Update on the situation at Ozenmunaigas

Update on the situation at Ozenmunaigas

Astana, 17 March 2010. JSC KazMunaiGas Exploration Production ("KMG EP" or "the Company") reports that it has achieved some progress in solving a labour dispute at "Ozenmunaigaz" (OMG) production unit in the city of Zhanaozen (Mangistau region). The illegal strike at OMG, begun 1 March, continues.

Yesterday, the Chairman of the Board of JSC National Company KazMunayGas, arrived in Zhanaozen, where he met with some of the striking workers. The protesters elected representatives to form a Resolution Committee to start a constructive dialog with the Company's Management. An official list of complaints and demands is being formulated.

In order to facilitate the resolution of the conflict and normalise the production process, Bagitkali Biseken, the Director of Ozenmunaigas production unit, submitted his resignation. Vladimir Miroshnikov, the deputy CEO of KMG EP, was appointed the acting Director of OMG.

To date the overall loss of production at OMG is estimated at 10,700 tonnes. The impact on the Company's full year production will depend on how quickly the situation at OMG is stabilised.

The Company is taking all measures to ensure the continued production at the OMG sites. Despite the strike, oil production at "Ozenmunaigaz" is not suspended.

NOTES

On recent changes to the payment scheme at KMG EP's subsidiaries

Changes in the wage system, introduced at the KMG EP's production units, including "Ozenmunaygaz", reflect changes in labour legislation and aim to improve the overall wellbeing of staff. Under the new system, the guaranteed part of the salary will grow from 55 to 77 percent, which means that the share of premiums to be paid, subject to meeting the production plan targets, would be 23 percent. The salary also includes previously used tariff rates, along with "territorial" and other coefficients which lead to wage increases. According to the Kazakh labour legislation a separate payment of these coefficients is prohibited. In order to ensure that the Collective agreement is consistent with the existing legislation and at the same time to maintain these payments to employees, the Company has included them in the monthly salary. Thus, by increasing the guaranteed part of the salaries, the average annual earnings of employees will grow by 1-3 per cent. The Company has also introduced the 9% inflation salary index.

The pretext for the mass absenteeism was the issuance of notices to employees about the transition to the new pay system, which was endorsed and explained in detail to the workers in October and November 2009. The demands of the protestors have been constantly changing and included: to return the JSC status to Ozenmunaigaz as it was in 1997; to change the management of the production unit and of KMG EP; to dismiss the chairman of the trade union; to cancel the transition to a new system of remuneration and competitive system of recruitment; to reduce the annual production plan; to legalise the territorial coefficient of the wage tariff.

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 total volume of proved and probable reserves, as at the end of 2008, was 241mmt (1.8bn bbl), excluding the relevant proportion of reserves at Kazgermunai and CCEL; including the share of reserves from Kazgermunai and CCEL the 2P reserves are over 2.1 bn barrels. The Company's 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 July 2009 International rating agency Standard & Poor's (S&P) confirmed KMG EP's "BB+" corporate credit rating and assigned the Company "GAMMA-6" level.

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 PR (+44207 337 15 17)

Elena Dobson

E-mail: [email protected]

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