REFERENCE: KazTransOil CJSC (Kazakhstan) - characteristics of activities

/IRBIS, information of the KASE Listing commission, Aug 27, 01/ - The following information is published due to the passing the listing procedure of the Kazakhstan Stock Exchange (KASE) under category "A" by first issue euronotes of KazTransOil CJSC. Primary activities of KazTransOil CJSC is to maintain and use the oil transportation system, as well as certain water supply systems in Kazakhstan. As of December 31, 2000 the company had 6,486 km of trunk oil pipelines, 39 oil pumping stations, 1.2m cubic meter oil storage facility, 6 water pumping stations; 4 oil loading platforms (1 in Aktau port); 2 unloading platforms and 2,434 km of trunk water pipelines. In 2000 KazTransOil CJSC has transported 27.8m tons of oil and 34.7m cubic meters of water. Oil transportation About 80% of the crude oil extracted in the country is transported through the company's pipeline network. KazTransOil CJSC also owns waterways, which are used to supply water to settlements in Atyrau and Mangistau regions of Kazakhstan, as well as to oil fields in Western Kazakhstan. Oil transportation destinations are: connections with external pipeline systems (including Atyrau-Samara pipeline at Western branch and Janajol- Orsk at Aktobe branch), oil refineries (NPZ) - Atyrau (Western branch), Pavlodar and Shymkent (Eastern branch); loading railroad terminals (platforms) at pumping stations in Atyrau and Makat (Western branch), which are used for subsequent transportation of oil to abroad and to Atyrau refinery; sea oil loading platform at Aktau sea port through pumping station in Aktau to deliver oil to tankers (Western branch). First trunk oil pipeline in Kazakhstan has been built in 1935 and it connected western fields of Kazakhstan with Orsk oil refinery in Russia. In 1966 a trunk pipelines has been built to supply oil from Uzen fields to Aktau port at the Caspian Sea, in 1969 a trunk pipeline has been built to connect Uzen with Atyrau refinery. The first oil pipeline for a "hot oil" - Uzen-Atyrau-Samara with total length of about 1,500 km was finished in 1970 and it is still used as the main export route for Kazakhstani oil to European markets. Water supply services Main water supply system of KazTransOil CJSC, which takes water from Kigash river, provides oil companies in Atyrau and Mangistau with up to 100 th. cubic meters of industrial water a day. Water purification facilities in Atyrau on Ural river supplies up to 55 th. cubic meters of water a day to the population of this region. Annual volume of water supplies of KazTransOil CJSC is quite stable and about 35m cubic meters. The company uses about 37.2% of its assets and 3% of annual revenues to water transportation. Other activities Other activities of KazTransOil CJSC are related to the oil and water transportation and include inventory and stock supplies, capital construction and pipelines repairworks, repair of technological equipment and vehicles, social-economic, engineering and other activities. STRUCTURE OF THE COMPANY The company has 3 branches on trunk oil pipelines: Western, Eastern and Aktobe. Western branch. Located in Aktau, it generates 70% of all annual revenues of the company and has the most developed network of oil pipelines, with total length of 3,012 km. Among the major and the most productive oil pipelines of the Western branch are: Atyrau-Samara (535 km) and Uzen- Kulsary-Atyrau (697 km), which are used to transport more heavier (high paraffin content) blends of crude oil from Atyrau and Mangistau, and equipped with 16 stations and 59 oil warming points. As a result of using anti-turbulence additives the capacity of Atyrau-Samara pipeline has been increased from 10.2m (planned capacity) to 15m tons of oil a year. Kalamkas-Karajanbas-Aktau oil pipeline, with 264 km length, connects the fields with a sea terminal at Aktau sea port. The effectiveness of this pipeline is to increase after the CPC pipeline has been put into service, which will be used to transport Tengiz oil, and it will result in freeing additional capacities to transport oil from Kalamkas-Karajanbas region. Western branch also has 2,434 km of waterways, oil loading railroad platforms, 23 oil pumping and 6 water pumping stations, heavy oil unloading station in Atyrau (completed in February 2001), as well as a sea terminal in Aktau. Eastern branch. Eastern branch in Pavlodar is the second largest complex of the company (about 20% of annual revenues) and uses a pipeline stretching for 2,574 km, from Western Siberia to South-West Kazakhstan, and it has 14 oil pumping stations. The oil pipeline has been built to provide two Kazakhstani oil refineries (Pavlodar and Shymkent), and several refineries in Uzbekistan and Turkmenistan with Eastern-Siberian oil, which has been supplies to Pavlodar refinery only since 1995. The pipelines Karakoin-Shymkent and Kumkol-Karakoin are now used to transport crude oil from Kumkol to Shymkent refinery for further processing and unloading and transportation by railroad. In June 2000 a new railroad unloading terminal has been finished in Atasu, which load-unloads oil for further transportation to China by railroad. As a result of certain technical difficulties related to oil flow in pipeline, Karakoin-Atasu line is not used to its full capacity. Aktobe branch. Aktobe branch in Aktobe provides about 5% of the company's revenues and it connects fields in Aktobe region with Orsk oil refinery (Russia). Aktobe branch uses 899 km of oil pipelines, including Janajol-Kenkyak-Orsk (two lines at 360 km each), and 4 pumping stations. The loading of the pipeline is completely dependent on the Russian quotas (now 2m tons a year) and crude oil acceptance by Orsk oil refinery. Now, the effective use of the Aktobe branch oil pipelines is limited to the production capacity of Orsk oil refinery. Presently, the major oil company in the region is CNPC-Aktobemunaigas OJSC. In 2000 Kazakhoil Aktobe LLP signed a mutual contract with the Canadian company to develop Alibekmola field, where the reserves are estimated by MEMR to be not as much as the reserves of the field developed by CNPC-Aktobemunaigas OJSC. The construction of Kenkyak-Atyrau oil pipeline, which is to be started in 2001, should give access to Atyrau-Samara or CPC to Aktobe region companies, including those extracting oil at Alibekmola field. And it is to increase the profitability of Aktobe branch. COMPANY CLIENTS As of December 31, 2000, most of the revenues (78%) from oil transportation in Kazakhstan came from 4 oil companies (placed in descending order of oil transportation): Mangistaumunaigas OJSC (Western branch), NOC KAZAKHOIL CJSC (Western branch), Tengizchevroil JV LLP (Western Kazakhstan) and Hurricane Kumkol Munai OJSC (Eastern branch). Within total revenues of KazTransOil CJSC from oil transportation, Mangistaumunaigas OJSC and NOC KAZAKHOiL CJSC account for up to 54%. In the opinion of KazTransOil CJSC management, these clients will use the company's services in the future, as their crude oil is heavy and the use of CPC pipeline will be questionable due to oil quality standards set there. Hurricane Kumkol Munai OJSC will also remain as the company's client as a result of its location, and it accounts for 11% of revenues. Tengizchevroil JV LLP accounts for 13% of the revenues from oil transportation. The management of the company believes that after putting into service the CPC pipeline, and where Tengizchevroil JV LLP will become a major client, the decline in revenues will be compensated by an increase in oil flows from Aktobe branch and from Kalamkas-Karajanbas region after putting the Kenkyak-Atyrau pipeline into service. Now, KazTransOil CJSC and its clients use annual contracts, which means the monthly prepayments for the use of the pipelines. However, KazTransOil CJSC plans to increase the term of these contracts by using new tariffs calculation method.