSC is awarded by the gratitude letter of the Department of Emergency Situations of Kyzylorda region as the best non-governmental firefighting service of the region. To celebrate 120th anniversary of Kazakhstan’s oil, 6 employees of the HSE Department of PKKR JSC were awarded with the anniversary medal of the Ministry of Energy of the Republic of Kazakhstan “Kazakhstan munaiyna 120 zhyl”, 4 employees were awarded with the Certificate of Honor of JSC KazMunayGasProfsoyuz and 1 employee received a letter of appreciation from the regional maslikhat.

PetroKazakhstan Oil Products LLP was awarded a special diploma and a prize-winner’s cup in the competition “Uzdik kauipsis kasiporyn” (“Distinguished Safe Enterprise”), organized in commemoration of the Global Labor Protection Day. State awards, medals and certificates of honor were awarded to the management and employees of PetroKazakhstan Oil Products LLP for their achievements in production activities on the occasion of the 120th anniversary of Kazakhstan oil. Employees of PetroKazakhstan Oil Products LLP won first places in the Uzdik Maman professional contest held in the Russian Federation. 

For the World Labor Safety Day, PKOP LLP was awarded first place in the nomination: “Best Occupational Health and Safety Service” organized among companies of Shymkent. At the V Forum of General Directors of NC KMG JSC, PKOP LLP was awarded the “Award for the high level of safety” and the certificate “For the high level of safety at work” for achieving exceptional safety performance in 2018.

In honor of the 120th anniversary of Kazakhstan’s oil and on the occasion of the professional holiday – Oil and Gas Employee’s Day – management and employees were awarded with various awards and badges of honor. 

Mr. Huang Xianxiong, President of PetroKazakhstan Kumkol Resources and PetroKazakhstan Inc. was awarded an honorary jubilee medal of the Ministry of Energy of the RK “Kazakhstan munaiyna 120 zhyl” for his contribution to the development of the energy industry. The awarding took place in Nur-Sultan in the framework of Kazakhstan Energy Week-2019. 

In addition, over 500 veterans of production and distinguished employees of PKOP LLP, PetroKazakhstan Kumkol Resources JSC and Kolzhan LLP received various awards for their work contribution, including anniversary medals, certificates of honor, letters of gratitude from the Ministry of Energy of the RK, “NC KazMunayGas JSC, Association KAZENERGY, Samruk Kazyna JSC, Akim of Kyzylorda region, Akim of Kyzylorda and Shymkent, maslikhats of the region and the city, Kazakhstan oil and gas industry trade union, etc. 

The Shymkent Refinery is the model of successful partnership of two national operators KazMunayGas and CNPC.

In parity management, an indicator of mutually beneficial cooperation is a successful execution of the tasks set before the staff of PetroKazakhstan Oil Products LLP and general contracting organization CPECC – China Petroleum Engineering Construction Corporation on completion of the large-scale project “Shymkent Refinery Modernization and Revamping”, which was aimed at fuel quality improvement to K-4 and K-5 standards, environmental safety of production, building-up of the Refinery design capacity to 6 million tons per year, as well as increase of output of light oil products for meeting the demands of the Kazakhstan market. 

Modernization of the Shymkent Refinery was implemented within the framework of the State program of industrial and innovative development and has become one of the milestone events of industry and Kazakhstan in 2018.

Financing of the large-scale project was provided from the parity loans by KazMunayGaz – PM JSC and CNPC E&D. Also, the loan was received from “Development Bank of Kazakhstan” JSC. The sum of project implementation investments was 1.8 billion US dollars.

Considering the fact that the Refinery provides about 30% of the total output volume of oil products in Kazakhstan, one of the main conditions was performance of all work without stopping the main production. The professional team managed to complete the Project successfully within the established deadline.  

It is to be reminded that the “Shymkent Refinery Modernization and Revamping” project was implemented in two stages. The general contractor was CPECC company (China Petroleum Engineering and Construction Corporation), a subdivision of CNPC corporation, possessing a wide experience in implementation of large investment projects worldwide.

The following units were commissioned upon completion of the first stage: Light Naphtha Isomerization Unit, Sulfur Production Unit with capacity of 4.0 tons per year, revamped Diesel Hydrotreatment Unit, and Automated On-spot Loading Unit. 

The following units were commissioned at the second stage: Catalytic Cracking Complex with capacity of 2.0 million tons per year; Catalytic Cracking Gasoline Hydrotreatment Unit with capacity of 1.0 million tons per year; Unsaturated LPG Desulfurization Unit with capacity of 303.1 thousand tons per year; Alkali Treatment Unit with capacity of 6,0 thousand tons per year; Saturated LPG Desulfurization Unit with capacity of 145.0 thousand tons per year; Sulfur Production Unit with capacity of 15.0 thousand tons per year; C3/C4 Splitter with capacity of 301.9 thousand tons per year; Amine Recovery Unit with capacity of 1.345 thousand tons per year; Sour Water Stripper with capacity of 792.1 thousand tons per year; and Pressure Swing Absorption Unit with capacity of 209.8 thousand tons per year. Also, the CDU of LK-6U complex with capacity of 6.0 million tons per year was revamped.  

Thus, upon completion of the Project the volume and the slate of output products have increased.

The works on modernization of the Refinery treatment facilities were completed. Use of “enclosed” and “ground” equipment prevents emissions into the atmosphere and soil cover, and allows saving fresh water to 1.5 million m3 per year. The reduction in emissions of hydrocarbons and other polluting substances into the atmosphere up to 90 %, and reduction in saturated/unsaturated hydrocarbons up to 21 % have been achieved.

 Also, the containers for collection of the used power sources and plastic boxes for waste paper collection were installed at the enterprise, according to the requirements of article 288 of the RK Environmental Code and according to “Rules of organization of collection, storage, utilization and removal of wastes of production and consumption”. 

One thousand tones of oil sludge was removed for processing and disposal. Within the frames of landscaping and improvement of the territory, many young plants of various bushes and trees were planted at the enterprise. Solar panels with a total area of 350 sq.m and 10 wind generators were installed. Also, the enterprise created the conditions for movement along the sites using the ecological transport – by bicycles and electromobiles.

With commissioning of the new units, PKOP LLP conducted additional certification of 284 new workplaces in 2017-2018. It should be noted that 98 % of the Refinery staff are the citizens of Kazakhstan, and only 2 % are foreign citizens. 

Moreover, 4,800 local workers with attraction of 30 companies of Shymkent city and Turkestan oblast were involved during the project implementation period.

Within the frames of mutual experience exchange, the trip to the Chinese refineries and the industry enterprises of the People’s Republic of China is organized annually for the staff of the company.

For high performance indicators in creation of safe working conditions to employees of the enterprise, PetroKazakhstan Oil Products LLP was awarded with a special diploma and a cup of prize-winner in contest “Model Safe Enterprise”, organized on the occasion of “World Day of Labor Protection”. 

The management and the staff of PetroKazakhstan Oil Products LLP were awarded with the State awards, medals and certificates of honor for achievements in productive activity and contribution to implementation of the “Shymkent Refinery Modernization and Revamping” project.

So far, PKOP LLP widely uses the international experience in the field of advanced new technologies, digitalization, and improvement of production processes, which has been made possible primarily owing to effective and fruitful cooperation at the level of national operators of Kazakhstan and China.

UPSTREAM

PetroKazakhstan Inc. is a group of energy companies, owned by CNPC E&D (67%) and KMG E&P (33%), engaged in the acquisition, exploration, development and production of oil and gas and sale of oil and refined products. All of the Group’s exploration and production operations are located in the South Turgai basin in South and Central Kazakhstan. The Group has interests in fields at different stage of development. The Group supplies major portion of its production in domestic market and also export crude oil from a variety of loading points mainly to China and Uzbekistan. 

The Principal subsidiaries are: PetroKazakhstan Kumkol Resources (100%), Kolzhan LLP (100%), PetroKazakhstan Overseas Services Inc.(100%), Turgai Petroleum JSC (50%), Kazgermunai LLP (50%) and other entities. The Group also has interests in the license 1057 (a joint arrangement between Kolzhan LLP and SSM Oil LLP) and in the license 951D (a Joint arrangement with PetroKazakhstan Ventures Inc. And Orient Petroleum (Central Asia) Ltd. 

88 wells were drilled during 2018 out of which 67 wells were drilled in operated upstream and 21 wells were drilled in KGM LLP. Out of 88, 21 were exploration and appraisal wells, while 67 were pilot and development wells. 

The PKI Group met the production target approved by PKI shareholders for the year 2018. Total gross production of the group was 4,836 thousand tons which is 142  thousand tons more than the approved budget of 4, 694 thousand tons. The group supplies around 84% of crude oil in domestic market which yields less netback comparing with exports. However due to better control on operating costs, corporate governance improvement , better production and average sales price, the profit of the group increased  in 2018 comparing to 2017. Being a responsible corporate citizen, PKI Upstream (including Joint Ventures) contributed US$ 6.6 mln gross for various social projects. 

As the PKI upstream is facing challenges, decline in production, high watercut, high operating costs, and sales volume in domestic market, PKI Management is optimistic to  secure smooth supply of energy resources ensuring successful exploration by increasing reserves and sustained operations & production in compliance with laws, and industrial best practices. The core and long term objective is to increase reserves through, acquiring new blocks, obtaining approval to explore new zones, extensions of existing blocks and successful exploration drilling. 

DOWNSTREAM

PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located near Shymkent in Turkestan region. Built in 1985 the refinery is the newest one among the three Kazakhstani refineries. The refinery accounts for around 30% of the total volume of oil products produced in the RK. 

The refinery is managed on a parity basis by National Company KazMunaiGas JSC and China National Petroleum Corporation (CNPC).

Large-scale Shymkent Refinery Modernization and Reconstruction Project was completed in 2018. It aimed to enhance the produced fuel quality to meet K4 and K5 emission standards, upgrade the target capacity up to 6 mln. tons annually, as well as boost light oil products output to meet the demand of Kazakhstan’s domestic market. Shymkent Refinery Modernization and Reconstruction was implemented according to Kazakhstan Government’s industrial and innovation development strategy. The project investment totaled USD 1.8 billion. The Project completion has been one of the milestones in Kazakhstan’s industrial development in 2018. 

In 2018, PKOP processed 4, 732,000 tons of crude oil and refined products output totaled 4, 301,000 tons including the following: 

 1,331,000 tons of gasoline    

 1,243,000 tons of diesel

 270,000 tons of aviation kerosene 

 168,700 tons of liquefied gas 

 461,100 tons of vacuum gasoil 

 825,800 tons of fuel-oil residue, and 

 1,127,000 tons of technical sulfur.

HSE

Corporate HSE Department developed and implemented a pilot project named Visualization Organization and Management Procedure at Kumkol Central Gas Facility in 2018 upon shareholders request. An HSE induction briefing video was released. The department developed a “Corporate standard of protective clothing, shoes and personal protective equipment for PetroKazakhstan Group of Companies.” The following was manufactured and communicated: “HSE Personal Liability Cards” and “12 Life-Saving Rules” posters. Commemorative medals “For Fire Prevention!” were issued and awarded to 19 Company employees on the day of the 100-th anniversary of the fire protection service. 99 PetroKazakhstan employees received awards under the Employee Award Program for Reported Near Misses, Unsafe Conditions and Acts. A paper recycling campaign was launched in the office. Internal training of the Company’s employees was conducted on the following topics: “The main actions of employees in case of emergency,” “Visualization Organization and Management Procedure,” “HSE Management System,” and “HSE Risk Assessment.” 

PKKR conducted HSE risk assessment in 2018, during which 693 technological processes were considered, 1,472 hazardous production factors were identified and their consequences were assessed. 2,224 behavioral safety audits, 10 internal audits and 98 HSE audits were conducted. An independent Road Traffic Safety Audit was conducted on the PKKR roads in June 2018. Its results are used to develop a “Road Map for Road Safety Management System Improvement in PetroKazakhstan in 2019-2021.” 

During the HSE month the “Safety First” competition was held, and another competition named “It’s easier to prevent a fire, than to fight it” was held in commemoration of the 100-th anniversary of fire-fighting service. The production shops of PKKR together with the teams of Kolzhan, PKOP, JV KazGerMunai, and Turgai Petroleum took part in this competition. PKKR was awarded with a “Certificate for the right to conduct fire-prevention and extinguishing operations, ensure fire safety and conduct rescue operations using the mobile equipment at organizations, populated localities and facilities” which is valid until 2021. 

PKKR won the first place in the nomination “The Best HSE Service” in SENIM National HSE Contest for Employers.  PKKR won the third place in the First Annual Environmental Responsibility Rating of Oil and Gas Companies of Kazakhstan, organized by the World Wildlife Fund (WWF) of Russia and CREON Group with the support of the United Nations Environment Program in Central Asia (UNEP CA) and the Kazakh Ministry of Environment. 

The additional certification of 75 new jobs was conducted at PKOP in 2018 in connection with the launch of new installations. Also, behavioral safety observations for drivers were launched at the refinery with the aim to develop a safe driving culture and reveal and prevent unsafe actions of drivers. As part of AMAN integrated safety system project the following nominations were awarded in 2018: The Team of the HSE Classic Status to 3 shops at the refinery, Most Active Participants of Sub-Committee to 12 employees, The Best HSE Employees to 12 employees, and Learn to Teach to 6 employees. 

The refinery’s sewage treatment plant repair project was completed. Now, it uses onshore closed-loop cycle equipment that prevents atmospheric emissions and soil contamination and allows saving up to 1.5 million m3 of fresh water annually. Atmospheric emissions of hydrocarbons and other pollutants were reduced by 90%, and saturated and unsaturated hydrocarbons by 21%. Containers for waste power source collection and waste paper bins were installed on the refinery premises in compliance with the requirements of Article 288 of the Kazakh Environmental Code and Industrial and Household Waste Collection, Storage, Recycling and Disposal Practices. 1000 tons of oil sludge were shipped for recycling and disposal. Various shrubs and trees were planted on the refinery area as part of a landscaping campaign.  

The Labour Inspection Department of the South Kazakhstan province awarded PKOP with a diploma of “Distinguished Safe Enterprise” on the Global Labor Protection Day. PKOP took part in the IV-th Annual Forum of the General Directors of NC KMG Group named “100% Safety: Health and Safety Is a Matter of Everyone’s Personal Priority.” PKOP was awarded with a certificate in the nomination “20 Years of Zero Fatality Rate.”

CORPORATE SOCIAL RESPONSIBILITY

The corporate social responsibility policy of PetroKazakhstan relies upon the principles of efficiency, viability and consistency.

The Company fulfilled all its CSR commitments in 2018.

In general, PKKR and PKOP have spent about 176 million tenge on social projects over the past year. The company continues implementing its long-term projects for social infrastructure development, support of disadvantaged people, orphans, people with disabilities, veterans of the Great Patriotic War and Afghanistan campaign, and in projects for the development of healthcare, sports, culture and art.

Below is brief description the Company’s basic sponsorship and charity projects in Kyzylorda and Turkestan regions and the city of Almaty implemented in 2018: support of Shapagat rehabilitation center for disabled children, Atameken children’s village, “Present Children with Life” project of the Dobrovolnoye Obshestvo Miloserdiye (DOM) (“Mercy” Voluntary Society) Public Fund, support of the International Vocalist Competition established by Bibigul Tulegenova, Altyn Zhurek (Golden heart) National Philanthropy and Charity Award, support for war and labor veterans, participation in the Burabike charity bike race as part of corporate healthy lifestyle support programs that aim to raise funds for equipping children’s hospitals in Kazakhstan with vital medical equipment, organizing free vacations for 1,290 low-income families and Company workers in Arai Sunrise children’s camp, support of mass sports, holding various sport events in the regions of Company’s operations, and other projects.

Special attention is paid to social support of the Company employees. For example, the employees were able to receive 39 higher education scholarships under the Financial Assistance Program. The employees’ dependent children received 29 scholarships under the PKOP scholarship program. 

PKKR and Kolzhan management has awarded 102 scholarships during 2018-2019 as part of the education program for dependent children. 

ACHIEVEMENTS AND AWARDS

The Company’s contribution to the development of regions and the merits of PKKR and PKOP employees  are recognized at the republican and local levels every year.   97% out of the total amount of employees are Kazakhstan nationals.  

PetroKazakhstan Oil Products was awarded with a special diploma and a winner’s mug for high performance in creation of safe work environment for the company’s employees in a competition “Distinguished Safe Enterprise” organized in commemoration of the Global Labor Protection Day. PKOP’s management and workers received governmental awards, medals and certificates of merit for their contribution to industrial development and Shymkent Refinery Modernization and Reconstruction Project implementation.

PKKR won the Third Place in the Environmental Responsibility Rating of Oil and Gas Companies among 16 leading oil and natural gas producers in 2018. The main participants were compared by the following criteria: environmental management, environmental impact and information disclosure/transparency.

PetroKazakhstan Inc. is a group of companies, owned by CNPC E&D (67%) and KMG E&P (33%), engaged in the acquisition, exploration, development and production of oil and gas and sale of oil and refined products. All of the Group’s exploration and production operations are located in the South Turgai basin in South and Central Kazakhstan. The Group has interests in thirteen fields, at different stage of development. The Group supplies major portion of its production in domestic market and also export crude oil from a variety of loading points mainly to China and Uzbekistan.
The principal subsidiaries are: PetroKazakhstan Kumkol Resources (100%), Kolzhan LLP (100%), PetroKazakhstan Overseas Services Inc.(100%), Turgai Petroleum JSC (50%), Kazgermunai LLP (50%) and other entities. The Group also has interests in the license 1057 (a joint arrangement between Kolzhan LLP and SSM Oil LLP) and in the license 951D (a Joint arrangement with PetroKazakhstan Ventures Inc. And Orient Petroleum (Central Asia) Ltd.
Further PKKR has a consortium with Turgai petroleum on (i) crude oil pipeline (ii) gas processing and power generation facility.
The core and long term objective is to increase reserves through, acquiring new blocks, obtaining approval to explore new zones, extensions of existing blocks and successful exploration drilling . During 2017, PetroKazakhstan Operated Upstream (PKKR, Kolzhan, Joint Ventures in licenses in 1057(50%) and 951D(75%) added around 1.5 mln tons reserves under SEC rules and also planning to register around 1.4 mln reserves addition with Reserves Committee of Kazakhstan.
 77 wells were drilled during 2017 out of which 55 wells were drilled in operated upstream and 22 wells were drilled in Kazgermunai LLP. Out of 77, 17 were exploration and appraisal wells, while 60 were pilot and development wells. The success rate to discover oil in exploration and development wells were 64% and 95% respectively.
The PKI Group met the production target approved by PKI shareholders for the year 2017. Total gross production of the group was 5,186 thousand tons which is 58 thousand tons more than budget of 5, 092 thousand tons. The Group supplies around 78% of crude oil in domestic market which yields less netback comparing with exports. However due to better control on operating costs, improvement in corporate governance, better production and sales price, the profitability of the Group is getting better during 2017 comparing to 2016. Being a responsible corporate citizen, PKI Upstream contributed 5.4 mln gross for various social projects.
 As the PKI Upstream is facing challenges, decline in production, high watercut, operating costs, and sales volume in domestic market, PKI Management is optimistic to secure smooth supply of energy resources by ensuring successful exploration by increasing reserves and sustained operations & production in compliance with laws, and industrial best practices.

DOWNSTREAM

PetroKazakhstan Oil Products LLP (PKOP) is an oil refinery located in Shymkent in the South Kazakhstan Oblast. Built in 1985 the refinery is the newest one among three Kazakhstani refineries.
Refining output of PKOP LLP for 2017 amounts to 4,686,000 tonnes that is 107.47% of the plan approved by the Ministry of Energy of the Republic of Kazakhstan in excess of the plan 326 thousand tonnes. The indicators of oil products manufacturing amounted to 4,388,000 tonnes or 107.5% of the plan, of which the following oil products have been manufactured:
 gasoline – 1,027.45 thousand tonnes, the plan was fulfilled for 107.47%, in such a case, the share of high octane gasoline with planned 69.02% amounted to 85.82% of the total volume of the motor gasoline that was 124.3% of the plan fulfillment;
 diesel – 1,209.36 thousand tonnes, the plan was completed for 104.67%;
 aviation kerosene – 279.7 thousand tonnes, the plan was completed for 126.97%;
 liquid gas – 96.9 thousand tonnes, the plan was completed for 92.47%;
 vacuum gasoil – 818.1 thousand tonnes, the plan was completed for 103.95%;
 fuel-oil residue – 955.9 thousand tonnes, the plan was completed for 111.47%;
 technical sulfur – with planned 457 tonnes – about 554 tonnes were produced, the plan was fulfilled for 121.23%.

The light naphtha isomerization unit including the preliminary raw materials hydrotreating unit enabling to increase the production of high octane gasoline of K-4 and K-5 emission standards was commissioned in June 30, 2017. Declaration of the quality conformance was received.
Diesel fuel of K-4 and K-5 emission standards was received in December, 2017. Declaration of the quality conformance was received.
Thus, stage 1 of Shymkent Refinery Modernization and Reconstruction Project has been completed.
PetroKazakhstan Oil Products LLP implements a large-scale project on Shymkent Refinery Modernization and Reconstruction according to Kazakhstan Government’s industrial and innovation development strategy that determines the development of local refineries.
The Project implementation advantages include: capacity upgrade to increase light oil products output for import substitution and supply to the Kazakhstan’s domestic market, new jobs in the city of Shymkent, and green production facilitation. Shymkent Refinery Modernization and Reconstruction Project is implemented in two stages.
Stage 1 is completed
• The Diesel Hydrotreater with a capacity of 1.5 mln tonnes per year has been commissioned;
• The Sulfur Plant with a capacity of 4 mln tonnes per year has been commissioned;
• The automated single point loading of oil products with a capacity of 2.5 mln tonnes per year has been commissioned, 251.4 thousand tonnes of gasoline were loaded within the period from July to December, 2017.
• The Isomerization Unit with a capacity of 600 thousand tonnes per year has been commissioned, 570.7 thousand tonnes of high octane gasoline of K-4 emission standard were produced within the period from July to December, 2017.
Stage 2 is being completed
92% of the project was implemented, including:
– 26,700 shop drawings and more or 100% were developed;
– orders for 1,408 of 1,408 items of equipment were placed, of them 1,237 items or 87.8% were supplied, 1,171 items or 83.2% were assembled;
– 56,851 of 56,876 m3 of concrete or 99.9 % were poured;
– 20,852 of 2,875 m3 or 99.9 % of reinforced concrete structures were assembled;
– 20,310 of 20,379 tons or 99.7 % of metal structures were assembled;
– 501 of 524 km or 95.6 % of process pipelines were assembled;
– 750 of 960 km or 78.1 % of electric cables were assembled;
– 1,045 of 1,318 km or 79.3 % of the Instrument cables were assembled, etc.

Mechanical completion of the off-plot facilities of Stage 2 was made, a mechanical completion certificate was signed and commissioning work was started in December 29, 2017.

Key dates
 March 15, 2018 – Mechanical completion of the refinery process units;
 July 1, 2018 – Raw materials acceptance (light vacuum gasoil circulation).
 September 30, 2018 – Reaching the guarantee indices and putting into service.

HSE

In 2017 the Corporate HSSE Department updated the Corporate Safe Land Vehicle Operation Procedure at the request of the shareholders. Memorandum of Understanding and Cooperation was signed between the companies using PKKR JSC’s motor roads in March. The road raids were carried out on the roads of Kumkol and KAM oil fields to inspect the speed enforcement and meeting the road safety requirements.
Internal training of the Company’s employees was carried out on the following topics: “SAP: HSE Incidents Management Module”, “Behavioural Safety Audits Performance”, “Objectives, Tasks and Plans on HSE Management” and “HSE Risks Assessment”. Interactive training of the Company’s employees was held for their knowledge of the HSE management system. HSE information materials were prepared and distributed: “First Aid Guide”, “Rules and Methodology for Behavioural Safety Supervision”, “Behavioural Safety Supervision Sheets”, “HSE Personal Liability Cards”, “10 Steps to Recovery” brochures.
An independent audit on health care, industrial sanitation and hygiene was held in all business units of PetroKazakhstan. Safety and Health Certificate for industrial facilities and rotational camps of Kumkol, Aryskum and Kyzylkiya field was received. A new ambulance car was procured for casualty evacuation of the patients from the field to Kyzyl-Orda city. The lectures were conducted on topics: “Caution! The Flu”, “Smoking is Bad for Your Organism”, “Traumatism”, “Intestinal Infections Hazard”, “Essential Factor for the Health”, “Tick Bite”.
In June, 2017, during the HSE month under the slogan “Be the Best in Performing Your HSE Obligations” there were the competitions “The Best Contractor for HSE and Social and Living Conditions according to the Results of the First Six Months of 2017”, “The Best Business Unit for Emergency Preparedness”, “The Best Workshop in the HSE Area”, and a competition titled “It’s easier to prevent a fire, then to fight it” was held prior to the Fire Safety Day.  24 employees of PetroKazakhstan received awards under the Employee Award Program for Reported Near Misses, Unsafe Conditions and Acts.
In February, 2017, PKOP LLP started implementation of Stage 3 of AMAN Project where the heads and employees were trained on the following topics: “Working at Height”; “Line Management – Roles and Responsibility in management and implementation of the Safety Management Projects”; “Learn to teach” as well as a practical seminar with the HSE specialists. In December, 2017, the employees of the plant were awarded by single cash bonus, commemorative prizes and letters of recognition in the following nominations: “The Team of the HSE Classic Status”, “Most Active Participants of Sub-Committee” and “The Best HSE Employees”.
The plant facilities inspections as well as instrumental measurements of the environmental components condition are held in PKOP LLP according to the Programme of Industrial Environmental Monitoring to monitor compliance with the specified standards of the maximum allowable emissions (MAE) and discharges (MAD) and soil quality within the plant buffer zone. There were no facts of exceedance of the specified standards as a result of the conducted measurements. In 2017, the environmental emissions were carried out within the specified standards.

CORPORATE SOCIAL RESPONSIBILITY

As before, PetroKazakhstan is implementing a multipurpose sponsorship program in all regions of its operation. The company actively participates in projects for social infrastructure development, paying special attention to long-term programs for the support of vulnerable segments of population, orphans, veterans of the Great Patriotic War and workers of the labor front, veterans of the Afghanistan war and disabled persons, and in projects for the development of health care, mass sports, culture and art.

Since 2011 the Company has been actively collaborating with Bauyrzhan Public Foundation, which once again organized and held an anniversary national award Altyn Zhurek (Golden Heart). Traditionally this project aims to identify and award individuals and companies, whose charity efforts make an invaluable contribution to the society development. In such a way the company contributes to the development and promotion of philanthropy in the country, creating a dialogue space for good doers and socially vulnerable community.

PetroKazakhstan is a permanent sponsor of the International Vocalist Competition established by a USSR People’s Artist, a hero of socialist labor, academician Bibigul Tulegenova.
For a long time the company continues its cooperation with DOM Public Foundation; the funds are allocated to support the veterans of the Great Patriotic War and workers of the labor front on an annual basis.

In 2017 the Downstream Unit of the Company (PetroKazakhstan Oil Products LLP) allocated KZT 75 million for traditional social projects and the support of sponsored organizations, including sports development projects in the oblast and rehabilitative support of children with disabilities, and labor veterans of South Kazakhstan Oblast.

PKOP LLP performs the work on social support of Shymkent Refinery’s employees. 35 educational allowances were given to the employees to go into higher education under the Financial Aid Program. Also, 39 educational allowances were given to dependent children of the employees of PKOP LLP under the Scholarship Program.

The funds allocated by the Upstream Unit (PetroKazakhstan Kumkol Resources JSC) for social projects amounted to KZT 45 million. Also, the Company keeps on implementation of the social projects on support of the Rehabilitation Center for disabled children and child care center for the disadvantaged children. In 2017, PKKR JSC arranged for free-of-charge rest for 1,080 children of the company’s employees and disadvantaged children in Arai Sunrise children’s camp.

ACHIEVEMENTS AND AWARDS

In celebration of the 20-th anniversary of cooperation of Kazakhstan and China in the oil and gas sector, the management of China National Petroleum Corporation (CNPC) awarded the medals of honor and letters of gratitude “For Contribution to the Development of Cooperation in the Oil and Gas Sector Development between Kazakhstan and China” to the distinguished employees of all business units.

The Company’s contribution to the development of regions and the merits of PKKR and PKOP employees is recognized at the republican and local levels every year. Therefore, KAZENERGY Association, the Kyzylorda Oblast and Kyzylorda City Akimats, the Chamber of Entrepreneurs of the Kyzylorda Oblast awarded medals For Contribution to Oil and Gas Sector Development, Veteran Worker medals, Honored Worker of Oil and Gas Industry award pins, certificates of merit and letters of gratitude to more than 50 PKKR employees.

PetroKazakhstan Oil Products LLP was awarded with special diploma and winner’s mug for high performance in creation of the safe labor conditions for the company’s employees in a competition “Distinguished Safe Enterprise” organized in honor of Global Labor Protection Day – April 28 by the Labour Inspection Department of the South Kazakhstan Oblast.

The Competition Awarding Committee of the RK Ministry of Health and Social Development selected the Shymkent Oil Refinery as the best enterprise in the nomination “For Contribution to Ecology”.
A solemn winner award ceremony took place within the framework of the Industrialization Day with participation of the Head of the State – Nursultan Nazarbayev – in the capital’s Kazmedia Ortalygy Center. The highest award was received from the hands of RK Prime Minister Bakhytzhan Sagintayev by Aslan Mynbayev, Vice-President for Modernization and Development, PKOP LLP. This high award esteems efforts of the entire refinery team. 
PetroKazakhstan Oil Products LLP pays significant attention to the enhancement of its environmental management. Thus, in 2009 it introduced ISO 14001:2004 International Environmental Management Standard. In 2015, based on audit results, a decision was made to confirm the certificate of conformance of its management system with requirements of ISO 9001:2008, ISO 14001:2004 and OHSAS 18001:2007 standards. 
The company has a system to monitor emissions of contaminants to the environment (atmospheric air, water and soil resources, plants, snow cover and radiation situation) and the condition of the natural environment. Besides, the refinery permanently carries out biological reclamation of contaminated soil areas on refinery sites. Recycling of secondary oil refining waste (oil sludge) and pyrophoric compounds is in place.
PKOP LLP also signed a memorandum for business social responsibility in the region for general improvement and landscaping of the oblast, city and district. Annually refinery workers plant trees in the buffer zone around PKOP. This year they planted 908 trees. 
For the record, the refinery was already awarded a President Award for its environmental policy: in 2011 PetroKazakhstan Oil Products LLP won a Golden Paryz Award in the nomination “For Contribution to Ecology”.

The Head of the Government had a look at production operations and the progress of the Shymkent Refinery Reconstruction and Modernization Project.

In accordance with its Modernization Program the refinery is busy constructing new process units, such as an Isomerization Unit with an annual capacity of 600 thous. tons and an RFCC Catalytic Cracker for processing of fuel oil and vacuum gas oil with an annual capacity of 2.0 million tons per year, to produce high-octane motor fuels.

The PKOP Modernization Project is being implemented in two stages. At the first stage it is planned to launch the production of motor fuels complying with K4 and K5 emission standards (analogs of Euro-4 and Euro-5) in accordance with requirements of the Customs Union’s Technical Regulation.

To date, under the Shymkent Refinery Modernization Program, 6,785 cubic meters of concrete (67%) have been laid at the Isomerization Unit. 110 equipment items (74%) and 3,400 tons of metal structures (96%) have been installed in the unit. Pipings are being manufactured and pipelines are being installed. 1,454 people are engaged in the construction and installation scope under the project.

The second modernization stage is intended for increasing the refinery overall capacity to 6 million tons of crude oil per year and the oil conversion ratio. At this stage the refinery equipment will be expanded to include an RFCC Catalytic Cracker, a Prime G+ Gasoline Hydrotreater, a Merox Saturated and Unsaturated Gas Treatment Unit, a Hydrogen Treatment Unit and others.

Once the second stage is completed, the production of high-octane gasolines at the refinery will increase to 2,270 thousand tons per year, of diesel – to 1,916 thousand tons per year, and of jet fuel – to 400 thousand tons per year. The share of high-octane gasolines will reach 100%.

Overall the project covers construction and revamp of 11 process units and 29 off-site facilities.

Within the framework of the Program in December of 2015 a grassroots Sulfur Production Unit with a capacity of 4 thousand tons a year was put into operation. New jobs were opened and training in the new technology was provided. The unit is designed to recycle acid gases which were earlier flared and to produce sulfur with purity exceeding 99.9 % wt.

In the course of the meeting the Prime Minister of the Republic of Kazakhstan gave some instructions regarding timely and meaningful implementation of plans under the Refinery Modernization Project.

PetroKazakhstan Oil Products LLP pays much attention to the project on modernizing its production facilities, and invests significant funds in its upgrade. One of PKOP’s achievements -costs decrease and processing efficiency increase– became possible due to implementation of the programs on improvement of production, revamping of operating units, and introduction of the new modern technologies. 

The company management has drawn up a long-term plan for Shymkent refinery development. The main objective of the project is to upgrade the refinery operation to the level which would meet the modern international standards of refineries’ performance.  

•   recover the design crude throughput up to 6 million tons per year;

•   increase crude  processing depth;

•   improve the yield quality up to Euro-4 and Euro-5 standard requirements;

•   increase the product slate – propane-propylene (petrochemical feedstock), elemental sulfur;

•   improve ecological programs.

Implementation of the project on “Shymkent Refinery Modernization and Revamping” will result in construction of 14 new process units, including the Residue Fluid Catalytic Cracking (RFCC), the Catalytic Cracking Gasoline Hydrotreater Prime G+, MTBE production unit, Merox unit for sulfur removal from non-saturated LPG, unit of tail gas treatment and sulfur recovery. In June 2015 there were successful guarantee operational tests conducted to start-up the facility “Diesel hydrotreater unit”. Installed reactor R-301-1 enables throughput of 1.5 million tpa with achievement of design indicators in producing a summer diesel component at Euro-5 standard level. The outgoing hydrogen sulfide is a feedstock for SPU-4000.

“Sulfur Production Unit – SPU-4000”, which was commissioned in December 2015, is a grass-root, completely constructed facility, the design capacity of which is 4 thous. tpa of elemental sulfur. Thus:

27 new workplaces with new technology training have been arranged; the specialists from related enterprises were invited for commissioning. As of today, 300 tons of sulfur has been produced by means of acid gas utilization, which was previously flared. The sulfur purity is above 99.9 % wt.

The completion of construction and commissioning of the “Oil products on-spot loading unit” are planned for the IV quarter of 2016. The automated gasoline loading makes a provision for 2 loading points through the telescopic pipes with a capacity of 730 m³/hour within 6-7 min. for 1 RTC. For today, construction and assembly works have been performed in the volume as follows: concrete pouring– 876 out of 2,014 m3; metal structures mounted- 340 tons out of 416 tons; installation of equipment has been started.

The project on “Isomerization unit with feedstock preparation block” is intended to produce the motor gasoline components of K-4, K-5 level with a capacity of 600 thousand tpa. More than 700 builders and assemblers with planned headcount increase up to 1,200 at the peak of construction and assembly works (in summer-autumn period) have been attracted to work on Isomerization unit. The earthworks at off-site facilities have been started; the ditch for tank farm #3600 has been prepared. They have started grouting the bored piles on the flare. As for today, the following works have been executed at the Isomerization unit: designing works – 98.9 %, placement of equipment orders – for 147 units out of 149, or 99 %; foundation arrangement– 6, 568 out of 6, 970 m3, or 94 %; installation of equipment – 62 of 149 units, or 41,6 %, including 3 distillation columns: K-205, K-701, K-704, the weight of which is within 200-400 tons, the height- up to 55 m, diameter- up to 6.6 m, and also absorbers, vessels, heat exchangers;  assembly of pipe furnaces P-206 and P-751 is on-going.  

Mechanical completion of the Isomerization unit is planned for the IV quarter, 2016; completion of off- site facilities and commissioning and start-up of the Isomerization unit– for the end of 1st quarter, 2017.

The “Catalytic cracking unit” project is intended to increase the crude throughput to 6 mln. tpa and processing depth- to 85 %. 

As for today, there have been executed: designing – to 13 % and off-site facilities – 15 %; placement of equipment orders– for 17 units out of 598, or 2.8 %; foundation arrangement – 1, 645 out of 8, 760 m3, or 18.8 %. 

The deadline is 4th quarter, 2017. It is planned to attract up to 3,500 people in total for this project during the peak of construction and assembly works under Stages 1 and 2. 

Performance of construction and assembly works under modernization project implementation does not involve production shutdown or decrease in yield. All new units are under construction in parallel.