MOODY'S UPGRADES KAZTRANSOIL TO BAA1; STABLE OUTLOOK

/Frankfurt, December 15, 2006/ - Moody's Investors Service has today upgraded the ratings for Kaztransoil ("KTO") from Baa2 to Baa1. The outlook is stable. The upgrade is driven by the improved fundamentals for oil transmission business in Kazakhstan reflected in an improved Baseline Credit Assessment (from 12 to 11 on a scale from 1 to 21 with 1 reflecting the highest and 21 the lowest). As an indirectly 100% government owned issuer, Kaztransoil is rated in accordance with Moody's methodology for government related issuers, and the other inputs to the Baa1 ratings -- high support, medium dependence and the Baa1 local currency rating of the government of Kazakhstan -- remain unchanged. The improved Baseline Credit Assessment which has lead to the upgrade to Baa1 has largely been a result of i) the Kazakhstan-China pipeline having come on-stream earlier this year, thereby reducing KTO's dependence on Transneft (rated A2) and its existing major pipelines, primarily the ageing Atyrau-Samara pipeline; and as a result ii) of an improved tariff framework allowing faster tariff adjustments for investments. The upgrade is further supported by KTO's strengthened performance over recent years, which -- apart from a risen crude oil price - also reflects: (i) KTO's special status as the national oil pipeline owner and operator in Kazakhstan with monopoly position; (ii) its strategic and fiscal significance to the country: the growing economic importance of oil production to the future development of Kazakhstan will be dependent upon the parallel build-out of an integrated oil transmission system; iii) over 90% of its earnings are derived from the transportation of crude oil under a relatively generous tariff regime; (iv) established customer base and relative price competitiveness. However, the ratings remain constrained by: (i) the company's heavy medium-term investment requirements to build out and improve the integration of its pipeline infrastructure, to increase capacity in certain key pipelines and to provide greater access to export routes; (ii) increasing competition from alternative oil transportation routes such as the Caspian Pipeline Consortium (CPC); (iii) political and concentration risk as KTO connects to and transports via Transneft, the Russian pipeline operator; (iv) contingent obligations associated with the involvement in the Kazakhstan- China Pipeline company ( KCP LLP). Medium dependence reflects the importance of KTO to the national economy, its lack of geographic diversification, and the company's operating and financial proximity to the government. High support reflects the strategic importance of KTO to the state, the interventionist history of the government, and the importance of energy exports to the growth of the Kazakhstan economy. The rating outlook is stable reflecting the expectation that the company will sustain the competition from alternative oil transportation routes and increase export enabling it to bolster cash flows and strengthen debt protection measurements. KTO, headquartered in Astana, Kazakhstan, is the indirectly wholly-state-owned owner and operator of the national oil transmission system of Kazakhstan. With over 5,801 km of main oil pipelines, 2,175 km of water pipelines and 36 oil pumping stations, the company is currently controlling around 62% of oil transmission in the country. The company 's transit in 2005 was 38.2 million tones of crude oil and had revenues of USD 480 million and EBITDA of USD 216 million in 2005. Frankfurt Johannes Wassenberg Managing Director Corporate Finance Group Moody's Deutschland GmbH JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Moscow Larissa Loznova Vice President - Senior Analyst Corporate Finance Group Moody's Eastern Europe Telephone: +7 495 641-1881 Facsimile: +7 495 641-1897 [2006-12-20]