JPMorgan - KASE

The total royalty and tax expense for the nine months ended September 30, 2002 was $43.7
million compared to $30.7 million for the comparable period in 2001. The $13.0 million increase
was primarily due to increased production and higher prices received for crude oil. In addition to
royalties, we incurred other statutory taxes of $12.2 million for the nine months ended
September 30, 2002 (compared to $3.2 million for the comparable period of 2001), out of which
$5.1 million relates to a tax assessment.
Transportation Costs
Transportation costs consist of the costs of shipping crude oil from our Central Processing Facility
located at the Kumkol South field to the Shymkent refinery, the costs of trucking crude oil from
the QAM fields to the CPF and railway transportation from the Shymkent refinery to the
destination ports under non-FCA sales contracts. Transportation costs also include transportation
of crude oil produced by our Kazgermunai joint venture to its export customers. The pipeline
tariff from the CPF to Shymkent depends on the ultimate destination of the crude oil. The tariff
charged in respect of crude oil destined for export is $1.41/Bbl, while the tariff relating to crude
oil processed in the refinery is $0.84/Bbl.
The following table sets out the constituent components of transportation costs:
Nine Months Ended
September 30, 2002
Nine Months Ended
September 30, 2001
($000’s)
Pipelinecosts....................................... 39,923 26,255
Kazgermunai transportation costs ..................... 5,611 6,381
Railwaytransportation .............................. 50,743 1,582
Otherrelatedtransportationcosts .................... 3,854 —
Total .............................................. 100,131 34,218
The $65.9 million increase in transportation costs from the nine months ended September 30,
2001 to the comparable period in 2002 was the principal cause of the overall increase in
expenses. The absolute increase in transportation costs in the nine months ended September 30,
2002 as compared to the comparable period in 2001 resulted from the increase in volume of
crude oil sold for export, which attracts a higher tariff. For the nine months ended September 30,
2002, export volumes were 5.8 million barrels or 45% higher than the corresponding period of
2001. Railway transportation increased as compared to 2001 for the nine months ended
September 30, 2002 due to the increase in non-FCA sales. Other related transportation costs are
principally trucking costs incurred to transport the QAM field crude oil to the CPF located at
Kumkol.
Refining
Refining costs represent the direct costs related to processing all crude oil including toller’s
volumes. The total refining costs in the nine months ended September 30, 2002 were $17.6
million or $0.88/Bbl of crude oil processed, compared to $14.6 million, or $0.71/Bbl, for the
comparable period in 2001. The $3.0 million increase resulted from the reclassification of costs
from crude oil and refined product purchases to refining costs.
Crude Oil and Refined Product Purchases
Crude oil and refined product purchases represent the cost of purchasing crude oil for our
Shymkent refinery from third parties, as well as refined product for resale. These costs totaled
$50.4 million in the nine months ended September 30, 2002 compared to $60.9 million in the
comparable period in 2001. The $10.5 million decrease in the nine-month period in 2002, as
compared to the same period in 2001, resulted from the reclassification of domestic sales
discussed above, a decrease in volumes purchased from third parties and the reclassification of
cost from crude oil and refined products purchased to refining costs.
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