JPMorgan - KASE

Other Export Routes
The Government is considering the development of additional export outlets, including routes
through Iran, Azerbaijan, Georgia and Turkey. However, these options remain in the preliminary
planning stages.
Foreign Investment in Oil and Gas
In 2000, foreign investors invested $2,160 million in Kazakhstan’s oil and gas sector. As of the end
of the first nine months of 2001, foreign investors had invested $2,472 million in Kazakhstan’s oil
and gas sector. The most significant foreign investment has been in the Tengiz oil field where,
under the terms of a 40 year joint-venture agreement, Tengizchevroil (“TCO”) is expected to
invest a total of approximately $20 billion in the field. Since the signing of the CPC Protocol,
Mobil Corporation acquired a 50% interest in the Government’s interest in TCO. The
development of the CPC pipeline is estimated to allow production at the Tengiz oil field to
increase from current levels of around 120,000 barrels per day to around 700,000 barrels per day.
In addition to direct investment in transportation, exploration and production projects, there
have also been significant purchases by foreign investors of state-owned oil and gas enterprises.
In 1997, the Kazakhstani government sold 60% of JSC Aktobemunaigas to China National
Petroleum. China National Petroleum, as controlling shareholder in JSC Aktobemunaigas, has
agreed to invest up to $4 billion over a period of 20 years in developing the Aktobe field.
In November 1997, during the visit of President Nazarbayev to the United States, two agreements
were signed: a development agreement relating to Karachaganak’s oil and gas fields and a
production-sharing agreement relating to the north Caspian Sea. The agreement relating to
Karachaganak is with an international consortium of oil companies for a term of 40 years and
provides for investments of $16 billion. The consortium members plan to construct an oil pipeline
connecting the Karachaganak fields to the CPC pipeline. The agreement relating to the north
Caspian Sea is with another international consortium of oil companies, also for a term of 40
years.
Regulation of the Oil Industry
Ministry of Energy and Mineral Resources
The Ministry of Energy and Mineral Resources, or MEMR, was organized by Presidential Decree
No. 507 dated December 13, 2000, as a result of the restructuring of the Ministry of Energy,
Industry and Trade and the Ministry of Mineral Resources and Environmental Protection. MEMR
represents the interests of the Government of Kazakhstan in enterprises engaged in the
exploration, extraction and processing of hydrocarbons. That same decree also transferred to the
MEMR the responsibilities for regulation of subsoil exploration and production.
KazMunaiGas
In 2002, the President Nursultan Nazarbayev issued Decree No. 811 establishing a new national
oil and gas company, Closed Joint Stock Company National Oil and Gas Company KazMunaiGas,
or KMG, as a successor of Kazakhoil and holding company for KazTransOil and KazTransGas. The
exact role of KMG is yet to be determined but it is believed that KMG will monitor investment
projects in the oil and gas industry and will be responsible for the implementation of the
following functions as set forth in the Petroleum Law:
‰ participating in the development of strategy for production rates and for further increases
of petroleum resources;
‰ representing national interests in the contracts with contractors conducting petroleum
operations by means of mandatory share participation in such contracts, in the manner
defined by the Government;
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