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Adhering to Mutual Benefits and Achieving Common Development

Speech at the 2008 China-Kazakhstan Senior Business Forum, Beijing 
Zhou Jiping, Vice President
April 9, 2008

Your Excellency Prime Minister Karim Masimov, Republic of Kazakhstan,
Your Excellency Vice Premier Wang Qishan, State Council of PRC,
Your Excellency Chen Deming, Minister of Commerce of PRC,
Your Excellency Vladimir Shkolnik, Minister of Industry and Trade, Republic of Kazakhstan,

Distinguished guests, ladies and gentlemen,

It is a privilege to participate in this China-Kazakhstan Senior Business Forum. On behalf of China National Petroleum Corporation (CNPC), I'd like to extend my congratulations on the opening of the forum. I'd like to take this opportunity to brief you on oil & gas cooperation between China and Kazakhstan and share with you my thoughts on expanding such cooperation. 

First, let's review China-Kazakhstan oil & gas cooperation over the past decade.

Cooperation between China and Kazakhstan over the past ten years has taken place as Kazakhstan adheres to an open-door policy, maintains social stability, enjoys sustained economic growth, and witnesses the speedy development of its petroleum industry. Our cooperation has benefited from Kazakhstan's favorable macro-environment and its opening-up policies, while taking advantage of the two countries' rapid economic growth. In addition, this cooperation made its due contribution to the development of Kazakhstan's oil industry, economic growth and social progress, and the well-being of the Kazakh people.

CNPC has always been committed to the mission of "Caring for Energy, Caring for You" and, over the past decade, has consistently based its cooperation on the principle of "Mutual Benefit for Win-win Outcomes". With the support of the leaders and governments of both China and Kazakhstan and various sections of Kazakh society, and based on its systematic theories, experience and practical technologies gained in the past fifty years in oil and gas exploration and production, transportation and operation, and refining and chemicals, CNPC has dramatically increased the oil and gas output of major projects such as AktobeMunaiGaz and PetroKazakhstan, thanks to its enhanced technical innovation, and applied results in risk exploration, controlling water cut to stabilize oil production in mature oil fields, enhancing recovery efficiency, technical upgrading of refineries and optimization of pipeline transportation, in line with specific geological conditions in Kazakhstan.

Over the past decade, CNPC leveraged its advantages in the integration of the upstream, midstream and downstream sectors, investment and engineering, and technical services, and achieved substantial socio-economic results with its Kazakh partners, while placing a high premium on sustainable development and the efficient use of energy resources and paying a great deal of attention to environmental protection. With the joint efforts of employees from both countries, the eight projects invested by CNPC in Kazakhstan - AktobeMunaiGaz, PetroKazakhstan, KAM Oilfield, North Buzachi Oilfield, ADM Oilfield, Kazakhstan-China Crude Pipeline, Northwest Crude Oil Pipeline and the Oil Products Sales Company - have obtained great achievements in exploration, development, refining, crude oil pipeline transportation and marketing. In 2007, CNPC produced 18.62 million tons of crude oil, and reached a natural gas productivity of 4 billion cubic meters. 

Since 1997, CNPC has invested a total of USD 6.5 billion and paid USD 3.19 billion in taxes in Kazakhstan. CNPC also donated USD 50 million and created 18,100 jobs for local people. With 92 percent of its employment localized, local talents were promoted to middle-management posts, accounting for 60 percent of the total. Training in professional skills and foreign languages was also provided and more than 300 Kazakh employees received trained in China. In addition, CNPC financed more than 120 outstanding Kazakh students studying in China and invested in the construction of the Beijing Plaza in Astana.

Oil & gas cooperation between Kazakhstan and China has tightened the already friendly ties between the two nations, which has won the recognition of the governments and peoples of both countries. As a matter of fact, such cooperation is regarded as the hallmark of Sino-Kazakh economic cooperation. 

Second, I would like to share with you my thoughts on expanding oil and gas cooperation between Kazakhstan and China.

Based on the achievements made in the past decade, Sino-Kazakh oil and gas cooperation will develop even further. The second-phase project of the Kazakhstan-China Crude Pipeline and the Kazakhstan-China Natural Gas Pipeline will be launched, indicating a new stage and a higher level of cooperation with much potential for further development.

To further expand Sino-Kazakh oil and gas cooperation in the pursuit of mutual benefits and common development, we should further strengthen personnel exchanges and the cultivation of talents in order to promote further integration; expand two-way investment to forge stronger partnerships; and enhance technological communication and cooperation to share achievements and better seize new opportunities in response to new challenges. To this end, we'd like to share with you three proposals:

The first proposal is to strengthen personnel exchanges and the cultivation of talents.

Competition is all about competing for talents. CNPC is willing to expand personnel exchanges with Kazakhstan to contribute to the development of human capital in Kazakhstan.

Kazakhstan-based CNPC projects currently employ 18,100 local people, with 92 percent of the total employment localized. Over 60 percent of middle-management posts are taken by local employees. In addition to technical and foreign language training for Kazakh staff, CNPC has also sent more than 300 local employees to China for training. In September 2004, CNPC reached an agreement with the Ministry of Education of Kazakhstan to finance Kazakh students studying in China. Under this agreement, each year CNPC will finance 15 Kazakh students studying in Chinese colleges and universities for five years. CNPC has sponsored a total of 120 Kazakh students studying in China, including those sponsored by CNPC affiliates based in Kazakhstan.

To strengthen exchanges and the cultivation of human capital, all CNPC's Kazakhstan-based projects will place a higher premium on local talents and increase the proportion of local people in middle-management so that more competent local employees can be promoted to managerial posts. At the same time, CNPC will increase its investment in professional skills training targeting local workers, and sponsor more Kazakh students to study in China.

The second proposal is to expand two-way investment in order to forge a stronger partnership.

With the further implementation of the policy of reform and opening, China will open wider to the outside world and conduct international cooperation in more sectors. 

Therefore, in addition to its cumulative USD 6.5 billion investment, CNPC will continue to increase investment in Kazakhstan to contribute to its socio-economic progress. Meanwhile, we welcome Kazakh enterprises to invest in China. CNPC is willing to establish joint ventures with Kazakh companies to invest in both countries so as to conduct wider-ranging cooperation and push our cooperation to a higher level. 

The third proposal is to enhance technological communication and cooperation in order to share achievements and seize new opportunities in response to new challenges. 

In recent years, based on the geological conditions of oil and gas fields in Kazakhstan, CNPC successfully applied its unique series of technologies through the combination of headquarters technological support and field research, significantly improving the oil and gas output of major projects such as AktobeMunaiGaz and PetroKazakhstan. 

As for exploration technology, focusing on the Pre-Caspian central block in Aktobe and the South Turgay Basin, we strengthened comprehensive geological study, improved sub-salt seismic imaging, and popularized industrial mapping technology based on sequence stratigraphy, 3-D continuous coverage processing, pre-stack time migration and pre-stack depth migration technologies. By integrated the use of seismic and logging data to identify fractured, low-resistance and lithologic oil/gas reservoirs, we made a breakthrough in extending old zones and the risk exploration of new zones, putting resource replacement in a much better situation.

With respect to oil and gas development technology, we developed and utilized the technologies of tapping residual oil in mature oilfields, represented by fine reservoir description, residual oil distribution pattern, enhanced recovery efficiency by water flood, well pattern optimization and reservoir stimulation. We also continued to improve waterflood technology for extremely low-permeability carbonate reservoirs with abnormal high-pressure and complex carbonate reservoirs with condensate gas caps. We also made great efforts to promote the use of technologies such as gas lift, horizontal drilling and acid fracturing.

As for the optimization of oil and gas transportation, we used technologies such as internal detection, chemical pour-point depression and safe operation automatic monitoring to optimize intra-oilfield combined oil and gas mixed pipelining technology.

As to refining and chemicals, while accelerating technological upgrading to increase the light oil recovery rate, we focused on the development of new techniques and products that are energy efficient, environmentally friendly and ensure safe production.

In the future, CNPC will further expand its technological communication and cooperation with Kazakhstan in order to share technological achievements, seize new opportunities and address new challenges.

Ladies and gentlemen,

Looking back, Sino-Kazakh oil and gas cooperation has brought us satisfactory results. Looking to the future, there is even greater potential and there are even brighter prospects for our cooperation. It is our firm belief that with the strong support of both governments and the joint efforts of oil companies from both countries, our cooperation will surely reap more benefits in a spirit of reciprocity.

Thank you!


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