Fitch: Kazakhstan Oil & Gas Industry - Emerging Potential

/Fitch Ratings, London/Moscow, September 23, 08/ - Fitch Ratings says in a special report published today that the Kazakhstani oil and gas industry is poised for strong growth, albeit with certain operational and financial risks inherent in its development. "Although Kazakh oil and gas companies are well-placed to transform themselves into medium-sized players, their success and thus future rating actions will depend on their ability to implement their expansion projects without severe delays and cost overruns and to finance anticipated intensive investment programmes without jeopardising their credit profiles,"says Angelina Valavina, Director in Fitch's Energy, Utilities & Regulation group. Fitch expects oil production in Kazakhstan to expand at a compound annual growth rate (CAGR) of 5.7% over 2007-2015 - to 2.3 million barrels per day in 2015 - driven by output growth at the main onshore and offshore fields of Tengiz, Karachaganak and Kashagan. The risk to this forecast stems from uncertainties inherent in the Kashagan project development. Moreover, as Kazakhstan is a land-locked country, its oil and gas expansion potential is heavily reliant on the expansion and construction of pipeline infrastructure. Hydrocarbon producers in Kazakhstan (except for gas pipeline operators) compare well with their Russian and international peers - based on their solid credit profiles. However, some risks are arising which include planned aggressive capex programmes and the introduction of a new tax on the sector. Fitch rates KazMunaiGaz National Company (NC KMG, 'BBB'/Negative) using the agency's Parent and Subsidiary rating methodology, and aligns its ratings with that of the sovereign. Other Kazakh companies in the sector are rated primarily on a standalone basis. Implicit state support is incorporated into the ratings of NC KMG's subsidiaries. Fitch does not anticipate any positive rating actions in the short-term, but will monitor developments which might impact the ratings of the Kazakh producers in the medium-term, i.e. financing of the capex programmes and planned production expansion. Fitch's full report, "Kazakhstan Oil & Gas Industry - Emerging Potential", is available on the agency's public website, www.fitchratings.com. Contact: Angelina Valavina, London, Tel: +44 (0)20 7682 7383; Jeffrey Woodruff, +44 (0)20 7682 7322. Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364; Alla Izmailova, Moscow, Tel: +7 495 956 9903. [2008-09-23]