Mr Tussupbekov, first allow us to congratulate you for Vega Ploiesti Refinery’s 110th anniversary. This Romanian oil industry flagship started out with German majority shareholders. Now KMG International is the company’s majority shareholder. What are your comments on this global capital movement to which Romania and Kazakhstan are an integral part in the energy sector?
Thank you. We are proud to not only have witnessed but also to have played an active role in the remarkable evolution of Vega refinery and, implicitly, in the evolution of the refining sector in Romania. It is not only our significant investment in the consolidation and expansion of the refinery’s core operations but also our long-term vision that have contributed to its current success.
This 110th anniversary also marks an operational milestone in the life of the refinery, namely the record results obtained this year – 252,000 tons of feedstock processed in the first nine months of the year, an increase by 13.5% than same period last year and 12,000 tons of bitumen produced and delivered in September alone.
However, I believe this incredible outcome would not have been possible without our complex operational model in place and the highly efficient complementarity relationship between the two refineries of our Group, as Petromidia refinery provides the Ploiesti unit with all the raw materials / semi-products necessary for the production of special products with a high added value.
Our goal is to continue investments and efficiency increase in all our operations so as to transform KMG International into one of the biggest players in the industry and Romania into an energetic hub, a solid link between the resources in Kazakhstan and the competitive markets in Western Europe. We have already started our mission, by constantly upgrading and developing our assets throughout our operations, from Petromidia and Vega refineries, to the Midia Marine terminal or our retail network, to name just a few.
How do you view the evolution of KMG International’s business on the Romanian market? Please present KMG Group’s presence in Romania from its beginning up to now.
I am confident KMG International will continue to have a positive evolution in the local market. Our operational results improve from year to year, continuing the outstanding performance registered in 2014, unique in the 15 years of its existence.
Our presence in the Romanian market is marked by the implementation of numerous successful projects, which translate into significant numbers and figures – 1.4 billion USD total investments in the 2007 – 2014 interval, over 33 million tons of processed feedstock since 2007, over 10.8 billion exports, over 10.5 billion USD in contributions to the state budget, over 7,500 employees, more than 4.200 commercial partners and a monthly social impact on 30.000 people.
The record production obtained in both 2014 and 2015 was determined by several factors, from the implementation of the Business Transformation program and the expansion of our retail network in the Black Sea region to the transfer of filling stations from the COCO to the CODO model and the continuation of the station rebranding process in Romania and near abroad countries.
What is KMG’s current business portfolio in Romania and how do you see its evolution in the coming years?
There haven’t been any significant changes in our business portfolio in Romania in recent years. KMG International continues to be active primarily in refining, marketing and trading, with additional operations in exploration and production, and other oil industry services such as drilling, EPCM, and transportation.
As stated previously, I foresee a positive evolution of our operations and an ascending trend in our results. Our goal is to evolve into one of the top oil companies and strengthen our presence in the Black Sea and Mediterranean regions. We strive to fulfill our long-term strategy by pursuing two important directions: optimizing the current portfolio and generating sustainable growth on current markets.
In order to achieve our goal, we will continue to target the improvement of our financial and operational performance through ample projects and programs established together with our sole shareholder, KazMunayGas.
In spite of the global oil price crisis, KMG has registered significant operating profit both in mid-2015 and after nine months. Is it based solely on KMG’s investment in its assets in Romania?
Of course investments are important, especially in this context; however, they are not the only factor in determining the growth of a company. Changes in the oil and gas market have determined all players in this field to adapt to the new economic environment. In our case specifically, the improved operational performance is due to internal measures aimed at increasing efficiency, reducing costs, implementing highly profitable projects and diversifying our project portfolio.
In this sense, KMG International initiated in 2013 an ambitious program called ‘Change for Good’, anticipating a larger Business Transformation Initiative of our sole shareholder. ‘Change for Good’ represented KMG International’s first step in its journey towards full-scale Transformation, which, based on the benefits generated so far, is already an established example of success, intended to be replicated in other KazMunayGas member companies.
What new investments do you forecast for next years?
Our long-term strategy focuses on the organic growth in the countries of the Black Sea region, including the expansion of retail and gas business in Romania, enhancement of operational efficiency of the Petromidia refinery after the record performances reached in 2014 as a result of the large investments of KazMunayGas in this sector. We also aim further organic growth on the priority markets as well as expansion of activity in the provision of industrial services (EPC) in Kazakhstan, North Africa and the Middle East.
We are working on increasing our investment program by looking for a partnership with other big players which intent to have more investments to European downstream operations.
In terms of investments, in 2015 the Group had an investment plan of over USD 200 million, a large part being allocated for the scheduled general overhaul of Petromidia platform and Vega refinery. Another investment direction was represented by the construction and development of the fuel distribution network in Romania, as well as the completion of rebranding for all Rompetrol gas stations.
In 2016 and the next years, one of the main business objectives would be to further invest in the development of the retail segment in Romania and abroad, building new stations and rebranding the network in the near abroad subsidiaries of the Group, so that Petromidia production to be sold through controlled, high margin, growth market segments.
Does KMG plan to develop its activity in the exploration and exploitation of deposits in Romania too?
KMG International’s current focus is on developing its refining and retail sector, in parallel with its trading and service-proving activities. At the time being, exploration and exploitation of deposits in Romania is not a priority.
Please emphasize some of KMG International’s sustainability directions.
Our evolution over the past few years stands witness for our efforts to become one of the most sustainable oil & gas players in the national and regional market. In 2015, it was issued the first Group Sustainability Report (2013-2014). I warmly invite you to read our report and find more about how KMG International is working towards achieving global economic growth and development, while supervising and managing issues that could impact our stakeholders.
The sustainability strategic areas of KMG International refer to our people and the workplace, environment, community and marketplace. We have not only invested in the technical aspects of our business, but also in our people and the community we operate in. Our internships and career development programs, as well as our CSR platform have grown tremendously, providing better opportunities and a better future for numerous people.
We continued our corporate social responsibility program “Together for Each and Everyone”, aimed at developing local communities. With more than 300,000 beneficiaries since its beginning in 2009, 101 projects implemented in sustainable environment and healthcare, the program has provided funding to the communities in excess of USD 1.5 mln.
KMG International, through Rompetrol brand, actively supports many cultural events aimed at presenting the culture, art and history of Kazakhstan to the Romanian public. This year, we have collaborated with The Embassy of the Republic of Kazakhstan in Romania on two valuable initiatives, the Kazakh Film Festival, one of largest event of its kind in Europe and a premiere for Romania, and the violin concert performed by Arman Mourzagaliyev on the Romanian Athenaeum stage, on 5th of December.
Since 2011, KMG International has been actively involved in cultural programs and projects that promote social and cultural values of Romania both nationally and internationally, namely George Enescu Festival and Competition or the support of Princess Margareta of Romania Foundation.
Our sustainable approach also include the partnership with many local NGO’s that encourage civil initiatives, to name a few ”Gala Societății Civile”, Hospice Casa Speranței, OvidiuRo are our long terms partners in Romania.
As you can see from our many projects and initiatives, sustainability is one of the major pillars of our business strategy and we intend to go further.