BoD meeting results

PRESS-RELEASE

KMGEP Board of Directors approved the 2011 budget

and the Development strategy for 2010-2020

Astana, 14 December 2010. The Board of Directors of JSC KazMunaiGas Exploration Production ("KMG EP", "the Company") has approved the 2011 budget.

In accordance with the official forecasts of the Government of the Republic of Kazakhstan and the National Company KazMunayGas, the budget assumes average Brent oil price for the year of US$65 per barrel. The Company's capital expenditure for 2011 is expected to be 99.1bn Tenge (US$661m) which is 15% higher than in 2010. The increase in capital expenditure as compared to 2010 is due to the increase in production drilling from 213 wells to 239 wells and an increase in exploration budget from 4bn Tenge (US$27m) to 8bn Tenge (US$55m). The subsalt drilling budget will be considered separately.

The approved budget reflects certain factors detrimental to the Company's profitability in 2011 including the salary increases for the workforce at the production facilities of KMG EP in June 2010, the introduction of the Export Duty in August this year and announcements regarding its possible increase.

Planned production from the Company's core assets (Embamunaigas and Uzenmunaigas) is expected to be 9,100 thousand tonnes (183kbpod) in 2011, an increase from the 2010 target of 8,781 thousand tonnes (177kbopd). From this amount 1,900 thousand tonnes will be supplied to the domestic market.

The preferred shares buyback programme will continue in 2011. Since the start of the program in February 2010 the Company acquired 1,346,213 preferred shares to the amount of 24,358 million Tenge (US$165m). The programme is expected to run till 31 December 2011. There are currently 2,789,894 preferred shares outstanding

As the timeframe covered by the development strategy adopted in 2006 has elapsed and in light of new factors that influence the Company's priorities, the Board approved KMG EP's Development Strategy for 2010-2020. The updated strategy focuses on improving the efficiency of production activity, exploration, participation in offshore Caspian projects, as well as the expansion of the Company's production base in Kazakhstan and beyond.

CEO of KMG EP, Kenzhebek Ibrashev, said: "Approved by the Board of Directors, the Development Strategy for 2010-2020 allows the Company to move into 2011 with new development priorities, which in turn allows us to run our business with a long-term view. This is all the more important because a lot of work that involves, in particular, increasing capital investment in 2011 will bear fruit in the medium term, allowing KMG EP to strengthen its leading position in the oil and gas industry of Kazakhstan. "

The Board was also briefed on the status of the previously announced acquisitions of shares in the JSC Mangistaumunaigas, LLP Kazakhturkmunai and LLP Kazakhoil Aktobe. It was noted that KMG EP is still committed to implementing these transactions, and management of the Company is making necessary efforts in this respect. At present the above transactions are in the process of approval by relevant authorities of Kazakhstan.

At the same meeting, the Board of Directors also considered the status report on the Collective Agreement for 2011-2013.

The Board of Directors has appointed Zhumabek Zhamauov, director of "Embamunaigas" production unit, as a member of KMG EP management board.

Notes to Editors

KMG EP is among the top three Kazakh oil and gas producers. The overall production in 2009 was 11.5mmt (an average of 232kbopd) of crude oil, including the Company's share in Kazgermunai and CCEL. The volume of proved and probable reserves (2P) of KMG EP as at the end of 2009 was 234mmt (1.7bn barrels); while including the share of reserves from associates and joint ventures, preliminary about 2.2 bn barrels. The Company's ordinary and preferred shares are listed on Kazakhstan Stock Exchange and the GDRs are listed on The London Stock Exchange. The Company raised over US$2bn in its IPO in September 2006. In December 2009 International rating agency Standard & Poor's assigned KMG EP "GAMMA-6" level of the corporate governance and in July 2010 confirmed the Company's "BB+" corporate credit rating. 

Mr. Zhamauov graduated from the Kazakh Polytechnic Institute in 1980 with a degree in "Drilling oil and gas wells". He began his career as an assistant driller and in recent years headed oil producing and oil servicing companies, including "KMG -Drilling", where he has worked as general director prior to the appointment at KMG EP.

For further details please contact us at:

«KMG EP». Public Relations (+7 7172 97 7600)

Daulet Zhumadil

E-mail: [email protected]

«KMG EP». Investor Relations (+7 7172 97 5433)

Asel Kaliyeva

E-mail: [email protected]

Pelham Bell Pottinger (+44 207 861 3147)

Elena Dobson

E-mail: [email protected]

Forward-looking statements

This document includes statements that are, or may be deemed to be, ''forward-looking statements''. These forward-looking statements can be identified by the use of forward-looking terminology including, but not limited to, the terms ''believes'', ''estimates'', ''anticipates'', ''expects'', ''intends'', ''may'', ''target'', ''will'', or ''should'' or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. They include, but are not limited to, statements regarding the Company's intentions, beliefs and statements of current expectations concerning, amongst other things, the Company's results of operations, financial condition, liquidity, prospects, growth, potential acquisitions, strategies and as to the industries in which the Company operates. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur. Forward-looking statements are not guarantees of future performance and the actual results of the Company's operations, financial condition and liquidity and the development of the country and the industries in which the Company operates may differ materially from those described in, or suggested by, the forward-looking statements contained in this document. The Company does not intend, and does not assume any obligation, to update or revise any forward-looking statements or industry information set out in this document, whether as a result of new information, future events or otherwise. The Company does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved.