Ozenmunaigas: Fails to Secure MET Relief for the Uzen and Karamandybas Fields

KazMunaiGas Exploration & Production announces that Ozenmunaigas’ (“OMG”) request to temporarily have Mineral Extraction Tax (MET) relief for 2015, approved for the Uzen and Karamandybas fields in Mangystau Province, has not been approved by the Kazakh Government. In a low oil price environment, the Kazakh Government has the ability to make relief to temporarily reduce the MET on hydrocarbon fields that produce low or no profits. Had the Company been awarded such a relief, a MET rate of 0.65 percent would have applied retrospectively throughout 2015 (as opposed to the current 13-percent MET rate).

The Company has provided the government with all the requisite papers and calculations, including the necessary data for the eleven months of 2015 taking into consideration macroeconomic changes. Given the low oil prices, the Company saw a loss of 49.4 billion tenge (or US$252 million) from its operating activities over the first nine months of 20151 consolidated profit of 138 billion tenge (or US$703 million) over the said period is largely a
result of the foreign exchange benefit from the low tenge. The breakeven point for OMG, as at 30 September 2015, was estimated by the Company to be approximately US$65 per barrel of oil, while the average price per barrel of Brent oil was US$55.30 per barrel. Given the current macroeconomic environment, the breakeven point may vary.

KMG EP Chief Executive Kurmangazy Iskaziyev commented:

“The Company is disappointed that the request for the MET relief for the Uzen and Karamandybas fields for 2015 has not been approved. Under the current circumstances, where OMG employs almost 14,000 people including employees of oilfield service companies, and is the major employer in Zhanaozen, the MET relief would have helped maintain the Company’s profitability in these hard times of falling in prices for oil”.

Due to the negative oil price dynamics KMG EP will continue to apply for OMG’s MET relief for the Uzen and Karamandybas as well as for Embamunaigas fields.

KMG EP has been one of the biggest taxpayers in Kazakhstan since it was established in 2002. Over the first nine months of 2015, the Company has paid 226 billion tenge (US$1.2 billion) to the state budget in the form of taxes and other charges.