Transportation and Sales

Kazakhstan is essentially a landlocked country, so increased production for export requires an improved transportation infrastructure. Fortunately, this infrastructure has been developed considerably over the past few years.

Strong relations with the parent company provide KMG EP with reliable access to pipeline infrastructure. The UAS and CPC pipelines are key outlets for the Company’s exports. KMG EP is the largest supplier to Atyrau refinery. Kazgermunai supplies crude oil to China via Kazakhstan-China pipeline.

Until recently the main outlet for the Company’s production has been through Russia via the 1,500 km Uzen-Atyrau-Samara (UAS) pipeline to Samara which is the main export outlet. Since 2001 this has been complemented by the Caspian Pipeline Consortium’s (CPC) 1,510 km pipeline to the Russian city-port of Novorossiysk on the Black Sea – a more profitable route for the Company and the reason behind our efforts to increase the proportion of exports through CPC.

The 1,000 km Atasu-Alashankou pipeline between Kazakhstan and China became operational in December 2005, with a capacity of 10 million tonnes p.a. (200 kbopd) projected to double in the coming years. Other pipeline routes from Kazakhstan are being considered.

In July 2006 an alternative route has been developed: the first direct pipeline with planned capacity of 50 million tonnes (1,000 kbopd) link between the Caspian and the Mediterranean Sea. The Baku-Tbilisi-Ceyhan pipeline runs through Baku in Azerbaijan to the Turkish port of Ceyhan and began operating in July 2006. This pipeline is a potential alternative route for Kazakhstan’s oil.

The above examples indicate that despite Kazakhstan’s dependence on its neighbours to export its oil overseas, the country enjoys considerable growing and diversified access to the export market. Through our good relations with our parent company, the Company has guaranteed access to the oil transport infrastructure owned by NC KMG.

In 2016, KMG EP exported 59% of crude oil produced on its core assets UMG and EMG. During this period, 26% of Company’s (UMG and EMG) crude oil sales were exported via CPC pipeline and 33% via UAS pipeline.