2012 Year in Review

March 4, 2013

Dear Friends,

2012 was another good year for TCO. Our Total Recordable Incident Rate (TRIR) declined for the fifth year in a row, we set a record for annual TCO Kazakh Content expenditures by spending $1.8 billion and we successfully, and safely, executed the first major turnaround of the Sour Gas Injection (SGI) and Second Generation Plant (SGP). Our operating expenses met our business plan target and we met our permit volumes and conditions for gas flaring.

We also completed our KTL acid gas flaring project, started the next set of projects to further reduce our flaring and emissions and were awarded the prestigious Excellence in Flaring Reduction Award at the 10th annual Global Gas Flaring Reduction Conference held in London. Since 2000, TCO has invested $2.5 billion on projects to minimize environmental impact, which have enabled us to reduce total gas flaring volumes by 92 percent since 2000.

Our growth over the last two decades has been tremendous and has resulted in direct financial payments of $74.2 billion to Kazakhstani entities since 1993. In addition to increasing our sulfur sales in 2012, TCO marked a major milestone in November when we reached production of 250,626,566 tonnes (2 billion barrels) of crude oil recovered from the Tengiz and Korolev fields in Kazakhstan since startup in 1993. In 2012, we achieved partner alignment on our Future Growth Project (FGP) / Wellhead Pressure Management Project (WPMP). FGP will expand TCO production by approximately 12 million tonnes (250,000-300,000 barrels) per year and FGP and WPMP together will require more than 20,000 positions at the peak of construction.

In 2013, Safety, Production, and Cost Management will continue to be key focus areas.

Safety & Health

Tengizchevroil continues to have industry-leading safety results in standard industrial safety measurements such as Days Away from Work. In 2012, more than 18,000 people worked for a total of 49 million hours for Tengizchevroil with seven injuries which required a day away from work. While this statistic is truly world-class performance, TCO strives for zero workplace injuries and is continuously working to improve in this area.

TCO’s Total Recordable Incident Rate (TRIR) is a measure of injury and illness cases without lost time, but that have the potential to lead to lost time. As it is an important leading indicator, TCO manages TRIR closely. In 2012, we reduced our TRIR for the fifth consecutive year, again achieving world-class performance. However, we still had 25 incidents that were preventable. This will be a continued area of focus for TCO in 2013.

Environmental Protection

TCO’s investments of more than $2.5 billion on projects to minimize environmental impact since 2000 have been essential to the continuous improvement in environmental protection that has been achieved at Tengiz. Such investments have enabled TCO to reduce total gas flaring volumes by 92 percent since 2000, increasing gas utilization rates at Tengiz to over 99 percent. Gas utilization and other programs have helped reduce total emissions by 69 percent in the same timeframe. In 2012, TCO averaged just 2.61 kilograms per tonne of oil produced. Since 2000, TCO has increased annual crude oil production volume by 131 percent.

Investments in environmental protection and improvements in plant reliability have helped TCO reduce the number of technical malfunctions at the KTL plant by 81 percent, and the volume of sour and acid gas flaring during technical malfunctions by 87 percent between 2000 and 2012.

One such investment that has paid dividends for TCO is our implementation of the Exapilot software system. If, for example, a sulfur plant has a technical malfunction, it is not possible for an operator to immediately stabilize the system as there are can be about 60 control valves to manipulate. In this situation the excess acid gas would be flared, which would create SO2 emissions. With Exapilot, the software automatically changes position of all those valves at once, thereby containing the acid gas within the system and eliminating the need to flare.

Acid gas flaring is responsible for about 1100 tonnes of annual SO2 emissions and Exapilot is expected to reduce this amount significantly. Exapilot is also used to regularly monitor the control valves and signal the operator when they need to be repaired or replaced. This increases the reliability of the equipment and helps further reduce technical malfunctions.

Production & Product Sales Success

Crude production for 2012 was 24.2 million metric tonnes (193 million barrels). TCO’s actual production was 3.7 percent below the business plan target, mainly due to transportation system constraints beyond the control of TCO, weather induced disruptions and SGI/SGP plant reliability.

The SGI/SGP turnaround was a success and TCO achieved record production levels post-turnaround. This was due to the fact that the turnaround team spent two years planning every detail of this project and executed with excellence. TCO worked with over thirty contract companies on all stages of planning, preparation and execution. The 6,500 person workforce was mobilized and demobilized with no significant safety incidents.

TCO sold 1.2 million metric tonnes of LPG and 6.2 billion cubic meters of dry gas. TCO sold 3.5 million metric tonnes of sulfur, which is 169 percent of the 2.1 million metric tonnes produced for the same period. TCO’s sales success has resulted in the reduction of volumes of sulfur stored in Tengiz inventory to 2.6 million tonnes as of December 31, 2012.

Financial Benefit to Kazakhstan

Since Tengizchevroil’s founding, the company has distributed $74.2 billion dollars to the Republic of Kazakhstan including purchases of Kazakhstani goods and services, profit distributions to KazMunaiGas, taxes and royalties paid to the government, tariffs and fees paid to state-owned companies and employee’s salaries. In 2012, direct payments to the Republic of Kazakhstan totaled $14.2 billion.

TCO spent almost $1.8 billion on Kazakhstani goods and services in 2012. TCO has invested more than $13.1 billion on Kazakhstani goods and services since 1993. TCO continues to employ multiple tools to increase Kazakhstani Content, including $13.8 million in loans to small and medium-size Kazakhstani businesses. TCO has a long-term contracting strategy that will encourage development of Kazakhstani content by its contractors. The company is actively working with the government, KazMunaiGaz and industry unions such as the Kazakhstani Union of Machine Builders to identify and capture opportunities for manufacturers in Kazakhstan. During 2012, TCO has identified new Kazakhstani manufacturers and has already placed work orders.

Corporate Responsibility

Since 1993, TCO has invested more than $800 million to fund social projects and programs in the Atyrau Oblast for the community and employees. TCO invested $20 million in the Egilik (benefit in Kazakh) social infrastructure program in 2012. Most of the investment was focused on reconstruction of a new, $60 million water system in Kulsary. Additionally, TCO’s Community Investment Program’s budget invested more than $1 million in 2012, funding programs in partnership with local and international organizations which are focused on improving education and health in Atyrau Oblast.

In 2013, TCO has another $25 million budgeted for Egilik, the majority of which will be spent for construction of kindergartens and schools in Atyrau and Zhylyoi district.

Workforce Development

TCO’s strong training and development programs have a long tradition of helping advance our Kazakhstani employees to positions of increasing responsibility. Kazakhstani citizens now hold 87 percent of TCO positions and Kazakhstani managers and supervisors hold 76 percent of TCO supervisor and manager positions. Since 2007, 87 Kazakhstani citizens have replaced expatriates in manager, supervisor and key technical positions.

Because attracting and retaining a world-class workforce to manage Tengizchevroil’s large and complex business is critical to the company’s ongoing success, we strive to be one of the best places to work in Kazakhstan. Some of the most popular aspects of TCO’s compensation package are a pay for performance system, international development assignments and world-class training programs. TCO will continue to identify successors for TCO senior managers and to prepare those successors to take over those positions. Expatriate assignments for our Kazakhstani employees are an important method by which to support those employees to gain the international experience that will enable them to achieve their goals. Currently, TCO has sixty Kazakhstani employees working outside of Kazakhstan.

Outlook for 2013

TCO’s safety focus in 2013 will see us working to achieve a Day Away From Work Rate target of zero incidents and reduce the Total Recordable Incident Rate, while safely progressing our queue of large and complex projects. TCO will also continue to work to advance several major capital projects, including the Future Growth Project and the Wellhead Pressure Management Project, in a capital efficient manner. We will also have a strong focus on the execution of our production plan, completion of 2013 turnarounds and continuation of our drilling and workover programs.