Fitch Rates NC KazMunaiGaz 'BBB'; outlook stable

/Fitch Ratings, May 02, 07/ - Fitch Ratings has today assigned National Company KazMunaiGaz (NC KMG) foreign and local currency Issuer Default ratings (IDR) of 'BBB' and a Short-term foreign currency rating of F3'. The Outlooks on the IDRs are Stable. The ratings reflect NC KMG's strategic importance to the Republic of Kazakhstan ('BBB'/Positive/'F3') in oil and gas. The Stable Outlook reflects Fitch's expectations that the company will continue to enjoy state support both in terms of regulation and tariffs as well as legislation designed to favor national interests, including 50% participation and operator rights in all newly discovered oil fields. NC KMG is a vertically integrated oil and gas operator and the country's national oil and gas champion with subsidiaries in onshore oil exploration and production (KMG EP), oil transportation (KazTransOil (KTO; 'BBB-' (BBB minus)/Stable/'F3')), natural gas transportation and distribution (KazTransGas (KTG; 'BB'/Stable/'B')) and marketing and trading of oil and petroleum products (TH KMG). The oil and gas industry in Kazakhstan accounts for more than 60% of the country's total exports, yielding earnings of approximately USD18bn per year. NC KMG has been chosen by the government to pursue strategic goals in the energy sector including various acquisitions such as the purchase of a 50% stake in crude oil producer KazGerMunai for USD1bn and 33% stake in PetroKazakhstan Inc. for USD1.37bn last year. NC KMG is the country's second largest crude oil producer through its subsidiary KMG EP after Tengizchevroil ('BBB-' (BBB minus)) and is responsible for managing the majority of the country's oil exports through KTO and all of the country's natural gas exports through KTG. NC KMG also manages the state's interests in offshore exploration and production projects in the Caspian Sea as well as other oil pipeline projects, specifically the Caspian Pipeline Consortium (CPC). Offshore exploration and production are expected to represent the majority of the country's future oil production growth between now and 2015. NC KMG is 100% state- owned and the authorized body designated to represent the state's involvement in any Production Sharing Agreement regime. Any upgrade to the company's ratings would largely be based on evidence of favorable operating results such as cost containment, steady reserve replacement, growing hydrocarbon transportation volumes as well as maintaining a financial profile appropriate for the rating category. The company's ratings could come under review for a downgrade should NC KMG adopt a more aggressive financial profile, lose market share or fail to achieve stated oil and gas transportation targets. Contacts: Jeffrey Woodruff, London, Tel: +44 (0) 207 417 4294; Andrew Steel, London, +44 (0) 207 862 4086 Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364; Alla Izmailova, Moscow, Tel: +7 495 956 9903 [2007-05-02]