News 2016
January 2016KMG EP
In 2015 JSC “Ozenmunaigas” did not receive a positive decision on their application for a temporary reduced rate on mineral extraction tax (MET) for Uzen and Karamandybas fields in Mangystau region, JSC ”KazMunaiGas Exploration Production” reported. Reduced rates are provided for by the government of the Republic of Kazakhstan for marginally profitable and unprofitable hydrocarbon deposits under the conditions of unfavourable pricing environment.
In case of granting, relief had to be 0.65% (compared with the current rate of 13%) and be effective throughout 2015. In order to receive a relief the company presented to applicable public authorities all necessary documents and calculations, including data for 11 months of 2015, taking into account the national measures. Due to the low level of oil prices, for 9 months of 2015 KMG EP received a loss from operating activities amounting to KZT 49.4 bln (USD 252 mln). Consolidated profit for this period of KZT 138 bln (USD 703 mln) received mainly due to exchange rate differences.
Based on company’s estimates, breakeven point for OMG, as of September 30th 2015, amounted to about USD 65 per barrel. Upon that, the price of Brent crude oil averaged USD 55.3 per barrel. Taking into account the evolving macroeconomic situation, the breakeven point may vary in the future. “The company has been forced to note with disappointment the lack of positive decision to reduce MET rate for Uzen and Karamandybas fields in 2015, - said Director General of KMG EP Kurmangazy Iskaziev. - In the current environment, when “Ozenmunaigas” is a town- forming enterprise, providing jobs to almost 14 thousand people, including employees of oilfield service companies, and has a great social pressure, MET relief would allow to maintain a profitability of enterprise in a difficult period of falling oil prices”.
Due to the fact that the growth rate of oil prices continues to be unfavorable, KMG EP plans to apply for reduced rate on MET for OMG’s fields, as well as JSC “Embamunaigas” for year 2016. KMG EP during all stages of its activity is one of the largest taxpayers in the Republic of Kazakhstan. Thus, for 9 months of 2015 payments to the budget of the country make up KZT 226 bln (USD 1.2 bln) in the form of tax payments and fees.