IN 1994 REPUBLIC OF KAZAKHSTAN'S CABINET OF MINISTERS MADE A RULING ON STATE PRIZE AWARDING SEVERAL KAZAKHSTAN I AND RUSSIAN GEOLOGISTS FOR DISCOVERING THE UNIQUE TENGIZ OILFIELD IN 1979 IN THE WEST PART OF KAZAKHSTAN. "TENGIZ" FROM KAZAKH MEANS "SEA", I.E. "SEA OF OIL". TENGIZ IS THE WORLD'S DEEPEST PRODUCING SUPERGIANT OILFIELD, FAMOUS FOR ITS UNIQUE FEATURES, HIGH HYDROGEN SULFIDE CONTENT AND RESERVOIR PRESSURE.
The history of Tengizchevroil LLP began on 6 April, 1993 with the signing of Formation Agreement between Republic of Kazakhstan and Chevron Corporation; it was a difficult time for a young independent Kazakhstan, and it was extremely important to involve a major Western investor for the development of the unique and challenging Tengiz field. Tengizchevroil, which was established with the support of the first President of Kazakhstan Nursultan Abishevich Nazarbayev has become an engine of the country's new economic development. Total recoverable oil at Tengiz and Korolev fields through April 2033 is from 750 to 1.1 billion metric tons (6 to 9 billion barrels). Estimated oil in place in Tengiz field is 3 billion metric tons (26 billion barrels) with 190 million metric tons (1.5 billion barrels) in Korolev field. The reservoir is 19 kilometers (12 miles) by 21 kilometers (13 miles). TCO's current production capacity is approximately 51,000 metric tons of oil per day or 400,000 barrels of oil per day (bopd) and 13 million cubic meters or 450 million standard cubic feet (mscf) of gas per day. On June 5, 2008 the President of the Republic of Kazakhstan Nursultan Nazarbayev has inaugurated Tengiz expansion project in front of a country audience, partner special guests and more than 500 employees. The addition of full facilities is projected to further increase daily crude production at Tengiz to 540,000 barrels. Included in the expansion are the Sour Gas Injection (SGI) project and the Second Generation Plant (SGP). SGI reinjects produced sour gas into the reservoir at very high pressures to boost production. SGP separates natural gas for injection while stabilizing and sweetening crude oil, and processing sour gas into gas products and elemental sulfur. As pointed RoK President Nursultan Nazarbayev: "Chevron was the first foreign company to work in
Kazakhstan. The Agreement signed in 1993 was the biggest one not only in the republic but in ex-Soviet countries. Chevron demonstrated itself as reliable partner. Since 1993 Chevron has invested more than 20 billion USD in the development of the oilfield, and more than $20 bin has been contributed by TCO to the economy of Kazakhstan. Another great result of TCO work of the last 15 years - many of our compatriots have obtained specialist qualifications. According to Chevron very four employees out of five are Kazakhstani people. RoK President Nursultan Nazarbayev also said: "Expansion project is the largest innovation project in the country, and Tengizchevroil is the corporate leader in the oil and gas sector" TCO is targeting commissioning of a pioneering expansion for mid-2008 and daily production capacity will grow to about 70,000 metric tons of oil or 540,000 barrels and 22 million cubic meters or 765 mscf of gas.
Since its inception, Tengizchevroil has been successfully implementing its policy of being a good corporate citizen. In practical terms that policy means hundreds of completed projects and programs aimed at improvement of the natural environment and the local employment situation, charity, better public health and education facilities for the Atyrau City and Region, where Tengiz oilfield is located.
Tengizchevroil has invested about $380 million on projects in the areas of healthcare, education, and support for the needy and infrastructure development in the region. Specific projects include extending electrical and natural gas systems in Atyrau to un-served areas and improving the drinking water system. Fully outfitted medical institutions have been built in the region. Building the capacity of Kazakhstan's small and medium-sized businesses is also a key priority of Tengizchevroil. TCO works hard to find and enable opportunities for local businesses. A suecessful result of this effort is the fact that forty percent of the steel for Tengizchevroil's expansion project was fabricated in-country. Tengizchevroil's expansion was possible through the contribution of more than 200 Kazakhstani companies providing more than $2 billion in goods and services. Along with the investment in its operational performance and community, Tengizchevroil also invests in its employees. Tengizchevroil has training programs for employees designed to develop their skills so that they can compete with the best in the world. Very recently there has been developed a training program for new hires called Horizons. This training will focus on improving technical, project management and managerial skills for overall professional growth. As part of production expansion, there have been trained more than 5,000 Kazakhstani people in craft skills at a training center that had been established. We are also continuously creating programs to make TCO an even better place to work. We have recently enhanced our benefits package to include a savings program where an employee can put as much as 10 percent of their salary for a company match at a good interest rate. This program compliments our long-running and popular employee housing loan program. Tengizchevroil is very proud of its overall contributions to the Republic of Kazakhstan economy , with total direct payments to Kazakhstan entities of $5.0 billion in 2007 alone and totaling $21.7 billion since inception.
Growing Product Sales for the Benefit of Kazakhstan
TCO set important records for production and sales in 2007. In 2008, TCO expects to significantly exceed the 13.9 million metric ton record thanks to the start-up of our expansion later this year. TCO also sold a record 2 million tons of sulfur which is 126 percent of its 2007 production. Our experienced sulfur sales team continues to expand Kazakhstan's global market presence and we now sell sulfur in four different forms to 61 customers in 24 countries. Increased sales led to a five percent reduction in sulfur reserves.
We have plans to continue sales performance through additional investments and projects like increasing annual sales capacity to 3 million tons. Tengizchevroil has budgeted more than $600 million for sulfur-related capital projects for 2008-2011. TCO operates and manages sulfur storage in an environmentally safe manner that is consistent with Kazakhstan's regulations and global practices.
Continued Environmental Improvements
Tengizchevroil is initiating projects that will continue to improve environmental performance. There have optimized processes to reduce flaring, achieving an 80 percent reduction since 2000 and putting TCO on track to eliminate routine flaring of associated gas by the end of 2009. TCO is also enhancing other areas of its operations to reduce emissions. TCO has spent more than $1.7 billion over nine years on environmental improvement projects. That investment has reaped results as we achieved a 58 percent reduction in air emissions over that time period.
A Dedication to Safety Excellence
TCOs employees' and contractors' dedication to a safety and operational excellence has enabled Tengizchevroil to achieve very strong performance for its shareholders, the Atyrau region and the Republic of Kazakhstan over the last 15 years. TCOs commitment to ensuring the health and safety of our employees and the community resulted in the safest year ever in 2007. TCOs focus on incident-free operations, implementation of an Operational Excellence Management System and adoption of best practices and standards has enabled our achievement of world-class safety performance. Injury rates have improved 66 percent over the last three years and Tengizchevroil's goal is to achieve an injury-free workplace. As Tengizchevroil will move through the year, it will work to out-perform all of 2007 records to become an even stronger company for its employees, shareholders, the Atyrau region and for Kazakhstan.