Interview With Magzum Mirzagaliyev, CEO Of KazMunayGaz

1.  What place does KMG occupy in the national economy?

Thank you for your interest in our company. KazMunayGas, it is not an overstatement to say, is the leading oil and gas company of Kazakhstan. We manage assets across the entire production cycle – from hydrocarbons exploration and production to their transportation and refining as well as services we provide in the oil and gas sector. Our company was founded in 2002 and, as a state-owned company, we represent the country’s oil and gas industry interests. In February 2022, KazMunayGas celebrated its 20^th anniversary. Since December 8, 2022, KMG’s shares are listed on two Kazakhstan stock exchanges – AIX and KASE, free float is 3%.

The total volume of oil production in projects with KMG participation is 76 million tons, of which KMG’s share is 23 million tons. This means 85% and 26% of all oil production in the Republic of Kazakhstan, respectively. KMG in partnership with such global oil majors as Tengiz (20%), Kashagan (16.88%), Karachaganak (10%) also participates in all the three oil megaprojects we have in Kazakhstan, which are the world’s largest fields.

To give you an understanding of the company’s scale, let me also clarify that by the end of 2022, KMG’s share in gas production was 15%, in oil refining – 84% and in oil transportation (including trunk pipeline and offshore oil transportation) it was 53%. The Company controls the three largest oil refineries in Kazakhstan. 

2. What are the main oil and gas exploitation sites in the country? How do you see the future of the national company, particularly in the Atyrau region?

KMG runs commercial production operations at 13 projects with its share ranging from 8.6% to 100% in 5 administrative regions of the country: Atyrau, Mangistau, Aktobe, Kyzylorda and West Kazakhstan regions.

KMG’s business development is closely linked to the projects in the Atyrau region. Firstly, this region has the largest production share in the country due to the largest fields (Tengiz, Kashagan) and 37 fields of Embamunaigas – our subsidiary (100% owned by KMG). Hydrocarbon rate-plateau growth projects are now in progress at Tengiz and Kashagan. So, we expect a prominent expansion project launch at the Tengiz field, which will enable annual production growth by 12 million tons. Projects at the Kashagan field one by one will be commissioned until 2030. However, I should also mention such large fields in Mangistau region as Uzen, Zhetybai, Kalamkas and Karazhanbas, the share of which is 15% (approximately 14 million tons) of the total country’s production.

Secondly, we are now actively working over the high-margin petrochemical projects. They are located in the Atyrau region. Kazakhstan Petrochemical Industries Inc. – a large-scale integrated gas chemical complex with an annual design capacity of 500,000 tons of polypropylene was launched last year. This equates to 1% of global polypropylene production. The Atyrau polypropylene complex is one of the largest in the CIS.

We are now implementing the second gas chemical project – a Polyethylene Plant Construction (annual capacity is 1.25 million tons). The finished products are planned to be sold both on the domestic market and for export. According to the experts’ estimates, the annual growth in demand for this polymer in the world until 2030 is expected to be 4%.

3. What major exploration projects are underway?

We plan to further keep our exploration and production leadership in the oil and gas industry of Kazakhstan. Given the level of oil and condensate production in 2021, we have the 1P category reserves sufficient for 16 years, which is comparatively higher than the KMG’s peers have. Our 2P reserves across all KMG projects increased to 5.5 mln boe.

At the same time, KazMunayGas pays special attention to the hydrocarbon reserves development. We have formed a diversified portfolio of 11 exploration projects, both onshore and offshore. The largest of them are Abay, Bekturly Vostochny, Turgay Paleozoic, Al-Farabi. We are delivering most of the projects with the participation of such international strategic partners as ENI, LUKOIL and other.

In addition, we are running the exploration projects at our existing fields (Ozenmunaigas, Embamunaigas, Mangistaumunaigas, etc.). We are implementing as well the Karaton Podsolevoy – a new promising exploration project.

However, there are 15 sedimentary basins in Kazakhstan with an unexplored resource potential, especially in the deep subsalt sediments of the Pre-Caspian Basin. The giant Tengiz, Karachaganak and Kashagan fields were previously discovered within its boundaries. These promising sites need to be prepared for geological exploration, more precisely, regional seismic survey. Therefore, we want to hold a global road show to attract investment for promising areas exploration. The scope of these works includes the GE projects, the Caspian Sedimentary Basin Project and a number of other promising and active KMG projects.

In 2022, KMG has already started seismic surveys as part of subsoil geological exploration (GE) at 5 projects (Berezovsky, Mugodzhary, North Ozen, Bolashak, Zharkyn), which suggest that the new promising structures need further engineering.

4. In Eastern Europe, KMG owns gas stations. How do you diversify your group’s activities internationally? What are your expansion plans in Europe, and particularly in Germany?

In Europe, we have our footprint in the markets of Romania, Bulgaria, Georgia, Turkey and Moldova through our 100% subsidiary KMG International N.V. Our core business activities are trading and logistics, petrochemicals and oil refining (Petromidia Refinery, Vega Refinery, petrochemical complex), petroleum products retailing through a network of filling stations under the Rompetrol brand, and industrial services. KMG continues to be one of the key players in the Romanian market and annually provides up to 4 million tons of feedstock to the Petromidia Refinery.

KMGI’s current strategy is to develop and implement petrochemicals and business decarbonization projects, taking into account the changing environmental requirements of the EU.

At the same time, Kazakhstan continues to be one of the major oil exporters to the countries of the European Union, and every year we increase the supplies volume. The main consumers of Kazakh oil in Europe are Italy, the Netherlands, Greece, France, Turkey and Spain.

Furthermore, we are seeking for cooperation expansion. Earlier, as you know, the Government of Germany addressed Kazakhstan with a request to supply Kazakh oil through the Druzhba pipeline to the PCK Raffinerie (Schwedt). In February 2023, we started supplies of oil from Karachaganak Petroleum Operating (KPO) reserves to PCK Raffinerie (Schwedt). During February-October 2023, we have already transported 690 thousand tons of oil to Germany. The expected volume of Kazakh oil transportation (from KPO) through the Druzhba pipeline in 2023 is 890 thousand tons.

5. KMG signed a cooperation agreement with the French company Air Liquide in 2022? What does the latter consist of, and what new opportunities does it open up?

We highly appreciate the partnership with Air Liquide – a world’s leader in the gases production for industry, healthcare and environmental protection. We have already successfully implemented 5 projects at the three KMG plants – Pavlodar Plant, Atyrau Refinery and KPI.

Following the official visit of the President of the Republic of Kazakhstan K. Tokayev to France in 2022, we signed a Cooperation Agreement with Air Liquide on a new hydrogen production unit construction at the Pavlodar Plant. On June 8, 2023 we signed a Supplementary Agreement. This document will allow us to move to the practical realization of the project. We will use hydrogen from the new unit to produce diesel fuel in the amount of up to 160 thousand tons per year, as well as to increase the production of jet fuel.