Climate Risk and Opportunity Management within the LCDP‑2060 Framework
GRI 3-3, GRI 201-2
The Company takes a systematic and consistent approach to managing climate-related risks and opportunities, guided by corporate governance principles and the requirements of IFRS S2. The Company views climate-related risks and opportunities as factors that may affect its operations, investment decisions, financial stability, and long-term ability to create value.
The role of governing bodies in the management of climate-related risks and opportunities
The KMG Board of Directors provides the highest level of oversight on climate change issues, including:
approving strategic documents on low-carbon development, including the LCDP-2060.
overseeing the integration of climate considerations into the Company’s Development Strategy.
monitoring progress in the implementation of key climate initiatives and targets.
Role of Executive Management
The Company’s Management Board ensures the operational implementation and integration of climate-related aspects into strategic and day-to- day management. Within the management structure, specific responsible officers have been designated, including:
the Deputy Chairman of the Management Board, who coordinates the implementation of the climate agenda;
heads of relevant divisions responsible for monitoring greenhouse gas emissions, managing carbon assets, and implementing low- carbon solutions.
The Decarbonization and Ecology Division (formerly the Low-Carbon Development Department) plays a central coordinating role in the implementation of the climate strategy, which:
develops and monitors the implementation of the LCDP-2060 and the action plan for its implementation;
provides methodological support for greenhouse gas emissions monitoring and reporting processes at the KMG Group level;
coordinates interaction with subsidiaries;
supports projects in the areas of renewable energy, methane management, CCUS, hydrogen energy, and offset projects.
To address environmental, climate, and sustainable development issues in detail, the Corporate Governance structure includes the Health, Safety, Environment, and Sustainable Development Committee (HSESDC).
The Committee regularly:
reviews information on climate risks and opportunities;
analyzes the alignment of the Company’s activities with the approved climate strategy;
reviews proposals for improving climate policy and internal regulations.
Climate and ESG metrics are integrated into the executive performance evaluation system: the variable portion 22 of compensation depends on the achievement of approved targets, as well as on the results of external assessments and ratings (ESG and CDP ratings).
Policies, Procedures and Internal Regulations
During the reporting period, the Company continued to apply and further develop internal regulatory documents aimed at strengthening the management system for climate aspects, including:
the Methodology for Monitoring and Reporting Greenhouse Gas Emissions;
the Methane Emissions Management Instruction;
corporate MRV procedures and operating regulations for Automated Monitoring Systems (AMS) at Category I facilities.
These documents establish a unified and comparable approach to climate-related management across the KMG Group and provide the methodological basis for the preparation of climate-related disclosures.
Integration of Climate Risks into the Risk Management System
Climate risks are integrated into KMG’s Corporate Risk Management System, which ensures their identification, assessment and monitoring alongside other strategic and operational risks.
Within this approach, the Company:
identifies physical and transition climate risks taking into account climate change scenarios;
develops risk maps and action plans, including adaptation measures and measures to reduce adverse impacts;
conducts regular monitoring of climate risks and reflects them in the Risk Register and Risk Map, as well as in corporate reporting.
To manage the identified risks, the Company implements adaptation and impact mitigation measures, including:
improving the energy efficiency of assets;
developing renewable energy sources;
deploying CCUS technologies;
developing hydrogen energy;
reducing methane emissions.
22. Quantitative data on the percentage of compensation (%) tied to performance targets is confidential
Transparency and Disclosure
Transparency and the quality of disclosures are important elements of KMG’s corporate approach to climate risk management. On a regular basis, the Company discloses information on climate risks, greenhouse gas emissions and mitigation measures in accordance with applicable international standards and initiatives, including IFRS S2, GRI, CDP and ISO 14064.
The Company considers the integration of climate aspects into the corporate governance and risk management system to be a key factor in enhancing business resilience and adapting to the conditions of the energy transition in the medium and long term.
Managing Climate Risks and Opportunities under the LCDP-2060
The Company is implementing the LCDP-2060, which is relevant to the reporting period, forms the basis of the Company’s climate strategy and defines the key priorities, directions and instruments for reducing the carbon intensity of its operations.
The LCDP-2060 is aimed at the systematic management of climate risks and opportunities and is integrated into the Company’s strategic, investment and operational management processes, including capital expenditure planning, asset management and the corporate risk management system.
The LCDP-2060 has been developed taking into account the industry-specific characteristics of the oil and gas sector, the national climate commitments of the Republic of Kazakhstan and global energy transition scenarios, including the goal of achieving carbon neutrality by 2060.
The key elements of the LCDP-2060 include:
integration of the climate agenda into core business processes, including investment planning, production activities and the risk management system;
a phased reduction of greenhouse gas emissions and transition to a low-carbon development model through the use of proven and emerging technologies;
development of renewable energy sources, implementation of energy-efficient solutions and execution of methane emissions reduction measures, including the LDAR program;
application of CCUS technologies, development of hydrogen energy, as well as implementation of forest climate offset projects;
ensuring regular monitoring, progress assessment and disclosure in accordance with international standards.
Implementation of the LCDP-2060 is focused on reducing both transition and physical climate risks, as well as on creating sustainable development opportunities for the Company in the long term.
Planning Horizons
The Company has identified three planning horizons for its operations, taking climate factors into account:
Short-term horizon (0-1 year) – covers annual budgeting, operational planning and management of current climate risks and opportunities, including fulfilling monitoring and reporting obligations.
Medium-term horizon (1–10 years) – corresponds to the Development Plan of the KMG Group of Companies and the business plans of its subsidiaries and affiliates, including achieving the targets of the LCDP-2060 for 2031, as well as taking into account the nationally determined contributions (NDCs) of the Republic of Kazakhstan.
Long-term horizon (10–35 years) – covers the Company’s strategic goals, including the implementation of LCDP-2060, the development of low-carbon projects (RES, CCUS, SAF), the adaptation of assets to physical climate risks, and the alignment of activities with Kazakhstan’s long-term climate goals until 2060.
Decarbonization scenarios
As part of its climate strategy, the Company applies a scenario-based approach (IPCC RCPs and NGFS scenarios), which makes it possible to assess the resilience of KMG’s strategy and business model under uncertainty in the climate, regulatory and technological environment. The scenarios are used to assess the potential impact of climate risks and determine priority response measures.
Scenarios Used in the LCDP-2060:
1. Realistic scenario
It involves a gradual reduction of the carbon footprint through:
implementation of measures to improve energy efficiency and energy conservation at production facilities;
implementation of renewable energy projects with a total installed capacity of approximately 1.3 GW in the Mangystau (hybrid power plant) and Zhambyl regions.
2. Green development scenario
It is aimed at achieving the target indicators of the LCDP-2060 and provides for:
expansion of energy efficiency measures;
increasing the share of renewable energy sources in the energy balance to the level necessary to achieve decarbonization targets;
implementation of a forest climate offset project to offset part of the greenhouse gas emissions.
Within the framework of this scenario, the Company implements:
organic emission reduction – through increased operational efficiency and modernization of production facilities considering possible changes in production volumes;
Inorganic emission reduction – through the implementation of new technological solutions at the corporate level, including the construction of renewable energy facilities and the acquisition of renewable electricity for production needs with subsequent distribution within the KMG Group of Companies.
3. Deep decarbonization scenario
The scenario envisages a 64% reduction in greenhouse gas emissions compared to 2019 levels due to:
large-scale implementation of CCUS technologies;
active compensation policy, including the implementation of forest climate projects and the development of hydrogen energy.
development of hydrogen energy and production of sustainable aviation fuel (SAF).
Within the framework of the LCDP-2060, this scenario is considered a long-term development target, with the implementation of individual technologies entailing pilot testing and phased scaling, subject to regulatory and economic conditions. Based on the results of the pilot testing of these areas, the Company plans to determine targets for achieving carbon neutrality by 2030.
Sustainability of the climate strategy
Based on the conducted scenario analysis, the Company assesses its climate strategy as sustainable in the long term, subject to the phased implementation of the LCDP-2060 and the adaptation of investment decisions to changing climatic and regulatory conditions.
At the same time, the Company recognizes the existence of a significant uncertainty associated with:
the speed and severity of global climate regulation;
availability and commercial maturity of CCUS, hydrogen and SAF technologies;
development of carbon credit markets and offsetting mechanisms.
These factors are considered during the regular revision of the LCDP-2060, investment priorities and climate scenarios.
Climate risk assessment
Approach to climate risk assessment and scenario analysis
To identify and assess climate risks, the Company uses a scenario approach (RCP/NGFS), which allows it to consider the uncertainty of climatic, regulatory and market factors and assess their potential impact on the Company’s activities over various time horizons.
Within this approach, KMG considers two key types of climate risks:
Physical climate risks associated with changes in climate conditions and extreme natural events that may have a direct impact on the Company’s production assets, infrastructure, and operational resilience; For KMG, the following are highlighted: chronic heat, water stress, wind loads, and acute events (floods/storms) affecting production continuity, costs, and safety. Adaptation measures (infrastructure strengthening, water conservation, and emergency response) and the prioritization of vulnerable water basins (including the Ural and Caspian Seas) are envisaged. In 2025, the key stage of the Tazalyk project at Atyrau Oil Refinery LLP was completed, the corporate water resources standard is being updated, and the draft Water Resources Management Program has been submitted to the Management Board.
Climate transition risks associated with the global energy transition, including changes in carbon regulation (KazETS/EU ETS), technological development, demand structure, and the expectations of investors and other stakeholders. During the reporting period, requirements for online data transmission at Category I facilities were strengthened; administrative fines and/or disputes were recorded for a number of assets, confirming the materiality of the regulatory risk and the need to further strengthen LDAR and MRV.
Physical Climate Risk Assessment
To analyze physical climate risks, the Company uses Representative Concentration Pathways (RCPs) developed by the Intergovernmental Panel on Climate Change (IPCC), which reflect different levels of climate policy and emission intensity:
RCP 2.6 – a low emissions scenario that assumes the implementation of strict climate policy and stabilization of global temperature growth;
RCP 4.5 is an intermediate scenario reflecting moderate measures to reduce greenhouse gas emissions;
RCP 8.5 is a high emissions scenario in which no significant measures are taken to limit them.
Using multiple climate trajectories allows the Company to assess the range of potential physical impacts on assets and operations, as well as identify vulnerabilities and priorities for adaptation measures.
Assessment of climate transition risks
To assess transition risks, the Company applies scenarios developed by the Network for Greening the Financial System (NGFS), which are widely used in international practice and take into account the relationship between climate policy, macroeconomic parameters, and the development of energy markets:
The scenario based on Kazakhstan’s Nationally Determined Contribution (NDC) considers all adopted and declared climate policy measures, including those that are under implementation;
The Below 2° C scenario assumes a gradual tightening of climate policy with the aim of limiting the increase in global temperature to below 2°C;
The “Delayed Transition” scenario is characterized by a slow implementation of climate measures until 2030, followed by the need for more drastic and costly transformations;
The Net Zero Emissions by 2050 scenario is an ambitious trajectory that assumes rapid strengthening of climate policy, large- scale implementation of new technologies, and the achievement of carbon neutrality.
Application of the results of scenario analysis
Based on the specified scenarios, the Company assesses climate risks at the corporate level and at the level of individual assets, which allows:
identify the potential financial and operational impacts of climate factors;
take climate risks into account in strategic and investment planning;
to formulate and adjust measures for adaptation and risk management in the medium and long term.
The use of scenario analysis enables more informed management decision-making and increases the resilience of the Company’s business in the context of the energy transition and changing climate agenda.
Current and expected financial effects
As part of the phased development of the climate risk and opportunity management system, the Company is establishing and enhancing approaches to their identification, assessment and disclosure. At the current stage, priority is given to the qualitative disclosure of climate risks and the mechanisms for managing them, which is consistent with the maturity level of the existing climate strategy. Taking into account the transition to new international sustainability requirements, the Company plans to expand the scope of disclosures, including the phased introduction of quantitative indicators, such as current and expected financial effects of climate risks and opportunities, and their disclosure within IFRS S2–compliant reporting in subsequent reporting periods.
Current period
Carbon compliance costs (ETS). At the level of individual subsidiaries and affiliates, the impact of costs associated with compliance with emissions trading systems is observed. These effects are partially mitigated by energy efficiency measures, LDAR programs, and the increasing share of “green” electricity (in-house generation/ purchase).
Physical risks/insurance coverage. Preventive measures are being implemented in vulnerable locations, and insurance coverage is being updated. At this stage, the impact assessment is primarily qualitative.
Regulatory effects: administrative fines/disputes related to compliance with air protection requirements (including ASM/emissions) were recorded for some assets in Q1–Q2 2025; weekly status monitoring of ASM readings and issues at subsidiaries and affiliates is underway.
Risk of a significant adjustment in the next period
Given the current level of methodological certainty, quantitative linkage to specific items in the profit and loss statement, financial position, and cash flow for certain risks is limited; the risk of a material adjustment to balance sheet indicators is assessed qualitatively and will be refined as data and assumptions improve, and will also depend on the effectiveness of EE/LDAR/ASM programs, regulatory dynamics, and market conditions.
Expected effects:
Short-term (0 –1 year). Limited impact on profit/ cash flow metrics from carbon compliance and “quick” efficiency measures; priority is compliance and organizational improvements.
Medium-term (1–10 years). Increasing the share of “green” electricity (including through joint venture generation and/or contracts), achieving zero routine flaring, and reducing methane leaks are factors that will mitigate the operating cost profile. At the same time, targeted capital investments (CAPEX) are envisaged for energy efficiency, renewable energy, methane programs, and adaptation.
Long-term (10–35 years). Scaling up CCUS, hydrogen solutions, and SAFs, as the appropriate markets and regulatory frameworks develop, will transform the cost structure, reducing the carbon tail of assets.
Methodology for determining “significant effect”.
The company applies a combination of quantitative and qualitative criteria (including EBITDA- oriented metrics, frequency/probability, and time profile) and uses Value at Risk and Cash flow at Risk metrics to assess sensitivity to carbon, energy, and physical risk prices.
Transition plan, goals and resourcing
The transition plan within the framework of the LCDP 2060 includes four key areas:
1. energy efficiency/resource conservation,
2. methane emissions management (OGMP/LDAR and complete abandonment of routine flare operations),
3. Renewable energy/hybrid generation and green procurement,
4. piloting CCUS, development of hydrogen energy, production of SAF and participation in offset initiatives (forest climate project 1,600 hectares – positive conclusion of the State Environmental Expertise and approvals received).
Targets: Reduction of Scope 1+2 by 15% by 2031 (by 2019) and by 64% by 2060, reduction of methane emissions by 32% by 2031 and by 96% by 2060, share of renewable energy in electricity consumption of at least 15% by 2031 and 50% by 2060. Monitoring – based on MRV with annual disclosure and independent verification. The operational and investment models use the internal “shadow” price of carbon.
Climate scenario analysis
The identification, assessment, and management processes cover direct operations and the supply chain and are based on enterprise risk management (ERM), ISO 31000/ISO 14001 standards, environmental impact assessment procedures, and local risk assessment tools (e.g., WRI Aqueduct). The review frequency is more than once per year, using agreed-upon time horizons (short-, medium-, and long-term).
The climate strategy remains sustainable over the long term with the phased implementation of the LCDP and the adjustment of investment priorities to the dynamics of regulation, markets, and technological maturity. Areas of uncertainty include the pace and severity of regulation, the scalability of CCUS/hydrogen/SAF, and the evolution of carbon credit markets.
Key projects within the framework of the climate strategy (LCDP‑2060)
For the second year in a row, the company has received a CDP rating of “B”, confirming the sustainability of its decarbonization and climate management practices, which comply with international standards.
1. Energy efficiency, operational decarbonization and energy conservation
Target: To improve energy efficiency, automate energy management, and reduce direct emissions (Scope 1) with an additional impact on indirect emissions (Scope 2) through the purchase of green electricity under PPA contracts.
As part of the implementation of the LCDP until 2031, it is planned to implement approximately 250 measures in the field of energy efficiency and energy conservation at subsidiaries and dependent companies, which will save 548 thousand tonnes of fuel equivalent of fuel and energy resources and reduce approximately 931 thousand tonnes of CO₂ -eq.
Work completed in the reporting year:
The implementation of a portfolio of energy efficiency measures at production and processing assets (optimization of modes, modernization, automation) continues, operational control has been strengthened through MRV procedures and weekly status reports on ASM at Category I facilities.
In 2025, 87 measures were implemented23 to modernize process equipment, including replacing gas burners in furnaces, introducing energy-saving technologies, optimizing heat generation and consumption, upgrading lighting systems, and more. These measures resulted in annual savings of 1,935.5 thousand GJ of fuel and energy resources and a reduction in greenhouse gas emissions by 128.3 thousand tonnes of CO₂ .
Energy-saving measures include the modernization of process furnaces and boilers, the installation of variable frequency drives on pumps, thermal integration of process flows, and the transition to energy-efficient lighting.
The costs of compliance with emissions trading systems (KazETS/EU ETS) are partly offset by the effects of EE/LDAR and the increased share of green electricity under PPAs.
The following events were held in the subsidiaries and affiliates:
At Atyrau Oil Refinery LLP, the Prime G system was installed on furnaces H 701, H 703, H 702 and H 704, and the Prime D system on furnaces H 2001, H 2002 and H 2003, along with an automated fuel/air ratio control system. This resulted in savings of 0.406 thousand tonnes of natural gas and a reduction of CO₂ emissions by 0.8 thousand tonnes. Effect: 18.5 thousand GJ.
At PetroKazakhstan Oil Products LLP, thermal insulation covers were installed on shut off valves, flange connections, pipelines and hatches, enabling savings of 0.8 thousand tonnes of fuel oil. The estimated CO₂ emission reduction amounted to 2.5 thousand tonnes (32.2 thousand GJ). Additionally, restoration of air heater X-718 at the isomerization unit C 700 allowed savings of 0.98 thousand tonnes of refinery gas and reduction of 2.4 thousand tonnes of CO₂ emissions (43.1 thousand GJ). Replacement of 137 steam traps resulted in savings of 4.107 thousand Gcal of heat energy and reduction of 1.3 thousand tonnes of CO₂ emissions (17.2 thousand GJ). Effect: 92.5 thousand GJ.
At Pavlodar Petrochemical Plant JSC, the temperature of fuel oil supplied to section 001 of the KT 1 unit was increased, which reduced fuel oil consumption by 1,074 tonnes and decreased CO₂ emissions by 3.4 thousand tonnes (43.2 thousand GJ). Additionally, variable frequency drives (VFDs) were implemented in fan equipment of sections C-400 and C-200 (4.2 thousand GJ), in pump H 1 (0.3 thousand GJ), and optimization of power consumption in blowers A-710-UK-101 A/B and A-710-FA-301 resulted in energy savings of 1,677.8 MWh and reduction of 1.3 thousand tonnes of CO₂ emissions. Effect of the events: 49.2 thousand GJ.
At JV CASPI BITUM LLP, faulty steam traps at the TGSS unit were replaced, and burners at furnaces F-1101 and F-1102 were upgraded. This resulted in savings of 17.100 thousand Gcal and reduction of 5.3 thousand tonnes of CO₂ emissions. Effect is 71,600 GJ.
At Karazhanbasmunai JSC efficiency of the combined cycle gas turbine (CCGT) plant was increased through heat recovery from exhaust gases of the steam turbine. Thermal insulation of steam pipelines and injection wellheads was also implemented. These measures resulted in savings of 23.4 million m³ of natural gas and reduction of 53.1 thousand tonnes of CO₂ emissions. Effect is 959,800 GJ.
At Ozenmunaigas JSC, measures were undertaken to reduce fuel gas consumption in oil heating furnaces. In PP 0.63 type furnaces, replacement of 16 burners resulted in a projected effect of 143.2 thousand GJ, while replacement of 33 burners in UN 0.2 furnaces resulted in 107.1 thousand GJ. Overall, gas consumption was reduced by 5.8 million m³, and CO₂ emissions decreased by 11.0 thousand tonnes.
At Mangistaumunaigas JSC replacement of burners (26 units) at PP 0.63 and PN 70 furnaces resulted in a reduction of associated petroleum gas consumption by 1.1 million m³ and a decrease in CO₂ emissions by 2.6 thousand tonnes. Effect: 38.2 thousand GJ.
At KazTransOil JSC optimization of hot oil pipeline operations resulted in savings of 8.9 million m³ of natural gas and reduction of 24.4 thousand tonnes of CO₂ emissions. Effect: 303,800 GJ.
Effect. Reducing specific energy consumption and emissions intensity mitigates operating costs and reduces energy cost volatility and ETS compliance.
Next steps: Scaling up best energy efficiency practices, integrating energy efficiency/carbon intensity KPIs into plans and budgets, and developing MRV analytics.
23. 2022 – 49 measures, the estimated annual savings of fuel and energy resources amounted to 2.057 million GJ, in physical terms – 33,448 thousand kW of electricity, 1,531 Gcal of thermal energy, 25,292 tonnes of boiler and furnace fuel and 21,732 thousand m³ of natural gas, which is equivalent to a reduction in emissions of 136.7 thousand tonnes of CO₂. 2023 – 60 measures (including 8 measures for the preparation of design and estimate documentation, as well as 52 energy efficiency measures), the estimated annual savings of fuel and energy resources of which amounted to 0.716 million GJ, in physical terms - 13,287 thousand kW of electricity, 10,776 Gcal of thermal energy, 2,489 tonnes of boiler and furnace fuel and 13,149 thousand m³ of natural gas, which is equivalent to a reduction in emissions of 45 thousand tonnes of CO₂ . 2024 - 70 measures, the estimated annual savings of fuel and energy resources amounted to 2.4 million GJ, in physical terms: 48,114 thousand kW of electricity, 22,334 Gcal of thermal energy, 21,188 tonnes of boiler and furnace fuel and 29,003 thousand m³ of natural gas, which is equivalent to a reduction in GHG emissions by 174.9 thousand tonnes of CO₂ .
2. Development of renewable energy/hybrid generation and green power supply contracts (PPAs)
Target: Achieve a 15% share of renewable energy by 2031 and 50% by 2060 (renewable energy portfolio and PPA procurement), as well as ensure the sustainability and reliability of energy supply to critical assets, including reducing production sites’ dependence on external grids and energy cost volatility.
Work completed in the reporting year:
Hybrid solutions are being implemented for fields (a combination of renewable energy sources and gas-fired maneuverable capacities), which reduces dependence on external energy supplies, increases the energy independence of fields, and reduces downtime.
The renewable energy portfolio (wind power plants/ solar power plants with storage) is progressing: early stages of construction and installation work have been completed and key deliveries are being contracted at a number of sites.
A major project to build a 247 MW hybrid power plant in Zhanaozen, Mangistau Region, is being implemented jointly with Eni SpA (51% Eni, 49% KMG). The project includes wind (77 MW), solar (50 MW), and a gas-fired power plant (120 MW). The solar power plant was commissioned in September 2025, and the gas and wind power plants are scheduled to be operational in late 2026.
In 2024, the EPC contract for gas-fired power plant and the solar power plant was signed. The solar power plant was commissioned in September 2025, and construction and installation work are ongoing at gas-fired power plant. The hybrid format ensures stable generation and allows for variable renewable energy generation to be offset by flexible gas-fired capacity, reducing the risk of power outages at production assets.
In the Zhambyl region, KMG Green Energy LLP (20%), together with Qazaq Green Power PLC (20%) and Total Energies Renewables SAS (60%), is implementing the country’s largest project – the Mirny Wind Farm, a 1 GW wind farm with a 600 MWh energy storage system. Basic design was completed in 2025, and detailed design is approximately 81% complete. The project envisions the installation of 150 onshore wind turbines (6.5–7.7 MW each), supplied by Envision Energy and SANY Renewable Energy. The project is expected to reduce over 2 million tonnes of CO₂ per year and cover the electricity shortage in the southern regions, which is critical for the stability of the Company’s assets.
KMG’s portfolio includes additional solar and wind power projects in the western and southern regions, the technical development of which is being conducted as part of the “ESG Projects” investment portfolio (991 KZT billion, KMG’s share is 363 KZT billion). These projects provide synergies with the corporate goal of 15% “green” electricity by 2031.
As part of the modernization of the production base for sustainable energy supplies, infrastructure is being expanded for the construction of a new gas processing plant in Zhanaozen, creating additional opportunities for hybrid solutions (a combination of gas-fired power plant and renewable energy sources).
The Company is also actively developing its own power generation and renewable energy sources. In 2025, electricity consumption from renewable energy sources (RES) amounted to 37,230.9 thousand kWh.
10,000 I-Rec certificates purchased.
Effect: Substituting carbon-based electricity reduces ETS costs and stabilizes the cost profile; for downstream operations, it improves the carbon intensity of production.
3. Zero Routine Flaring
Target: Completely phase out routine flaring by 2031 and maintain target intensity levels according to IOGP methodologies.
Work completed in the reporting year:
The KMG Group’s crude gas flaring rate for Q2 2025 is approximately 1.00 tonnes per 1,000 tonnes of hydrocarbons produced (IOGP methodology); flare mitigation action maps have been developed and prioritized for subsidiaries and affiliates.
Annual reporting under the World Bank’s Zero Routine Flaring initiative has been completed; since 2017, routine flaring volumes have been significantly reduced (target: ~89%).
Effect. The risk of fines and fees is reduced, the ETS profile is leveled, and hydrocarbon losses are reduced (positive effect on margins).
Next steps: Synchronize gas utilization programs associated with the development of gas processing and the introduction of local/hybrid energy sources at the fields; link to PPA/renewable energy input schedules.
4. Reduction of Methane Emissions (OGMP 2.0 / LDAR)
Target: Reduce methane emissions by 32% by 2031 and 96% by 2060; improve compliance with OGMP 2.0
Status for the reporting period:
KMG has joined the Oil & Gas Methane Partnership (OGMP 2.0), an initiative for methane emissions reporting at the oil and gas company level. OGMP 2.0 requires companies to submit annual methane emissions reports to UNEP, ranging from the lowest level of Level 1 to Level 5 of the gold standard. KMG has submitted two reports (for 2023 and 2024) on methane emissions (at Level 3).
Work to determine the baseline level of methane emissions at subsidiaries and affiliates continues. With the support of international companies and consultants, instrumental measurements of methane emissions and leaks were conducted using LDAR (Leak Detection and Repair) equipment at Ozenmunaigas JSC, KazGPP LLP, JV Kazgermunai LLP, Embamunaigas JSC, and Mangistaumunaigas JSC.
In autumn of 2025, partial aerial monitoring (by plane) of methane leaks was carried out with the support of the Oil and Gas Climate Initiative (OGCI), and data with coordinates of major leaks were sent to the subsidiaries for their elimination.
With the support of OGCI and IMEO, UNEP continues satellite monitoring of methane emissions at subsidiaries’ facilities (starting in 2023).
In 2024, KMG approved the Working Instructions for Methane Leak Management at KMG and its subsidiaries and affiliates. In 2025, a draft Corporate Standard for Methane Emissions Management at the KMG Group of Companies was developed.
In 2025, in collaboration with the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan and international consultants, a package of proposals was prepared for the implementation of a system of state regulation of methane emissions.
A series of trainings and seminars were held for specialists from subsidiaries and affiliates on methane emission management, including on quantifying methane emissions, gas utilization, and identifying the main sources of leaks, as well as methods for eliminating them.
In order to reduce methane emissions, a pilot project to reduce methane leaks with the subsequent generation of carbon units on the voluntary market is being implemented at Embamunaigas JSC in cooperation with Vema Carbon.
Effect. Reducing leaks directly reduces raw material/ fuel consumption and operating expenses (OPEX); indirectly, it reduces regulatory risks and potential ETS burden.
Next steps: Expanding LDAR coverage and measurement frequency, improving the accuracy of instrumental measurements (OGI/satellite/mobile platforms), and preparing for possible tightening of national methane regulations.
5. Carbon capture, use and storage (CCUS)
Target: Pilot CCUS technologies at priority sites and prepare for scaling after 2040; portfolio target: injecting up to 421,000 t CO₂ by 2060.
Work completed in the reporting year:
CO₂ sources in the Atyrau and Mangystau regions was completed; the terms of reference (TOR) for the feasibility study (FS) of a pilot project (10,000–20,000 t/year) at the Prorva gas treatment plant were prepared; and a preliminary assessment of the infrastructure and potential geological traps was conducted.
As part of a quadripartite agreement with Tatneft, an exchange of experience in licensing, monitoring, and reporting on CO2 injection has been launched. KMG Engineering LLP conducted a comprehensive feasibility study for the CCUS project in collaboration with Baker Hughes, including field selection, CO₂ injection modeling, and an assessment of underground storage potential. The estimated project cost is approximately $11.5 million, with a potential impact of up to 21,500 tonnes of buried CO2 per year; in its current configuration, the project is unprofitable.
At the same time, work is underway to develop a regulatory framework and standardize it. Proposals have been prepared to amend the Environmental Code and the Subsoil Code to recognize CCUS as an emission reduction technology and to establish geological storage of CO2 as a separate, licensed activity, aligned with ISO/TC 265 international standards for monitoring and safety. Initiatives have been initiated to include CO2 capture, transport, and storage technologies in BAT references and to expand the taxonomy of “green” projects to ensure access to green financing.
Effect.
Long-term – reduction of the “carbon tail” of assets and the possibility of using enhanced oil recovery (EOR) methods where geologically and economically justified;
Short term – R&D and capital expenditure on pilot preparation, no immediate impact on the P&L (impact expected as the product reaches commercial operation/monetization stage).
Next steps.
Conducting feasibility studies and basic design (Front End Engineering Design, FEED);
selection of the process flow diagram and licensor;
development of a regulatory framework in collaboration with relevant government agencies (CO2 accounting, permitting procedures, infrastructure, potential incentives) in line with the LCDP 2060.
6. Development of hydrogen energy and low-carbon chemistry (hydrogen, ammonia, methanol)
Target. KMG is gradually building its competencies and project portfolio in the areas of “blue” and “green” hydrogen, as well as low-carbon derivatives (ammonia/ methanol), taking into account integration with CCUS and renewable energy sources. The company intends to prepare the technological and infrastructure base for future demand and export opportunities.
Work completed in the reporting year:
An updated Water Resources Atlas has been prepared and applied to assess the potential for green hydrogen production in the western, central, and northern regions of Kazakhstan. Environmentally safe water intake points have been identified, and the systematization of water resource and renewable energy data has been completed. A calculator has been developed to calculate the potential for green hydrogen production, taking into account water availability and renewable energy potential. Intellectual property rights are being secured.
A comprehensive series of research and development projects on hydrogen technologies has been completed, including the development of hydrogen storage materials, the creation of digital tools for assessing hydrogen production potential, the implementation of pilot projects, and a study of the potential of various types of hydrogen. Supply chain hypotheses for pilot solutions have been developed.
In collaboration with Green Spark (Italy), the first pilot project for green hydrogen production is being implemented at the Atyrau branch of KMG Engineering LLP using renewable energy (solar generation). The 200 kW solar power plant was commissioned at the end of June 2025. Generation over 6 months is 115 MW*hours. Design work for the second stage has been completed, including site determination and detailed calculations for the ventilation system of the container with the electrolyzer. The electrolyzer was installed at the end of December 2025, and preparations are underway for construction and installation work, the launch of which will ensure energy savings and create a closed cycle for hydrogen production based on renewable energy sources. At the same time, the solution is planned to be scaled across other KMG subsidiaries. The preliminary assessment of the project for the installation of small-scale renewable energy sources for Embamunaigas JSC with a capacity of 1.4 MW has been completed.
In May 2025, the third annual seminar on hydrogen energy was held with the participation of government agencies, international organizations and scientific institutes.
A feasibility study to produce “blue” hydrogen and its derivatives has also been completed. This study envisages the production of low- carbon hydrogen, ammonia, and methanol using gas from the Prorva gas treatment plant using CCUS technologies. The project, implemented with the participation of Casale S.A., has a design capacity of up to 20,500 t/year of “blue” hydrogen, 105,000 t/year of ammonia, and 50,000 t/year of methanol, with an estimated cost of approximately $140 million. The project aims to diversify the gas chemical industry. KMG’s subsidiaries and affiliates have been familiarized with the feasibility study results, and the possibility of implementing a pilot project for the production of “blue” hydrogen at one of the subsidiaries and affiliates is being explored.
The potential of natural “white” hydrogen is being assessed: production projects in the USA, China, and Africa have been analyzed, and work is underway to conclude an NDA with Terra-A.
Expected impact: Strengthening technological readiness and diversifying future revenue; through 2025, primarily analysis and engineering costs; financial impacts are projected as pilot projects progress to the commercial stage.
Next steps: developing hydrogen storage materials, preparing scientific publications, and conducting research aimed at improving the efficiency and sustainability of these technologies. Prioritizing pilot projects, linking them with CCUS/RES (electrolysis/CO2 utilization) projects, preparing FEEDs, refining logistics and off-take models with potential consumers.
7. Sustainable Aviation Fuel (SAF)
Target: The company is creating the conditions for local SAF production in cooperation with technology partners, focusing on the growing demand of the aviation sector and export markets.
Work completed in 2025:
The completed Feasibility Study determined the estimated capacity of the future plant: processing 100,000 tonnes of bioethanol per year, producing 54,000 tonnes of SAF and 6,000 tonnes of RD. Bioethanol from the domestic producer BioOperations is being considered as the primary feedstock. A framework agreement for the transition to the Pre-FEED and FEED stages was signed in 2025, and work is underway to establish a joint venture and prepare for the next stage of the project.
Expected impact: creation of a new low-carbon product and future revenue; in the short term – completion of FEED, formation of a raw material base and partnership model
Next steps: conducting FEED, selecting a technology platform (HEFA/ATJ, etc.), securing raw materials (including bioethanol/alternatives), financial model and agreements with potential after-takers.
8. Natural solutions and offsets (forest climate projects)
Target. Forest climate projects are used as part of a portfolio of natural solutions to offset residual emissions and increase the sustainability of the climate strategy. The initial project is 1,600 hectares (Pavlodar region); by the LCDP 2060 horizon, the portfolio is expected to grow to six projects.
Work completed in 2025:
A positive state expert review and necessary approvals for the 1,600-hectare project have been received; preparations for the implementation phase are underway, with regular consultations among participants.
All preparatory stages of the project (soil research and analysis) have been completed, including the development of the Working Project and the passage of the state environmental assessment.
In September 2025, the Ministry of Ecology and Natural Resources amended the Carbon Offset Approval Rules, making the Project’s current implementation economically unfeasible. KMG and Chevron will continue to analyze possible options for further implementation of forest climate initiatives in the Pavlodar region, taking into account current regulatory requirements.
Expected impact: generation of high-quality carbon units in support of the 2031/2060 targets; increased sustainability of the strategy under scenarios of increased regulation.
Next steps: contracting the work, setting up monitoring/accounting of absorption, preparation for registration and verification of units in recognized systems
9. Water and resistance to physical risks
Target is to reduce vulnerability to chronic heat, water stress, and flooding; and to establish quantitative water targets within the corporate Water Management Program.
Work completed in 2025:
The Tazalyk project (Atyrau Oil Refinery LLP): a key stage of the reconstruction of the treatment facilities has been completed.
Water Program: document updated to reflect the new Water Code; approval Programs planned to end of 2026.
Disclosure of water balance/intensity – in the Sustainability Report and CDP;
Expected effect: reduced likelihood of fines/stoppages and associated financial losses; increased operational continuity and insurance resilience in vulnerable locations.
Next steps: setting up Kazakhstan Petrochemical industries Inc. LLP on water consumption/discharges, expansion of reuse/desalination, inclusion of water projects in the CAPEX adaptation portfolio.
10. Regulatory readiness: ASM, BAT, IEP
Target is to reduce the likelihood of sanctions and shutdowns by ensuring reliable online emissions monitoring, the implementation of best available technologies, and the receipt of comprehensive environmental permits.
Work completed in 2025:
ASM: at Category I facilities – implementation/ connection, operating regulations, weekly status meetings.
BAT: participation in working groups; refinery production passports updated to take into account the reduction of losses/burning.
IEP: submission/updating of packages; administrative fines/challenges were recorded in Q1–Q2 2025 – the materiality of the regulatory risk has been confirmed.
Expected effect: direct compliance result (reduced probability of fines/stoppages) and increased reliability of MRV.
Next steps: closing measurement/data transmission bottlenecks, scheduled preventative upgrades, and readiness for new requirements and industry methodologies.
Greenhouse gas emissions
GRI 3-3
Normative and methodological basis
KMG’s greenhouse gas emissions accounting and management system is based on international standards and national regulatory requirements. The company applies a unified approach to monitoring, accounting, and verifying greenhouse gas emissions, ensuring data comparability, process transparency, and the reliability of disclosed information.
In its activities, KMG is guided by the following standards and regulatory documents:
ISO 14064 – standard for quantification and verification of greenhouse gas emissions;
GHG Protocol – a methodology for calculating emissions for Scope 1, Scope 2 and Scope 3;
IPCC Guidelines for National Greenhouse Gas Inventories;
United Nations Framework Convention on Climate Change (UNFCCC);
Order of the Minister of Ecology and Natural Resources of the Republic of Kazakhstan dated January 17, 2023 No. 9 – national guidelines.
In addition, the KMG Group of Companies has developed and approved a Methodology for Monitoring and Reporting Greenhouse Gas Emissions, aimed at unifying accounting and reporting processes across the entire KMG Group of Companies.
An approach to calculating greenhouse gas emissions
KMG uses a comprehensive approach to calculating greenhouse gas emissions, encompassing the full cycle of identification, quantification, and verification. The company systematically analyzes direct and indirect emission sources, as well as other significant categories, to develop a holistic view of the carbon footprint of its operations.
Emissions calculations are carried out in accordance with the best international practices, which ensures comparability of data over time and increases stakeholder confidence.
Greenhouse gas emissions inventory
As part of its climate strategy, KMG regularly conducts an inventory of greenhouse gas emissions, ensuring comprehensive coverage of the main impact sources and comparability of data at the KMG Group level.
The emissions inventory is carried out in the following coverage areas:
Scope 1 – direct emissions arising from the combustion of fuel at the Company’s production facilities, including the processes of extraction, processing and transportation of hydrocarbon raw materials;
Scope 2 – indirect emissions associated with the consumption of electrical and thermal energy purchased from third-party suppliers and used in the Company’s production activities;
Scope 3 – other indirect emissions across the value chain, considering impacts associated with the use of sold products, logistics operations, business travel and other relevant sources.
Starting in 2023, the Company has consistently expanded the scope of its Scope 3 emissions calculations, focusing on the most significant categories in terms of their impact on the overall carbon footprint. Under this approach, the following key categories are included in the calculation:
indirect emissions associated with energy consumption, including transmission losses of electricity;
emissions arising from employees’ business trips;
emissions from employee commuting;
emissions from transportation and delivery of finished products;
emissions associated with the use of sold goods and services.
Expanding the scope of the inventory under Scope 3 allows the Company to more fully assess the impact of its activities throughout the value chain and use the obtained data in forming management decisions and climate initiatives.
Implementation of internal carbon pricing
To integrate climate factors into management and investment planning processes, KMG is gradually introducing an Internal Carbon Pricing (ICP) mechanism. This tool is used to assess the potential impact of climate risks on financial performance and improve the validity of management decisions.
The use of internal carbon pricing allows the Company to:
consider the financial risks associated with possible tightening of carbon regulations;
redistribute investment priorities in favor of low-carbon and energy-efficient projects;
determine the estimated (“shadow”) cost of CO₂ emissions when assessing the sustainability of investment initiatives.
Integrating carbon into investment decisions
Starting in 2022, calculating the carbon footprint and associated financial aspects will be included in mandatory feasibility studies for new capital projects. This approach ensures that climate factors are considered early in investment decision-making and contributes to the Company’s project portfolio’s resilience in the context of the energy transition.
Transparency and disclosure of information
KMG consistently develops its greenhouse gas emissions and climate risk disclosure practices, ensuring transparency and comparability of reporting data. The company regularly publishes relevant information in accordance with international reporting initiatives and standards, including:
CDP – Climate Disclosure of Emissions and Risks;
GRI – Sustainable Development Reporting Standards;
IFRS S2 (International Financial Reporting Standard S2 – Climate-related Disclosures) – disclosure information on climate risks and opportunities.
The approaches we use to calculate and disclose greenhouse gas emissions ensure the reliability and accuracy of reporting, allowing the Company to effectively manage its carbon footprint and adapt to changing climate regulation requirements.
As part of its climate impact monitoring, KMG calculates and discloses information on greenhouse gas emissions for all relevant coverage areas in accordance with the requirements of GRI 305: Emissions 2016.
By the end of 2025, the volume of direct greenhouse gas emissions (Scope 1) for the KMG Group of Companies amounted to 8.0 million tonnes of CO₂ and 9.4 million tonnes CO₂-eq.
The calculation of indicators is carried out in accordance with approved methodological approaches and ensures comparability of data over time, as well as transparency of information disclosure for stakeholders.
TABLE 15.GREENHOUSE GAS EMISSION INDICATORS 24
Greenhouse gas emission indicators
2023
2024
2025
Scope 1. Direct emissions
million tonnes CO₂/ million tonnes CO₂-eq.
7.44 / 8.57
7.7 / 9.06
8.0 / 9.4A
Breakdown by areas of activity
Production
million tonnes CO₂/ million tonnes CO₂-eq.
2.33 / 3.44
2.64 / 3.98
2.57 / 3.9
Refining
million tonnes CO₂ / million tonnes CO₂-eq.
5.01 / 5.03
4.92 / 4.94
5.25 / 5.3
Transportation
million tonnes CO₂/ million tonnes CO₂-eq.
0.1 / 0.1
0.14 / 0.14
0.2 / 0.2
Breakdown by country
Kazakhstan
million tonnes CO₂ / million tonnes CO₂-eq.
6.55 / 7.68
6.99 / 8.35
7.1 / 8.4
Romania
million tonnes CO₂ / million tonnes CO₂-eq.
0.88 / 0.88
0.69 / 0.69
0.97 / 0.97
Georgia
million tonnes CO₂ / million tonnes CO₂-eq.
0.02 / 0.02
0.02 / 0.02
0.02 / 0.02
Breakdown of emissions by greenhouse gas type
CO₂
million tonnes of CO₂
7.44
7.7
8.0A
CH₄
million t CO₂-eq.
1.11
1.34
1.34A
N₂O
million t CO₂-eq.
0.1
0.02
0.02A
Scope 2. Indirect emissions25
Scope 2 Indirect emissions (market-based method)
million tonnes CO₂ / million tonnes CO₂-eq.
3.4 / 3.4
3.3 / 3.3
3.37 / 3.37A
Scope 2 Indirect emissions (location-based
million tonnes CO₂ / million tonnes CO₂-eq.
3.5 / 3.5
3.4 / 3.4
3.45 / 3.45A
Scope 3. Other indirect emissions
million tonnes CO₂ / million tonnes CO₂-eq.
55.22 / 55.4
59.63 / 59.82
62.39 / 62.58A
Category 3 – Fuel- and energy-related activities
million tonnes CO₂ / million tonnes CO₂-eq.
0.274 / 0.274
0.232 / 0.232
0.227 / 0.227
Category 6 – Business travel
million tonnes CO₂ / million tonnes CO₂-eq.
0.002 / 0.002
0.004 / 0.005
0.005 / 0.005
Category 7 – Employee commuting
million tonnes CO₂ / million tonnes CO₂-eq.
0.015 / 0.015
0.012 / 0.013
0.032 / 0.032
Category 9 – Downstream transportation and distribution
million tonnes CO₂ / million tonnes CO₂-eq.
0.356 / 0.362
0.320 / 0.323
0.364 / 0.371
Category 11 – Use of sold products
million tonnes CO₂ / million tonnes CO₂-eq.
54.57 / 54.75
59.06 / 59.25
61.76 / 61.95
24. The calculation includes carbon dioxide (CO₂), methane (CH₄), and nitrous oxide (N₂O). The assessment of emissions in CO₂ equivalent is inherently subject to uncertainty due to limitations in scientific knowledge used to determine emission factors, as well as the values of conversion factors for different gases to CO₂ equivalent. To harmonize emissions on a single basis, Global Warming Potential (GWP) factors from the IPCC Fifth Assessment Report were applied (methane – 28, nitrous oxide – 265). Data on direct greenhouse gas emissions are consolidated using the operational control approach and have been confirmed by conclusions of independent accredited organizations for each subsidiary.
25. Scope 2 emissions calculations include only CO₂ emissions and are performed using the location based method for subsidiaries and affiliates located in the Republic of Kazakhstan, due to the introduction of the Single Electricity Purchaser mechanism effective from July 1, 2023. The calculations apply a blended emission factor based on the national methodology and reflecting the actual electricity generation mix. For subsidiaries and affiliates located in other jurisdictions, both calculation methods—the market based and location based approaches—are applied.
TABLE 16.GREENHOUSE GAS EMISSION INTENSITY INDICATORS
Greenhouse Gas Emissions Intensity – Scope 1
2023
2024
2025
Breakdown by business activities26
Production
tonnes CO₂ eq. / tonne of HC produced
0.1676
0.1767
0.1751A
Processing
tonnes CO₂ eq. / tonne of HC processed
0.2320
0.2233
0.2190A
Transportation
tonnes CO₂ eq. / tonne transported
0.0023
0.0030
0.0043A
Greenhouse Gas Emissions Intensity – Scope 2 (Location based method)
Breakdown by business activities
Production
tonnes CO₂ eq. / tonne of HC produced
0.0672
0.0548
0.0550A
Processing
tonnes CO₂ eq. / tonne of HC processed
0.0834
0.0891
0.0840A
Transportation
tonnes CO₂ eq. / tonne transported
0.0052
0.0045
0.0046A
26. In 2025, the Company revised the methodology for calculating greenhouse gas emissions intensity by business activities: intensity is now calculated based on physical volumes of production, processing, and transportation, which improves the comparability of the indicator and strengthens its linkage to operational efficiency.
