Relationship of “NC KAZMUNAYGAS” to the government

Operating expenses of two new transportation and drilling companies were 10.9bn tenge (US$73m) in 2012. Part of payments for employees not involved in the core business of these two companies amounting to 2.6bn tenge (US$17m) were classified as selling, general and administrative expenses. The remaining expenses were classified as production expenses.

Capital expenditures of these two companies amounted to 14.2bn tenge (US$95m) in 2012.

On July 12, 2012 the Tax Committee of the Ministry of Finance of the Republic of Kazakhstan completed the 2006-2008 comprehensive tax audit of the Company. As a result of this tax audit, which commenced in October 2011, the tax authorities estimated additional taxes for the Company of 16.9bn tenge, including 5.8bn tenge of tax, 7.2bn tenge of administrative fines and 4.0bn tenge of late payment interest. The Company is currently appealing to the Tax Committee of the Ministry of Finance. (For more details, please see note 26 in consolidated financial statements).

Operating cash flow in 2012 was 155bn tenge (US$1,039m), which is 4% higher than in 2011. Higher revenues were almost fully offset by increased income tax expenses and changes in working capital.

Purchases of property, plant and equipment and intangible assets (as per Cash Flow Statement) in 2012 were 108bn tenge (US$725m), which is 3% higher than in 2011. Of this amount, 8.3bn tenge (US$56m) was spent on exploration drilling.

On 30 May, 2012 KMG EP declared 91bn tenge (US$615m) as dividends for the year 2011. The approved dividend was the highest since IPO in 2006.

In 2012, the Company spent around 36bn tenge (US$242m) on the buy back of 15,630 common shares and 13,106,856 global depositary receipts.

Cash and cash equivalents as at December 31, 2012 amounted to 155bn tenge (US$1.0bn) compared to 207bn tenge (US$1.4bn) as at December 31, 2011.

Other financial assets (current and non-current) at December 31, 2012 were 552bn tenge (US$3.7bn) compared to 511bn tenge (US$3.4bn) as at December 31, 2011. Other financial assets include the NC KMG Bond, deposits and additional financial instruments. As at December 31, 2012 the outstanding amount of the Bond was 134bn tenge (US$891m).

78% of cash and financial assets (including the Bond) as at December 31, 2012 was denominated in foreign currencies and 22% was denominated in tenge. Financial income accrued on cash and financial assets (including the Bond) in 2012 was 34.5bn tenge (US$232m).

Borrowings as at December 31, 2012 were 7.3bn tenge (US$48m), compared to 88bn tenge (US$593m) as at December 31, 2011. In the third quarter of 2012, the Company fully repaid its non-recourse debt to KMG PKI Finance B.V. related to the acquisition of the 33% interest in PKI in December of 2009.

The net cash position as at 31 December 2012 was 699bn tenge (US$4.6bn) compared to 629bn tenge (US$4.2bn) as at 31 December 2011.

Income from associates and joint ventures

In 2012, KMG EP’s share in income from associates and joint ventures was 67bn tenge (US$452m), 20% lower compared to 2011. This was mainly driven by redistribution of selling volumes from export to domestic and higher income tax expenses.

 

 

 

 

 

 

 

 

Conclusion

 

This internship was very fruitful to me because I had to cover many different fields. I also learnt new concepts and new ways of working.

First, I got acquainted with the principles of the organization and activities of the JSC NC “KazMunayGas”.

For now the relationship between KMG and the government of Kazakhstan is a very close one, as is the relationship between the family of the president of Kazakhstan, Nursultan  Nazarbayev, and the country’s oil industry.  Those in key positions throughout the oil industry and a government, including the various ministries and executive level positions associated directly with the oil industry, understand the challenge that reform of the industry presents. They all realize that KMG needs to be transformed into an independent and transparent company within the remaining years of President Nazarbayev’s term in office, which ends in 2013—a company which no longer serves as an indirect instrument of foreign policy or as a source of domestic graft.

 

I could discover and learn to value my new working environment, and finally earned the confidence to deal with assignments myself. Now, I know about the environment of organization and how to communicate with colleagues and boss. I learned how to use theoretical knowledge in organization. I improved my communication and decision making power.

 

All in all, the experience of working and learning at the same time in such areputable organization is awesome. It will be an unforgettable experience of my life where I learnt the way to behave and polish my abilities atthe organization level, had the experience and exposure of performing and handling tasks, supervisor and subordinate relation and development of my skills and was able to practically apply my studies of management level.

 

 

 

 

 

 

 

References

 

1. Ekspert Kazakhstan
2. Kazakhstan oil and gas industry
3. Financial times
4. KazMunayGas website
5. Press club – oil and gas
6. Time of Central Asia
7. Economic Intelligence unit
8. Law of Republic of Kazakhstan (about gas and pipelines) 
9. Law of Republic of Kazakhstan (about normative legislative act) 
10. Tax code of Republic of Kazakhstan
11. Ecological code of Republic of Kazakhstan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

APPENDIX

APPENDIX I (a)

MAPS OF KAZAKHSTAN’S OIL AND GAS DEPOSITS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(b)

 

 

 

 

 

 

APPENDIX II (a)

 

 

 

(b)

 

(c)

 

(d)

 

 

 

 

 

 

 

APPENDIX III

TAX STRUCTURE

1. TAX STRUCTURE FOR TWO DIFFERENT TYPES OF CONTRACTS

 

 

 

 

III. Economic rent tax