2020 was a tough year for the world. It was also a challenging year for NCOC full of tremendous new challenges. But our company rose to meet those opportunities, and in many ways, 2020 was our most successful year ever.

Safety is and will always remain our fundamental value. In that spirit, we continued our Goal Zero journey and achieved zero Tier 1 or Tier 2 process safety incidents for the entire year. This result positions the Kashagan asset among the best process safety performance assets in the world. Our workplace injury rate also reached an all-time low in 2020, our best ever. We want to be good stewards of our environment. We take that seriously – and our flaring and vent emissions have dropped substantially in 2020 down from already-low levels.

As a growing company with a long possible future, we take a proactive approach and seek to ‘pay it forward’. Therefore, we have continued our local content development programme, investing more than 50% of NCOC’s total expenditures last year into improving the capabilities of national enterprises. In addition, several social and infrastructure projects were completed in Atyrau and Mangystau Oblasts and these have benefitted many people. In addition to the “regular” social projects performed by NCOC last year, we also spend millionsof US dollars on new hospitals, hospital renovations, medical equipment, doctors and nurses, and a range of other critical elements of support for our communities during the pandemic. In fact, we were awarded the prestigious Zhomart Zhurek award by the Republic of Kazakhstan for these contributions, and we are proud to have played a role.

The importance of sustainable development is best described in proverb «We do not inherit the land from our ancestors... we borrow it from our children». In NCOC, we know that sustainable development is no longer a matter of choice; it is the only viable option. This includes greenhouse gas emissions and we aim to be world class in this metric as well. We strive for excellent performance in all areas of our business, from production to projects to environmental to social and economic areas. This is what we owe to Kazakhstan, our world, and each other.

This is our sixth voluntary report on North Caspian Operating Company (NCOC) sustainable development. The report complies with “Oil and Gas Industry Guidance on Voluntary Sustainability Reporting” jointly developed by IPIECA (the global oil and gas industry association for social and environmental issues), IOGP (the International Association of Oil and Gas Producers) and API (the American Petroleum Institute).

The report reflects NCOC commitments to sustainable and responsible development of Kashagan field aiming to bring long-term benefits for Kazakhstan and the Company’s shareholders. It includes NCOC performance highlights in production operations, socio-economic development and environmental stewardship.

This report demonstrates the Company’s contribution to achieving Sustainable Development Goals aimed at addressing economic, social and environmental challenges in Kazakhstan.

In 2020 we continued to develop Sustainability Report in close cooperation with External Advisory Board, (see Section 11.7. External Advisory Board).

The data in the Report is fully consistent with reports on environmental and socio-economic performance of the North Caspian Project made to NCOC shareholders, and to the Republic of Kazakhstan in its oversight and regulatory capacities.

In February 2020, NCOC developed a 90-day action plan to secure the health and safety of the Company’s and contractors’ staff engaged at the operational sites. According to the plan, the access to the operations sites was strictly restricted and provided only to the critical staff. A mandatory quarantine had been introduced for the front-line personnel prior to starting the work at the Company’s facilities.

However, the employees were able to leave NCOC operational facilities provided that they needed to pass PCR-testing and the quarantine for re-entering the operational sites.

Additional health and safety measures had been put in place for offshore and onshore front-line staff. Eskene West operational site was notionally divided into two sanitary areas: a working area and a residential area.

All employees were provided with good accommodation, catering and rest. The terms of remuneration were agreed with all parties concerned.

During the 90-day period, no COVID-19 cases were registered at the Company’s operational sites

Following the declaration of the state of emergency in the country, effective 16 March 2020, NCOC had transferred most of its employees to the remote working mode with salary retention for all staff.

For NCOC it was essential to stay connected with all employees and know their experiences, views and feelings with respect to how they are working in NCOC. For that reason, NCOC delivered four working remotely pulse surveys aiming to:

• Compare the results with the last year’s feedback;
• Measure the effectiveness of the actions NCOC had put in place to date;
• Corelate the results with the other types of employee feedbacks.

This is a very important feedback channel that helps to address the areas of employees’ concern. Feedbacks received from employees showed that the team leadership connect with employees is becoming stronger through continuous feedback provision.

In April 2020, NCOC launched the Employee Assistance Programme (EAP) in partnership with EAP Kazakhstan to ensure employees and their family well-being. The programme intended to help employees deal with personal and professional issues with the support of trained health professionals.

During COVID-19 pandemic, that kind of assistance is particularly important for employees to manage stress and new challenges within their work and family environments.

Within this programme employees could attend webinars on the below topics:

• «NCOC EAP Introduction» – to learn in depth on how employees and their line managers can benefit from the programme;
• «Emotional well-being during pandemic and quarantine»;
• «Emotional well-being of children during pandemic and quarantine»;
• «How to safely organize remote working».

Respecting privacy of employees and their families, the EAP provided a confidential assistance. The programme assisted 106 employees with personal and work-related problems.

Since the pandemic announcement none of the company staff has been dismissed.

Monitoring the COVID-19 situation, the Company decided to purchase vital medical equipment very early in 2020. The list included artificial lung ventilators, oxygen stations,

modern ultrasound machines, defibrillators for intensive care units of Infectious Diseases Hospitals, multi-purpose hospital beds, medicines, personal protective equipment for medical staff, ambulance cars and many others items including medications and additional capabilities for the local health care system.

In total, over 3 billion tenge were allocated as direct assistance to the healthcare systems of Atyrau and Mangistau regions to fight against COVID-19.

NCOC built 2 modular-type infectious diseases hospitals with a capacity of 200 beds and the value of over 8 billion tenge each in Atyrau and Aktau. Each hospital is fully fitted with modern medical equipment including dedicated oxygen supply lines to support care for patients in severe condition.

As a joint initiative of the Company and other operators, intensive care doctors have been brought from the UK to support the local healthcare system.

Apart from healthcare system, NCOC has also supported educational institutions delivering 1,200 computers for children from low income families for online education.

NCOC employees also organized a voluntary charity campaign to support elderly and vulnerable people who faced difficulties because of quarantine. 200 families in Atyrau Oblast and 126 families in Tupkaragan District and Mangystau Oblast received support for about of 4,5 million tenge.

Additionally, NCOC frontline staff collected over 4 million tenge to purchase and donate lung ventilator and oxygen concentrator to Atyrau Regional Hospital.

Our business relations with our contractors are based on teamwork, responsibility, responsiveness and understanding.

NCOC considers protection of health, safety and welfare of our people as the highest value and it applies not only to our direct NCOC employees but also to our contractors.

47 critical contracting companies with over 2,000 people work for NCOC at different locations.

At the earliest stage of the pandemic response NCOC identified contractor companies as one of the main stakeholders.

NCOC actively engaged with the management of contractors and subcontractors and monitored the compliance with the Labour Code requirements. Furthermore, NCOC initiated a shorter term of payment (from 42 to 21 days) to contractors registered in the Republic of Kazakhstan during the state of emergency and quarantine period.

Since the end of February 2020, we timely informed them on different amendments and changes related to epidemiological situation, changes in the country categories, hygiene rules, travel restriction, employer responsibilities, and other rules introduced in the Republic of Kazakhstan.

Before the launch of “90 days operational area” or “bubble” concept, NCOC together with Contractor companies’ CEOs have identified the priorities to ensure the effective response:

• All required health and sanitation measures;
• Pay, conditions, industrial relations plans

Contractors’ Business Response and Preparedness Plans on COVID-19 were also aligned with NCOC plan. It had five key work streams:

• Limit the virus exposure to our people;
• Effective and timely communication;
• Medical treatment;
• Business continuity;
• Social stability.

Ensuring our employees and contractors stay safe and healthy is NCOC top priority. We work tirelessly to prevent any harm to our workforce and to have no leaks across our operations. We proudly display this as our Goal Zero ambition.

We expect everyone working for NCOC, whether employee or contractor, to intervene and stop a work that may appear unsafe.

The Company openly reports and investigates incidents and near misses. We aim to learn from these incidents and share findings to improve safety performance.

NCOC employees and contractors must meet all safety standards and requirements including our Golden Rules (see Sustainability Report 2015). These rules help us to focus on safety critical areas thereby allowing us to make significant progress in preventing serious incidents.

Even with the exceptional challenges presented by the pandemic in 2020, our Goal Zero ambition never wavered. We used this opportunity to understand exactly what was critical and ensuring our approach was fit-for-purpose given the distractions and turmoil of the pandemic crisis.

Our performance improvement is also seen in the reduction of High Potential Incidents (HiPos). We completed 2020 with zero high potential incidents compared to thirteen last year.

Investigating and lessons learnt

NCOC reports and investigates incidents to understand the underlying causes, including the technical, behavioral and organizational reasons. The Company shares learnings and takes steps to mitigate future incidents at work sites. We aim to use those findings to improve our standard ways of working in similar activities. We work to create sustainability in our approach by applying lessons learnt.

NCOC is committed to protect and promote healthcare and welfare of its people. We are constantly identifying the opportunities to improve workforce health through different health programmes.

The Company provides qualified medical services to its employees and their family members through local specialized medical services providers and encourages personnel to undergo periodic medical examinations.

The Company provides qualified medical services to its employees and their family members through local specialized medical services providers and encourages personnel to undergo periodic medical examinations.

To keep employees healthy and fit, NCOC covers the expenses for gym and health club assistance. Besides, all NCOC camps have gyms and sports grounds where various sports competitions are organized. Caring for its drivers who spend most of their hours sitting, the Company has organized for them a fitness corner near the vehicle parking facility. Regular exercising not only helps drivers to maintain good physical condition, but also better perform their jobs and focus on safety.

The vacation wellness support programme that was launched to promote employees’ health and wellbeing is yet another benefit for NCOC people.

The vacation wellness support programme that was launched to promote employees’ health and wellbeing is yet another benefit for NCOC people.

• Temperature screening;
• Social distancing;
• Face mask wearing;
• Cleaning and disinfecting;
• Bactericide lamps, etc.

NCOC Energize campaign promotes healthy lifestyle in the professional and personal lives of its employees. Through this campaign a number of educational and fitness initiatives are being provided to encourage everyone to practice healthy living habits and to exercise more.

Transport safety is a key concern of NCOC everyday logistics activities, such as conveying large numbers of people, delivering materials and equipment using land, sea and air vehicles. The Company adopted international standards supported by industry standards and best practices to manage the safety risks and drive to Goal Zero regarding any possible injuries and incidents. Thus, we developed a comprehensive transportation safety management process to minimize risks and promote transportation safety, which includes:

• Risk identification;
• Safeguards to minimize threats, and recovery measures to mitigate incident consequences, if one occurs;
• Safeguards to minimize threats, and recovery measures to mitigate incident consequences, if one occurs;
• Competency assessment for safety critical positions;
• Training for personnel to develop skills and knowledge to perform their jobs safely

We have systems in place for 1) reporting leading and lagging key performance indicators that enable interventions to eliminate repeated incidents and minimize the likelihood incidents happening in the future, and 2) behavioral-based safety observation with programmes like SAFE-R and Lead2Safety that provide feedback on worker behaviors, tracking and analysis of observations, and a process for identifying and implementing actions for improvement.

With strong leadership and guidance in 2020, the Company reached high transport safety performance.

30% of low potential incidents were road traffic incidents caused by third party. It was a great performance from all involved Company staff and the contractors who support our activities.

Road Transport remains one of the highest risk activities of NCOC with approximately 500 vehicles supporting the assets daily, and with an annual exposure of 25 million kilometers driven in a normal year. However, the impact of COVID-19 in 2020 reduced activity levels to 11 million kilometers as non-critical trips were stopped.

All light vehicle drivers take mandatory defensive driver training every 2 years and bus drivers – once a year.

All vehicles of the Company have in-vehicle monitoring systems (IVMS). They help to monitor driver’s behavior on the road such as speeding, harsh breaking and seat belt compliance.

The Company require its drivers and employees to follow transport safety rules:

• Follow a prescribed route for road journeys;
• Wear seat belts;
• Avoid using mobile phones or any other devices while driving and adhere to speed limits.

In 2020 for the first time we registered 0 high potential incidents during the winter months. Moreover, to support the local communities, NCOC distributed high visibility paints and reflective bands for animals among farmers. These paints and bands will reduce the likelihood of traffic accidents involving animals in darkness and low visibility on the roads.

Aviation. In 2020 NCOC completed 572 helicopter flights totaling 541 flying hours without incident. These flights transported 8,928 passengers between Atyrau and D-Island. 19 Medevac flights were conducted, including three at night. Throughout the year, the winching drills were undertaken to ensure the flight crews are prepared if they are called upon.

Marine. The Caspian Falcon hovercraft was successfully used during the year to medevac unwell employees from D-Island when it was not possible due to flight restrictions to deploy the helicopter. Assurance engagements with our contractors ensure a high level of compliance with our operating standards and provide learning opportunities for continuous improvement.

Warehousing, heavy lifting. These activities are routine and repetitive in nature and therefore we apply controls to ensure that complacency does not become a factor. For non-routine activities such as lifting over-sized items we prepare detailed lifting plans and get necessary approvals from subject matter experts.

Process safety management is about keeping our product in pipes, tanks and vessels to avoid any harm to people and the environment.

The process safety starts with ensuring quality design of facilities and requires continuous attention to proper operation of all our facilities so that they are operated safely, well maintained and regularly inspected.

NCOC operating standards and procedures define the controls and physical barriers we believe are necessary to prevent incidents.

We regularly inspect, test and maintain these barriers to ensure they meet industry standards. The Company takes all possible efforts to prevent even the smallest weeps and seeps that could cause loss of containment. When leaks are identified, our priority is to fix them. We utilize a system of barriers and recovery measures as a bow-tie model whereby process safety hazards are managed through prevention and response barriers.

The Company shifted its focus to leading indicators of process safety to understand and measure success, rather than focusing just on lagging indicators, such as the absence of safety incidents.

Process Safety Fundamentals

NCOC continues to strengthen barriers that involve critical safety tasks carried out by frontline staff via embedding a Process Safety Fundamentals across. These Fundamentals provide clear guidelines for good operating practice to prevent unplanned releases of hazardous materials. The Company encourages its employees and contractors to use them in daily conversations to identify safety dilemmas, so they can be resolved.

Process safety performance

In line with industry standards, we measure and report process safety incidents according to significance, with Tier 1 as the most significant.

We continued our 2019 success and maintained the number of Tier 1 and 2 operational process safety events at 0 in 2020.

NCOC is committed to maximize conservation of fresh water

Efficient water management can influence the availability of water for the local environment, socio-economic development and future demands. That is why we manage water use in an intelligent and responsible way.

The total volume of water withdrawn during NCOC operations in 2020 was 812 thousand m³. This includes 17.5 thousand m³ of desalinated fresh water. The return water from the desalination unit in the volume of 55.1 thousand m³ is discharged into the sea in accordance with the special water use permit. The volume of fresh water consumed by NCOC onshore facilities is 762 thousand m³.

As compared to the previous year, there is a trend in decrease of freshwater consumption. This is caused by suspension of many operations at NCOC facilities due to the quarantine and restrictions regarding the access of the contracting personnel to the Company’s sites because of COVID pandemic.

Accordingly, the volume of fresh water consumed per unit of production in 2020 was 40 tonnes of water per thousand equivalent tonnes of oil

Offshore facilities also need fresh water: about 17.4 thousand m³ were produced by offshore desalination units in 2020. This replaced fresh water that would otherwise be sourced from onshore

In 2020 NCOC treated and recycled about 60.7 thousand m³ of water for greenbelt irrigation, dust suppression at onshore facilities in Mangistau and Atyrau Oblasts and for domestic use at the offshore facilities. The highest effect can be achieved by water recycling in the process. Thus, the volume of water recycling in 2020 was 324.4 thousand m³. As reported last year, NCOC decreased the total amount of water withdrawn for Bolashak OPF needs from the Astakhan-Mangyshlak pipeline by recycling water from the Tail Gas Treatment Unit. In 2020 NCOC continued to pursue plans for additional wastewater treatment. Completion of the new water treatment facilities, expected in 2022, will further reduce water intake up to 70% and enhance the quality of water discharged into evaporation ponds.

The conservation of biodiversity is a prerequisite of the welfare for present and future generations. Therefore, the protection and conservation of the unique biodiversity in the Caspian region is a top priority for NCOC in global sustainable development.

Biodiversity Action Plan

The conservation of biodiversity in the Caspian Sea and its coastal areas is an integral part of NCOC activities under the NCPSA. Due to the completion of onshore and offshore construction and transition of the Project for Kashagan development to the stage of Experimental Development (EP), the decision was made to update the Biodiversity Action Plan (BAP). In 2020 NCOC completed the update of the BAP.

The main objective of the BAP is the conservation and improvement of biodiversity through identification and proactive management, minimization of potential impacts and operational risks at the EP phase.

In early November 2020, the Plan was presented to the public. It provides a set of actions for biodiversity study and conservation and raising the public awareness and involvement about biodiversity of the region.

The BAP planned actions cover three areas:

• 1. Study of offshore and onshore biodiversity for its further conservation;
• 2. Use of advanced practice;
• 3. Support of environmental programmes.

Study of offshore and onshore biodiversity

The activities aimed at biodiversity study and conservation include:

• Regular monitoring of onshore and offshore environmental parameters as part of compliance monitoring;
• Surveys of the Caspian seal population.

• Birds observations, environmental surveys in the Zhayik river;
• Development of a biodiversity geographical information system;
• Landscaping works in the OPF «Bolashak» sanitary protection zone;
• Development of a sensitivity map for the North-Eastern part of the Caspian Sea;
• Surveys of the artificial island colonization with bottom organisms;
• Release of fish youngsters from the sturgeon hatchery into Zhayik-Caspian water basin.

Use of advance practice

This area includes use of advanced technologies for biodiversity study and conservation:

• Use of unmanned aerial vehicles for wildlife surveys;
• Multispectral survey of the Caspian seal population;
• Creation of a sturgeon breeding scientific centre.

Support of environmental programmes

The Environmental Programmes are aimed at implementation of the following initiatives:

• Collaboration with specially protected natural areas management and authorized organizations for the wildlife protection within the framework of biodiversity data sharing;
• Raising public awareness regarding biodiversity conservation issues;
• Publication of popular science information on biodiversity conservation;
• Support of environment protection events;
• Issue of the Red Book of Flora and Fauna in the Republic of Kazakhstan;
• Support of initiatives on protection of Ustyurt population of saiga and provision of consulting and logistics support to Wildlife Rehabilitation Centres;
• Logistics support to Wildlife Rehabilitation Centres.

Logistics support to Wildlife Rehabilitation Centres.

The actions in the Plan envisaged for the period 2020-2025 can be amended and supplemented, if needed, depending on the current conditions

Caspian seal

Caspian seal Pusa caspica (Gmelin, 1788) is the only marine mammal and the endemic species inhabiting the waters of the Caspian Sea. The most important zone for the Caspian seals is the northern part of the sea, where they concentrate from autumn to early summer for breeding, which is one of the most significant and vulnerable stages of their life cycle.

In recent decades, the natural changes in the ecosystem of the sea (air and water temperature increase, sea level drop, reduction of ice coverage in winter, etc.) have been recorded, which result in changes of the marine environment and the condition of the Caspian aquatic organisms. The Caspian seal population is in a critical situation. Its number dropped in 2005-2012 from 1 million species at the beginning of the 20th century to 150,000 species according to the Caspian International Seal Survey (CISS).

Since 2008, the Caspian seal has had an “endangered” status on the Red List of the International Union for Conservation of Nature.

Scientists of the Pre-Caspian states register a drastic decline in the seals number and the threat of their extinction and proposed to the governmental bodies to include the Caspian seals in the National Red Books. In March 2020, these endangered species were included in the Red Book of the Russian Federation. At the end of November 2020, the RoK Governmental Resolution No.746 dated 9 November 2020 came into force and included the Caspian seal in the List of Rare and Endangered Species of Animals (the Red Book of the Republic of Kazakhstan).

Earlier in 1993, the Caspian seal was included in the Red Book of Azerbaijan, in 2011 – in the Red Book of Turkmenistan. At the initiative of Iran in 2017, the Caspian seal is included in Annexes I and II of the Convention on the Conservation of Migratory Species of Wild Animals (Bonn Convention).

As in all previous years, starting from 2005, NCOC conducted winter monitoring of seals in 2020 involving Kazakh experts (Kazakhstan Agency of Applied Ecology LLP (KAPE)) and supervised by scientific-research institutes (Russian Federal Research Institute for Fisheries and Oceanography (VNIRO), Volga-Caspian branch of the VNIRO).

The monitoring was performed from Mangystau-3 and Tulpar icebreakers carrying cargo between Bautino Offshore Supply Base and Kashagan field with the direct involvement of experts – seal observers. In 2020, the monitoring took place in the period from January 29 to February 23.

In addition to scientific data collection, on-board observers help the ship captains to avoid seals, in compliance with the mitigation recommendations developed by marine mammal experts at the start of the project. This is complemented with helicopter reconnaissance flights over the seal concentration areas. The reconnaissance results are reported directly to the icebreakers, where captains and seal observers define the safest navigation route. Recently, the thermal infrared cameras have been installed on all NCOC icebreakers. These cameras enable observers to watch the seals day and night, in blizzard or fog, at the distance of hundreds of meters from the vessel, which allows bypassing the seals in advance.

Comprehensive Caspian seal surveys programme

The successful implementation of the Programme for Comprehensive Caspian Seal Surveys initiated by NCOC was continued in 2020 within the jurisdiction of the Republic of Kazakhstan and the Russian Federation.

The leading participants of this programme are the Kazakh Agency of Applied Ecology LLP (KAPE) and the A.N. Severtsov Institute for Ecology and Evolution under the Russian Academy of Sciences (IEE RAS), Federal State Scientific Institution. At different stages, the research involves scientists from various scientific organizations: testing laboratory of the Chemical-Analysis Centre – Kazakh Agency of Applied Ecology LLP, Institute of Zoology under the Ministry of Education and Science of the Republic of Kazakhstan, Scientific and Production Centre of Microbiology and Virology LLP (NPC MiV), Kazakh Scientific and Production Centre of Fishery (KazNPCRH), M.V. Lomonosov Moscow State University, Moscow State Academy of Veterinary Medicine and Biotechnology of K.I. Scriabin Federal

State Budget Educational Institution of Higher Education (FGBOU VO MGAVMiB – MVA of K.I. Scriabin), Federal Research Centre of Fundamental and Translational Medicine Federal State Budget Scientific Institution (FGBNU FIC FTM), I.D. Papanin Institute for Biology of Inland Waters under the Russian Academy of Sciences, Scientific and Production Association “Typhoon”.

2020 was a challenging year for the arrangement of offshore environmental surveys because of quarantine sanctions. Yet, despite multiple quarantine restrictions the Programme of Comprehensive Seal Surveys was successfully completed. In February 2020 a multi-spectral aerial survey of the pupping grounds on ice in the Kazakhstan sector of the North Caspian Sea was carried out with use of Piper PA-34 fixed wing laboratory.

Regular counts of seals in the Caspian Sea with use of modern techniques and aerial surveys and further processing of the acquired data shall be conducted at least for three years (winter seasons) in order to identify the trends in changes of the Caspian seal population.

Like in 2019, a multi-spectral survey technique – a synchronised aerial survey in the infrared and visible range of the pupping grounds of the Caspian seal – was employed. The instrumental seal counts on ice allowed identifying 58,200 pups and 119,000 adult species. In 2020, according to the preliminary upper and lower limits estimation of the total population based on the data of the multi-spectral aerial survey of the seals ice rookeries, the abundance of the Caspian seals was 280,000 – 350,000 species.

Since the distribution of the Caspian seal pupping grounds in the Kazakhstan and Russia zones varies significantly in different years depending on the winter climate and ice conditions, it is necessary to perform seals counts in the entire water basin of the North Caspian Sea. Thus, the spring seal surveys in the moulting grounds were successfully carried out as follows: in April – within the Russian water area on the Maly Zhemchuzhny Island and the adjacent water basin, in May – within the Kazakhstan sector of the Caspian Sea on the sand bars close to the North Caspian Sea Channel. During the seal surveys from a sea vessel and with UAV use within the Russian sector of the North Caspian Sea over 1,000 seals were counted whereas an aerial survey over the Kazakhstan sector identified more than 3,000 species.

In autumn, the Caspian seal surveys were continued within the Russian water basin in the period from October 6 to 18 and in the area of the North Caspian Marine Channel (Prorva) in the period from November 1 to 13. Morphometric surveys were completed with acquisition of biological material for genetic, hormonal, serological, molecular and virological, toxicological, and other studies. The seals count within the Russian sector covered the area from Astrakhan Natural Reserve to the Maly Zhemchuzhny Island and the Volga-Caspian Canal with biological sampling from six dead and two live species of the Caspian seal. In addition to the morphometric and other studies, the tagging of 11 seal species with satellite sensors was performed in the Kazakhstan sector.

Ichthyofauna

The modern ichthyofauna of the Caspian Sea, as compared to the open seas, does not have a high species diversity and consists mainly of indigenous species. It comprises of 139 species and subspecies of fish and fishlike, five species of which are included in the Red Book of the Republic of Kazakhstan.

Spring, summer and autumn fish surveys are performed regularly at NCOC offshore sites. The process of ichthyofauna monitoring in 2020, like in the previous years, is characterized by specific features and requirements that differentiate it from other types of environmental surveys:

• Frequency of observations based on a fixed grid of monitoring points (stations);
• Unification, standardization of tools and methods of observation;
• Efficiency of review and interpretation of observed changes to identify ongoing changes and ensure timely response.

Such requirements allow obtaining the comparable data on fish stock trends.

The 2020 monitoring surveys of the North Caspian ichthyofauna carried out by a licensed contractor within the Company’s Contract Areas identified 70 species and subspecies of fish, which is over 50% of the nominal list of fish inhabiting the Caspian Sea.

Sturgeon fish is the most valuable fish species in the Caspian Sea. These species are currently endangered. In 2014 the Caspian states reached an agreement to ban commercial fishing of sturgeon to restore its population.

In 2020 NCOC released 250,000 sturgeon fries to maintain the population of valuable relict fish as part of the Fish Damage Compensation Environmental Programme. The Company plans to continue the release of sturgeon fries into the Zhayik-Caspian basin in the coming years.

Bird surveys in 2020

The North Caspian wetlands are the important grounds for over 280 bird species migrating from Eurasia to Africa and India and nesting on the Caspian Sea coast and in the deltas of inflowing rivers. The reed beds in this area are used by birds as shelters and for rest during the wintering, nesting and migrating periods.

NCOC realizes the importance of the region for preservation of global biodiversity and thus, it performs annual and regular seasonal birds’ surveys since 2000:

• Two annual surveys during seasonal migrations (spring and autumn);

• Studies of nesting birds’ distribution in the coastal area during the reproduction period;
• Monitoring of wintering grounds for waterfowls and semiaquatic birds;
• Observations in the onshore and offshore areas and in the nesting period in summer.

Ornithofauna surveys cover the extensive area from the Volga delta in the west to the Emba delta in the east, from Atyrau in the north to Aktau in the south.

The survey teams include NCOC ecologists, lead scientists and ornithology experts of Kazakhstan involved by the licenced contractor for wildlife monitoring studies, and inspectors from the Atyrau Oblast Department of Ecology and the Oblast Territorial Forestry and Wildlife Inspectorate.

In 2020 the spring surveys were canceled due to the sanitary and epidemiological situation and relevant restrictions. In summer, the surveys were carried out only onshore. 280,000 birds were recorded during the autumn survey on the northern coast westwards to the Volga river and eastwards to the Emba estuary. The average density of birds in the VolgaUral fluvial area has reached the maximum values for all these years, i.e. over 18,300 per allotment (30-35 km²). Though the survey programme has been curtailed, the density of birds’ distribution suggests a high number of mass species in the North Caspian Sea.

The Caspian Sea level continues to drop in 2020 resulting in a further decrease of the grounds suitable for birds on the northern coast. Accordingly, number of birds in the interdelta areas of the northern coast reduced due to their drainage and increased in pre-delta areas. It was also noted that ongoing dredging operations along the fish channel in Ural delta have created favourable conditions for the mass movement of fish in a relatively small area and have attracted fish-eating birds from a large area, inducing a high concentration of birds (up to 2,000 Dalmatian pelicans (Pelecanus crispus), over 500 white pelicans (Pelecanus onocrotalus), and about 15,000 cormorants (Phalacrocorax carbo)).

NCOC follows zero-discharge policy: no disposal or discharges of waste and treated wastewater into the natural surface waters including the Caspian Sea.

NCOC uses lined evaporation ponds as the safest available method for managing treated industrial water. Treated wastewater from industrial processes and treated domestic effluents are discharged via the strainer filters into evaporation ponds/ gathering ponds for further evaporation.

The total volume of hydrocarbons discharged with treated domestic effluents and industrial water into evaporation ponds was 1.85 tonnes in 2020. A significant decrease in hydrocarbon discharge into evaporation ponds versus the previous year is due to the fine tuning of wastewater treatment process

NCOC obtained all permits for discharge of treated water to evaporation ponds in accordance with environmental requirements of the Republic of Kazakhstan.

In 2020 NCOC started execution phase of the new onshore Water Treating Facilities Project. This major project aims to further reduce water intake from the Astakhan-Mangyshlak pipeline up to 70% and enhance the quality of water discharged into evaporation ponds by extra treatment of the water from Onshore Processing Facility. The environmental effect of the treated wastewater quality is the reduction of pollutants such as methanol, oil, H₂S, iron and suspended solids.

The Water Treatment Facility is expected to be in operation in early 2023.

The primary air emission sources at NCOC facilities include flaring units, gas turbine units, heating and hot-water boilers and diesel generators.

The flaring unit is a part of any oil and gas production facility and functions as a so-called “relief valve” of the plant to ensure safe operation of the facility. A small ignition flame burns at all times, to ensure readiness to flaring. The height of the flaring unit ensures maximum dispersion of combustion products in the air. Power is supplied to onshore and offshore facilities by gas turbines units running on associated gas produced from Kashagan field. The turbines are equipped with special burners designed to reduce nitrogen oxide emissions. Boilers produce steam, heat water and provide heating for buildings. Boilers run on fuel gas, however, use of diesel fuel is also possible. Diesel generators are used only for stand-by power generation.

In 2020, the volume of non-GHG air emissions from all NCOC operations was 23% of permitted volumes, and totaled:

• 947 tonnes of volatile organic compounds (VOCs);
• 14,899 tonnes of oxides of sulfur (SO_x);
• 3,818 tonnes of oxides of nitrogen (NO_x excluding N₂O, which is reported under GHG air emissions).

SO_x emissions at onshore and offshore facilities that make 94-76% of overall Non-GHG air emissions consistently reduced from 2017 through 2020 owing to:

• Reduction in gas flaring volumes;
• Improvement of indicators of reliability and availability of technological equipment.

NO_x emissions were higher versus 2019 due to increase in hydrocarbon production. VOC emissions were lower because of downtime of living quarters and support barges due to limited operations at production facilities in the quarantine period.

Air monitoring is an important part of NCOC general programme for industrial environmental monitoring. It includes the following several components:

• Under-plume monitoring;
• Monitoring at emission sources;
• Air quality monitoring stations (AQMS).

Air quality monitoring stations

Supported financially and technically by NCOC, 20 automatic stations for continuous monitoring of the air quality are installed in Atyrau City and Atyrau Oblast. 4 stations are located along the perimeter of the 7-km sanitary protection zone of Bolashak OPF; 7 more stations are installed in nearby and remote from the OPF settlements including Dossor and Makat; and 9 stations are located in Atyrau city.

The AQMS operate on a 24/7 basis and continuously measure the concentrations of 5 components (hydrogen sulphide, sulphur dioxide, nitrogen dioxide, nitrogen oxide and carbonic oxide), which are the main air pollutants, as well as meteorological parameters determining the conditions of contaminant dispersion in the air (wind speed and direction, temperature, barometric pressure and relative humidity).

The remote data transfer project has been implemented for the purpose of centralized data collection from the stations. It allows the transfer of measurements data on a 24/7 basis from every AQMS to the central computer in NCOC office, where such data is analyzed and stored. Simultaneously, the specialists of Atyrau Branch “Kazhydromet” and Atyrau Oblast Department for Natural Resources and Nature Use Regulation are provided with a remote access to the data received from the Company’s stations and an opportunity for online monitoring of the air quality.

Since 2016, the Company has been carrying out the modernization and upgrade of the stations including enhancement of the data transfer system to reduce the data deference time, resulting in the interval reduction to 1 hour; the gas analyzers installed in the OPF area have been replaced with new series models. The phased upgrade of the measuring tools at all stations will continue in 2021–2022. In addition, the issue of relocating the West Oil station No.104 installed in Atyrau southern industrial zone to a residential area of the city to control the pollutant impact on the population is under joint review with the state authorities.

Hydrogen sulfide

Hydrogen sulfide (H₂S) is another non-GHG air emission. It is a flammable and highly toxic substance with a strong and unpleasant odor. It can be generated anywhere with decomposition of sulfur-containing organic materials in absence of oxygen; thus, it is emitted naturally in marsh gases and volcanoes (sometimes in large quantities), oil and associated gas in some oil and gas fields.

Given the sour nature of Kashagan field, hydrogen sulphide is present at every stage of oil and gas production, transportation and processing and, accordingly, at all Company’s units associated with these processes.

NCOC specialists who work at the operational facilities, particularly, in immediate proximity to wellheads, flash gas compressors and other equipment attend a special training and use personal detectors and breathing apparatus. Depending on the facility hazard level and activities, they use respirators and escape self-contained breathing apparatus or operational breathing apparatus. With farther move from these locations, the risks and potential H₂S concentrations reduce rapidly.

NCOC can state with confidence that Bolashak OPF is safe for the community. The primary guarantor of safety is the 7-km sanitary protection zone (SPZ) around Bolashak OPF, sufficient to protect the residents of the nearby settlements from long-term air emissions impacts on their health and providing a high margin of safety even in case of non-routine events. Such confidence is driven by a careful design, the outcomes of multi-year studies and computer modelling, the conclusions of the state expert reviews and regulators’ approvals, and finally, by recent operating practice that confirms the appropriateness of the models. As in the previous years, the results of the continuous monitoring in 2020 indicate that the short-term H₂S peaks (from 1 to 20 minutes in duration) are still far more likely in Atyrau than close to Bolashak OPF.

Nevertheless, NCOC monitors the exceedance of air quality rates recorded at the AQMS in Es-kene West to identify the possible causes, including potential internal or external sources, given the wind direction at the time of the exceedance. It is difficult to confirm the impact of any po-tential pollution sources at NCOC facilities as emissions from sources at the Company’s facilities are within the regulatory limits for emissions and discharges and, therefore, are not the obvious cause of the exceedance. Additional studies are required to establish and confirm the causes. The completion of such studies is planned in 2021 (see Case Study Section Comprehensive Studies of the Air Quality within Atyrau City and in Eskene West in Bolashak OPF location area).

NCOC places first priority on prevention of oil spills. No matter how confident we are in efficiency of their prevention, the Company remains always prepared to respond quickly and fully to incidents were they to occur

In 2020, there were 0 hydrocarbon spills in excess of 1 barrel reaching the environment from NCOC operations (total volume: 0 barrels of oil-equivalent).

Actions taken in 2020

Prevention. The most efficient way to protect from oil spills is to prevent them from occurring in the first place, identifying spill risks and ensuring that the highest safety standards are continuously applied to mitigate those risks.

Technology. We employ innovative technologies to assist in responding to oil spills and are actively engaged in research on new and more effective methods

Response Training. NCOC has a dedicated Oil Spill Response group, with about 100 trained staff, and equipment suitable for use in the harsh environment of the North Caspian Sea. Such equipment is stored at marine support bases in Bautino and Damba. NCOC has a comprehensive Oil Spill Response Plan that is regularly drilled.

A large-scale Tier 3 Oil Spill Response Exercise “Karasha 2020” (“November 2020”) was delivered in November 2020. The exercise engaged 63 people, including representatives of international organization OSPRI and TRG Contractor. During the exercise NCOC Incident Management Team and Crisis Management Team members virtually practiced crisis management skills and techniques, taking all precautions to prevent COVID-19 spread. These techniques included online tools to request and track the resources and keep all the exercise participants updated of a total picture and a situation simulated on a real time basis. The exercise resulted in a huge experience gained and valuable feedback received, which will be used to continuously improve the crisis and emergency preparedness and response.

The total volume of waste generated by the Company in 2020 was 4,839 tonnes, including 2,209 tonnes of amber-level waste and 2,630 tonnes of green-level waste

The waste volume generated in 2020 dropped significantly versus 2019. The main source of increased waste generation in 2019 was preventive maintenance/turnaround conducted in the first half of the year. Meanwhile, in 2020 many activities at the Company’s facilities were suspended due to COVID-19 pandemic outbreak, declaration of the state of emergency in the Republic of Kazakhstan.

NCOC Waste Management System is aimed at reduction or generation of zero waste at the source or during the operational process through a proper planning of the Company’s operations.

NCOC Waste Management System presents a full cycle from waste generation to final waste disposal. Waste segregation (sorting) is one of the critical phases of the process cycle. It is prohibited to mix hazardous and non-hazardous wastes; therefore, they are collected separately at the generation point into dedicated containers and insulated tanks. For this purpose, additional special (Euro) containers for domestic waste and cages for plastic wastes have been installed.

According to the requirements of the RoK National Standards, all facilities in the Company have in place a system for separate collection of waste oil based on its types (engine oil waste, industrial oil waste and oil transmix waste), batteries, mercury wastes and vehicle tyres.

The awareness events take place at the facilities on a monthly basis for better understanding of separate waste collection by the personnel.

The decrease of the waste volumes and its toxicity is achieved at the Company’s facilities through the mechanical or thermal treatment:

• Food and medical wastes refer to the hazardous waste. To reduce their hazardous properties and ensure compliance with the sanitary requirements, TeamTec double chamber Incinerators are installed at the offshore facilities (Floatels);
• To reduce the wastes generated at the Company’s onshore facilities in Atyrau Oblast, a compactor is used to compact the paper and cardboard wastes.

All wastes generated at the Company’s facilities are handed over to a contractor for further processing and disposal under a Waste Handover Statement. The contractor performs pre-treatment of the waste oil through removal of mechanical additives and water for its further transfer to processing (regeneration). Following the additional segregation and pre-treatment at the contractor’s facilities, the plastic wastes, metal scrap, paper and cardboard waste, scrap tyres, batteries, waste oils are converted into the recyclable materials and transferred to specialized organizations for further processing.

Timber wastes are provided to the local community on a free of charge basis.

NCOC performs a phased replacement of mercury-containing lamps with LED lamps at its facilities. In 2020 1,518 fluorescent lamps were replaced with LED lamps at the facilities in Atyrau Oblast. The environmental effect from replacement of fluorescent lamps with LED lamps is driven by the following factors:

• Longer service cycle of LED lamps as compared to fluorescent bulbs results in reduction of the associated waste;
• LED lamps are mercury free and, thus, they are safe both in operation and disposal as waste;
• LED lamps consume less power.

In pursuing its waste management strategy, the Company is committed to comply with the requirements of the national and international standards.

NCOC undertakes a comprehensive programme of environmental monitoring to acquire the data in the area around the Company’s facilities offshore and onshore.

In accordance with the environmental impact monitoring programme, every year the offshore surveys are carried out in all seasons (except for the sites covered with ice in winter) and the onshore surveys are undertaken around the Company’s facilities in Atyrau and Mangystau Oblasts. The scope of such surveys includes the study of the seawater and the surface water, flora and fauna, the quality of soil, bottom sediments, and atmospheric air to have a better understanding of the environmental components’ quality.

The offshore impact monitoring covers the entire license area of Kashagan, Aktote and Kairan fields, the northern offshore section of the trunkline, and the Tyupkaragan Bay.

In 2020 the number of monitoring stations was 224 including 9 long-term monitoring stations used as baseline stations. All these stations perform monitoring of chemical and physical parameters of the seawater, bottom sediments, plankton (zoo- and phytoplankton) and zoobenthos organisms, aquatic vegetation and air quality.

Environmental stations (sampling points) for onshore impact monitoring are located around the onshore facilities and along the trunklines of the Company. 45 monitoring stations in Atyrau Oblast and 11 stations in Mangystau Oblast are used for soil sampling and description of flora and fauna. In 2020 apart from the monitoring activities, the Company undertook baseline environmental surveys offshore and onshore under the projects for the future Kashagan field development. The outcomes of these surveys have been incorporated into the pre-EIA and EIA of the relevant projects.

Despite the challenging sanitary and epidemiological situation and subsequent restrictions regarding the personnel and cargo movement, the environmental monitoring works were completed almost in full.

The total volume of direct greenhouse gas emissions from NCOC operations in 2020 was 3,035 thousand metric tonnes of CO₂-equivalent, including 2,842 thousand tonnes of carbon dioxide (CO₂), 184 thousand tonnes of CO₂-equivalent of methane (CH₄) and 8.8 thousand tonnes of CO₂-equivalent of nitrous oxide (N₂O). This total volume includes the emissions from mobile and stationary sources.

NCOC production facilities are self-sufficient in power, heat and steam supplies, which significantly increases the share of direct emissions (Scope 1) of the Company. Emission sources under the category “Energy Activities” are the major contributors and make 70% of the total emissions.

Emissions (Scope 2) are generated from purchased power for supporting facilities such as Bautino Base and Atyrau Training Centre. The total volume of indirect greenhouse gas emissions from NCOC operations in 2020 was 7,552 metric tonnes of CO₂-equivalent, all carbon dioxide.

Greenhouse gas emissions intensity (greenhouse gas emissions per unit of production) level in 2020 were 149 tonnes of CO₂-equivalent per 1,000 equivalent tonnes of oil produced, which is 6.3% lower than the similar indicator in 2019. In 2020 NCOC Shareholders implemented a “Greenhouse Gas Emissions Intensity” target to assess the annual performance of NCOC. Thus, starting from 2021, NCOC will monitor greenhouse gas emissions intensity versus set up targets.

The quantification of NCOC greenhouse gas emissions does not include an estimate of other indirect emissions (Scope 3). NCOC will provide the information on the volumes of oil and gas production to the stakeholders and give them an opportunity to assess these emissions generated during NCOC production cycle with use of their preferable methods.

NCOC facility emitting greenhouse gases in the amount above the emission threshold of 20,000 tonnes of carbon dioxide equivalent set by the law of Kazakhstan for the entities subject to regulation, was included in 2018 in the National Plan for Allocation of GHGE Quotas, which expired in 2020. Over the three-year period (2018-2020) of the Plan validity, NCOC consumed 65% of the total permitted quota (13.6 million tonnes of carbon dioxide).

The approach of the RoK Government to reduction of greenhouse gas emissions and fulfilment of the commitments under the International Climate Agreements has slightly

changed with introduction of the new RoK Environmental Code in 2021. Thus, a key incentive for business is still the emission trading system which establishes the limits (quotas) in the National Allocation Plan for certain sectors of the economy, where emissions from facilities exceed 20,000 tons of carbon dioxide. If quotas are exceeded, the operator of such a facility shall buy quotas at the commodity exchange to compensate the shortage or sell them in case of excess.

The five-year period planned in the new Environmental Code for the next National Allocation Plan was eventually divided into two periods: 2021 and 2022-2025. The volume of quotas allocated to NCOC in the new plan for 2021 is approved and amounts to 3.5 million tonnes of carbon dioxide. The quotas for next periods have not been defined yet, however, more stringent restrictions at the facility level should be expected given Kazakhstan goals to meet the Paris Agreement obligations to reduce greenhouse gas emissions by 15% by 2030 versus 1990 and the country’s total carbon budget at least by 1.5% annually.

The total energy volume consumed during NCOC operations in 2020 was 43.14 million gigajoules (GJ), where 0.42 million GJ was purchased in the form of electricity, including 0.33 million GJ purchased from the Financial Settlement Centre to support renewable energy sources. Specific energy intensity (energy consumption per unit of production) in 2020 was 2.11 GJ tonne of oil equivalent. The energy intensity of production has increased this year versus the previous year, primarily due to the temporary production restriction by OPEC+, and improvements in the system of accounting the input data on fuel and energy consumption.

In 2020 NCOC together with the experts of Shareholders (Total E&P Kazakhstan, Shell Kazakhstan Development B.V. and Agip Caspian Sea B.V.) conducted an internal energy inspection at the Company’s production facilities to identify the ways to improve energy conservation and energy efficiency.

These works resulted in a report with proposed actions to reduce the carbon volumes and energy intensity, which is described in the below Decarbonization and GHG reduction section.

NCOC follows “No Routine Flaring” policy

Phase I of Kashagan Project was originally designed to avoid routine flaring, i.e. the “routine” burning of excessive gas volumes, though in general, an oil and gas project has no other way of safe operations during oil production. As a matter of fact, at Phase I of Kashagan development, all produced gas is re-injected, used as fuel or sold. Flaring is, however, needed in the course of operations as the safest and most effective way to deal with gas that for temporary technical reasons could not be processed (for example, commissioning activities, operations, intermittent discharges to flare due to operational upsets, etc.). The volumes of gas flared in such cases is calculated and reported. NCOC is working continuously to reduce the volumes of technologically unavoidable gas flaring by improving methods of control at onshore and offshore facilities. Every year since the project inception, the volumes of gas for flaring have been reduced and optimized

The quantity of hydrocarbon gas flared from NCOC operations in 2020 was 26% of permitted volumes and totaled 47.2 million Sm³ (standard cubic meters). Flaring was down by about 18% in 2020 compared to the previous year, even with oil production increase by 7%. Operational reliability has been better than expected, and this improved process stability during commissioning allowed us to keep flaring below 0.52% of total produced gas volumes.

2020 was indeed a challenging year for the whole world. The coronavirus pandemic has triggered a need to address environmental challenges, including those related to global warming and climate change. The attitude of the society to environmental challenges has changed – it has become more demanding and engaged. A young generation of consumers is changing their preferences towards more environmental-friendly and low-carbon products.

Such changes and expectations of the society have triggered expedited scenario of low-carbon development, decarbonization and transfer to more clean energy sources in the industry and countries.

2020 was a record year due to declarations of countries and world energy companies regarding their aspiration for the carbon neutrality. Kazakhstan has joined such declarations and intends to achieve the carbon neutrality by 2060. A number of leading international oil & gas and energy companies declared also about their ambitious goals to achieve a neutral carbon footprint at own production facilities by 2050. The typical decarbonization and low-carbon development strategies of the international energy companies can be briefly described as “more energy and less carbon” and they include the development of the below basic elements:

• Energy efficiency;
• Renewable energy sources and energy storage systems;
• Circular economy;
• E-mobility (development of charging infrastructure for electrical cars);
• Biofuel, biogas and hydrogen;
• Carbon capture and storage;
• Support and procurement of low-carbon products and services (work with contractors and suppliers);
• Restoration of forests.

NCOC has developed its Greenhouse Gas Emission and Energy Efficiency Management Strategy based on the in-country commitments to reduce greenhouse gas emissions and on the experience of the Shareholders in development of decarbonization and low-carbon strategies. This Strategy was approved in September 2020 by the Company’s Shareholders Committee and it is intended to reduce risks and develop comprehensive solutions for managing greenhouse gas emissions given a need to ensure a stable hydrocarbons production and achieve the design capacities. According to the approved Strategy, NCOC intends to:

• Achieve 15% reduction in specific greenhouse gas emissions at Phase I of Kashagan development by 2030 versus 2019 level;
• Continue to explore the opportunities for further reduction in greenhouse gas emissions, including through the development of future growth projects and
• Set up the targets for such growth projects of 0.135 tonnes of carbon dioxide equivalent per tonne of oil equivalent on ALARP basis.

The achievement of the goals defined in NCOC Strategy is intended through the following actions:

• Realization of the approved actions identified during the energy inspection and mandatory energy audit;
• Implementation of Energy Management System (compliant with ISO 50001 requirements), i.e. a systematic approach to energy conservation, development and implementation of energy efficiency improvement measures;

• Implementation of advanced Leak Detection and Repair (LDAR) Programme to monitor fugitive gas leaks into the air;
• Implementation of the measures to reduce technologically unavoidable gas flaring;
• Introduction of a carbon competitiveness assessment process for design solutions;
• Assessment and development of projects for use of Renewable Energy Sources (RES) and alternative technologies to reduce the carbon footprint;
• Running GHG & EE awareness sessions on contractors and vendors’ level to highlight the importance of reducing GHG & energy footprint at their activities.

In Q4 2020, NCOC started a coherent implementation of its strategy, particularly:

• 1. Phased introduction of Energy Management System;
• 2. Development of draft methodology and programme for Fugitive Leak Detection and Repair (LDAR);
• 3. Development of a concept report on potential use of Renewable Energy Sources at the Company’s supporting facilities;
• 4. Continued leak testing of shut-off and control valves and relevant repair works at the onshore operational sites. The amount of greenhouse gas emissions prevented from flaring as a result of this action was 2.3 thousand tonnes of CO₂-equivalent.

NCOC is committed to developing a world-class project that maximizes the use of local goods, works and services, whilst developing the skills of local people and the capacity of local companies.

In 2020, NCOC continued a positive trend of Local Content increase in the local goods, works and services procurement, resulted in USD 509.1 million, equivalent to 55% of total expenditures.

This adds up to a year-end total of more than USD15.3 billion spent on local goods, works and services since 2004¹¹. These and other facts speak to the depth of NCOC’s commitment to the use of local content.

In 2020 NCOC conducted a mid-term review of Five-Year Local Content Development Programme. Additional target areas were defined for the participation of Kazakhstan businesses including new NCOC projects and drilling campaign.

As a part of goods localization, NCOC focused on 3 main areas:

• Оriginal equipment manufacturer goods localization – implementing localization opportunities with 4 established original equipment manufacturers in respect of localization of their products;

• “Early Tenders” – 5 contracts have been awarded to local manufactures;
• Pilot orders – 4 Pilot Orders were placed with local manufacturers.

As of the end of 2020, 90% of contracts in the budget equivalent were executed by local companies. This factor resulted from the use of huge efforts and resources within the Company, and Project management support.

As part of the local market survey in 2019 and 2020, NCOC identified about 90 local manufacturers, and have analysed in details/visited production facilities of 44 local manufacturers by now. Whenever possible, NCOC invites all local manufacturers (from amongst about 90 companies), which manufacture goods required for the project.

Single Window Form on external web-page

In 2020 NCOC launched a pilot project “Single Window Form”. The project allows to manage incoming questions and suggestions related to:

• Local content regulation and development;
• Local content interaction and cooperation;
• Supplier qualification and market research.

Development of local vendors is a priority for NCOC. The objective is to help local companies improve their technical and managerial capabilities so that they qualify as potential suppliers to the project, and longer-term could bid on other opportunities in national and international markets.

NCOC undertakes the following activities to support local suppliers’ development:

• Assist local companies to obtain international standards certifications for their management, goods and services, thus significantly increasing their competitiveness for contracts with NCOC;
• Identify potential local suppliers and contractors cover
• Implement improvement programme through trainings, seminars, workshops;
• Participate in Joint Venture Facilitation events.

NCOC supported 6 companies to complete non-destructive training and certification.

NCOC also completed technical gap analysis at 65 Kazakhstani companies on three categories:

• Ecology Services and Environmental Services;
• Insulation Materials;
• Machine Building.

Under the North Caspian Sea PSA, NCOC allocates a budget each year for development of social infrastructure projects. In 2020 this budget amounted to USD 76.9 million. The funds for construction of schools, kindergartens, hospitals, sport facilities, as well as utilities such as roads, electric power and water supply lines, and other infrastructure for the local communities are split equally between Atyrau and Mangystau Oblasts, the areas of the main operations under the North Caspian Project activities.

In the period from 1998 to 2020, 222 social infrastructure projects have been completed. Thus, cumulative spend on social infrastructure projects has reached USD 774.5 million.

• artificial lung ventilation devices, defibrillators, personal protective equipment sets (anti-plague kits), pharmaceuticals, disposables and disinfectants, PC software for donated computers, medical stuff for AIDH)
• 30 ALV
• Oxygen generator station
• Catering and accommodation for Russian doctors

• artificial lung ventilation devices, defibrillators, functional patient beds, personal protective equipment sets (anti plague kits), pharmaceuticals, disposables and disinfectants, fog generators, medical beds, oxygen concentrator)
• 3 ambulance vehicles
• Medical equipment and furniture for provisional center (200 beds, oxygen concentrator, pulseoxymetry device, PPE)

Social infrastructure projects are generally proposed by the Oblast Akimats (local authorities). Proposals are reviewed by NCOC and the PSA Authority to ensure they comply with PSA requirements and the Operator’s sustainable development commitment and are developed into projects in close collaboration with the Oblast Akimats. Once approved, NCOC is responsible for contract tender and execution up to handover

NCOC Social Infrastructure Projects Engineers together with Technical Supervision representatives regularly visit the sites and check the quality of construction and installation works and materials as well as equipment used to be compliant to design documentation, technical specifications for connecting to utilities requirements of technical regulations. Moreover, SIP team conducts weekly meetings where all issues related to the projects, including quality control and assurance are discussed.

Through its Sponsorship and Donations programme, NCOC responds directly to the needs and requests of local communities. USD 1.5 million is split equally each year between Atyrau and Mangystau oblasts for community sponsorships and donations. The Sponsorships and Donation programme focuses on five main areas of support for local communities:

• Healthcare;
• Education;
• Sports;
• Culture;
• Charity.

The Company gives preference to the projects that demonstrate sustainable development for the benefit of local communities. Thus, we support the projects including full equipping and certified training of beneficiaries that can be provided on a phased basis to achieve

efficient results. By helping the project to its feet, we assume that the project will be able to develop independently in future for the benefit of the community in terms of employment and stable financial growth.

Pursuant to the Company Policy, the sponsorship and donation projects shall not support political or religious organizations, create conditions for unfair market competition, or undermine the ecological sustainability of local communities or natural ecosystems. The initiative for projects generally comes from the local communities, however, may also be initiated by NCOC

In 2020, 38 projects were completed (19 in Atyrau Oblast and 19 in Mangystau Oblast). In total, USD 23.7 million has been spent on sponsorship and donation projects since 1998.

Our people are the main asset of NCOC. We are proud to employ the greatest minds from all over the world who drive Kashagan Project forward for the benefits of Kazakhstan.

As a means to achieve its medium- and long-term nationalization goals, the Operator has developed a special targeted programme for identifying and recruiting Kazakhstan citizens, and providing them with training for advancement in a long-term career with NCOC. Since 1998, 20,548 Kazakhstan citizens have received training, either as NCOC employees or as employees of local companies supported by NCOC. Over two decades, the Operator has spent in total about USD 291 million on job skills and crafts training to build local capacity for the North Caspian Project.

NCOC scholarship programme

NCOC successfully implements a Scholarship Programme for students in accordance with the NCSPSA. The Operator has sponsored 3,879 students from Kazakhstan to study in educational

institutions inside and outside the Republic of Kazakhstan with a monetary value over USD 9 million.

NCOC provides the funding and the KAZENERGY Association manages the Scholarship fund on a competitive basis for the academic training of Kazakhstan citizens (not NCOC employees) in the disciplines related to the petroleum industry, including training at universities, colleges or other educational institutions. In 2020-21 academic year, NCOC has sponsored 459 students in 55 educational institutions.

10.3. Nationalization

Nationalized positions

NCOC is committed to operate in a responsible way respecting human rights of all employees and everyone it cooperates with. NCOC’s approach to respecting human rights consists of several core elements, including adherence to corporate policies, compliance with applicable laws and regulations, regular dialogue and engagement with our stakeholders and contributing, directly or indirectly, to the general wellbeing of the communities within which we work. Our commitments in this area are supported by the General Business Principles, Code of Conduct, the Anti-Bribery and Corruption Manual and relevant Company procedures.

Dignity, honesty, integrity and fairness in all aspects of our business is a fundamental principle, and we require the same of all those with whom we do business.

NCOC aims to be an employer of choice in Kazakhstan.

NCOC is committed to maintain favorable work climate among personnel at all facilities of the Company. NCOC complies with international and national standards as well as safety, health and environmental protection regulations, and we expect the same from our contractors and suppliers

NCOC goes well beyond legal requirements of the Labor Code to provide compensation and benefits that attract, motivate and retain employees, and to incentivize their contribution to achieving our business objectives. NCOC carefully calibrates the competitiveness of its salary and benefits package with market surveys.

The remuneration philosophy is based on a “pay for performance” approach that is aligned with our Mission, Vision, Values and Culture at NCOC. In addition to the annual general salary increase, Oilman’s Day bonus and Vacation Wellness Support payment, an employee may receive an Individual Merit Salary increase and a variable annual Company Performance bonus, plus discretionary allowances and special monetary awards for outstanding performance or adherence to company values. Kazakhstan citizens who are directly hired by NCOC receive numerous other compensations and benefits, including generous paid and unpaid time off, paid pension, continuing education assistance, medical and life insurance, free commute on

company shuttle bus, financial assistance programmes for health club membership, home mortgage, wellness and medical issues, bereavement, children’s education and books.

NCOC aims to keep staff and facilities safe and sound while respecting the human rights and security of local communities. We carefully assess security threats and risks to our operations. We work with the RoK Government and partners to safeguard assets and provide a secure working environment for employees and contractors. NCOC does not use armed security as it does not correspond with current risk portfolio.

The Company has actively implemented the Voluntary Principles on Security and Human Rights that guide involved parties in assessing human rights risks when working with public and private security organizations. Since the moment of NCOC’s creation, we have 0 case of incidents related to human rights violation in Company or contractor sites.

During 2020, NCOC Security department played an important role in preventing the worstcase scenarios of mass spread of COVID-19 on company sites by securing access points and being involved in all other related activities together with health and safety teams. This helps to protect our people’s health and their right for healthy work environment as defined in WHO Healthy Workplace Framework.

NCOC is planning to sign a memorandum of understanding with government agencies, which implies sharing of responsibilities in the fight against terrorism threats. Apart from that, joint Anti-terrorism exercise with RoK Law Enforcement Agencies was held at the Onshore facilities.

NCOC Security participated in the review of the RoK resolutions related to anti-terrorism protection. Correspondent changes were discussed and suggested to the working group consisting of the RoK Authorities and other major oil and gas companies.

Security Department achieved some milestones in terms of new technology-related security projects:

• Personnel screening systems installation and development – X-Ray, walkthrough metal detectors, handheld explosives sniffers, alcohol testing units;
• Installation of electronic access control system at departure points to Offshore, Issuing permanent badges for Offshore personnel;
• Installation of a long range infrared system at Bautino Base (a similar work has been planned for the offshore facilities in 2021).

NCOC organized a number of trainings and workshops for the security contractor. We conducted regular internal self-assurance reviews to ensure Security contractor’s compliance with “Ethical conduct and human rights”.

Our contractors and suppliers are the essential part of NCOC, and they play a major role in our business. We build strong relationship with them and seek to work with them in safely and socially responsible way.

NCOC pays great attention to the way our contractors approach human rights practices.

The Company has developed and introduced Industrial Relations and Worker Welfare requirements aimed to improve contractors performance on industrial relations and equitable labor practices.

With support of subcontractors’ management and local government authorities, NCOC build a system of social partnership to ensure continuous stewardship of the contract, to make sure the Company’s expectations in the area of industrial relations are observed, including labor relations compliance and worker welfare standards.

The main industrial relations principles when working with contractors (subcontractors) are:

• Safety is the main priority, no harm to people and assets;
• Observe the RoK legislation, NCOC rules and deliver contractual obligations;
• Prevent social tension by building trust-based partnership with staff, local authorities and other stakeholders;
• Responsibility and trust-build relationships with staff, local authorities based on respect and open regular communication, resolve disputes by negotiations.

To ensure implementation of these principles, NCOC carries out following activities:

• Monitoring compliance. This is conducted in a form of inspecting the compliance with the RoK labour legislation by checking HR documentation, checking the timeliness of salary payment, provision of catering and living conditions for rotational employees, collecting periodic headcount information and monitoring the trends (monthly, quarterly and annual reports)
• Building capability through regular workshops and training on the application of the RoK labor legislation and NCOC requirements in the field of industrial relations.
• Handling grievances. NCOC has clear policies and procedures for dealing with workforce grievances, which apply equally to its contractors and subcontractors, serving to bring employee complain to management’s attention and ensure open, proper and timely resolution before frustrations can evolve into a conflict. In line with relevant policies, every written grievance submitted by an employee must be accepted, registered, reviewed and resolved. Employees may express their grievances freely and openly without fear of dismissal and intimidation. Employees have a right to appeal a decision, which he/she thinks may be violating his/her labor rights. If not resolved within NCOC, the grievance may be referred to appropriate local authorities
• Building IR response by supporting the subcontracting companies in development and deployment of Industrial action contingency plans.
• Attending social partnership commissions. NCOC is an active member to Social Partnership Commission of Atyrau Oblast and Social Partnership Commission of oil and gas industry. We help developing amendments to the Industrial Relations agreements at Regional and Industry levels.

Trade Union Tool to Protect Labor Rights

The Company jointly with NCOC Trade Union organization has established the following underlying principles:

• Joint commitment to the success of the Company;
• Joint recognition of each other’s legitimate interests;
• Joint focus on the quality of working life;
• Joint commitment to operating in a transparent manner;
• Joint commitment to add value to the arrangement.

These principles translate into common features that are associated with partnership working.

Engagement with local communities is a major part of external relations policy and we have been carefully adhering to this principle throughout the history of the North Caspian Project. It is our intention to proactively address any concerns raised about our operations, recognizing that public respect and confidence are earned through performance, open communications and community involvement. We engage with communities from early stages of the projects and keep them updated on ongoing processes.

Despite restrictions due to the pandemic in 2020, we continued engaging with our community:

• On February 18, NCOC held an environmental round table for NGOs, local community, state environmental authorities’ representatives with involvement of Kazakh and Russian scientists. Marine biologists and scientists from both countries shared preliminary data based on the results of aerial survey organized by NCOC in the Kazakhstan sector of the Caspian Sea with approval of all state regulatory bodies
• On February 28, NCOC participated in the "Safe Roads of Atyrau Oblast" round table. The Company shared its approach to mitigate risks of road accidents and road safety practice.
• On September 21, NCOC jointly with Zhaik-Caspian Aarhus Centre conducted online public hearing on "Kashagan field facilities development. Offshore. Marine Access Channels (MAC). Environmental Impact Assessment Project". More than 100 people took part in this event including representatives of state authorities, NGOs, developers of Environmental Impact Assessment documents, media representatives, public leaders and activists.

NCOC spoke about the needs of this project that are securing emergency exit for the staff on duties, safe operation of unmanned islands, delivering execution of turnaround scope scheduled in 2022 through providing sufficient water depth to bring in Living Quarter Barges and other bulk materials. The Company highlighted the potential environmental impact and its mitigation measures.

• Prior to the official public hearing, NCOC held a round table with NGO representatives on MAC on 7 September 2020 in the most open and constructive manner.
• On November 6, NCOC arranged a round table on environmental initiatives with participation of Atyrau Oblast Department of Natural Resources and Nature Use Control, Department of Ecology, Forestry and Wildlife Inspections, NGOs, Kazakhstani universities and other organizations. The Company updated on what have been done in air quality monitoring, environmental researches, expertise and audit, development of new regulatory documents.
• On December 3, NCOC conducted the public hearing of the Preliminary Environmental Impact Assessment to the Kashagan Development Project. Community representatives shared their opinions regarding the presented document. The Company shared the environmental protection plan and contribution to the socio-economic development of the region.

NCOC has in place a comprehensive programme for communication with the stakeholders and engagement with local media on pressing issues. Any citizen can raise concerns or report potential non-compliance with our values and principles (including anonymously) to NCOC Ethics and Compliance officer or use the Compliance Hotline opened in 2017 (For more information please go to the section on Business Ethics).

Honesty, integrity and fairness in all aspects of NCOC business is a fundamental principle, and we require the same of all those with whom we do business.

NCOC General Business Principles apply to all our business affairs and describe the behavior expected of every staff member of NCOC, including direct-hire Kazakhstan citizens, secondees, and contract staff. In addition, all NCOC staff are required to adhere to a Code of Conduct, which instructs them how to apply the General Business Principles in line with our core values. It provides practical guidance on how to comply with laws and regulations and how to relate to customers, communities and colleagues. Staff communications and monitoring programmes are designed and implemented to assure compliance.

No one at NCOC may instruct staff to take actions that violate the law or contradict our General Business Principles or Code of Conduct. If an employee observes such an action or instruction, he or she is required to refer the situation in confidence to a supervisor, to the NCOC Ethics & Compliance Officer, or to the Compliance Hotline for further investigation and possible disciplinary action. The Compliance Hotline is a 3rd party operated website (http://www.ncoc.deloitte-hotline.com), with e-mail address (ncoc.hotline@deloitte.kz) and phone number (8 800 080 15 65) that allows anyone to report suspected violations of law, General Business Principles and Code of Conduct including on an anonymous basis.

NCOC staff, vendors, suppliers, contractors or anyone else can raise concerns or report possible non-compliance to the NCOC Ethics & Compliance Officer or to the Hotline,

even anonymously. Details are kept confidential. The Ethics & Compliance Officer looks into allegations, and if confirmed, NCOC management takes actions appropriate to the circumstances. NCOC does not tolerate retaliation of any kind against those who report an issue concerning our General Business Principles, the Code of Conduct or Anti-Bribery & Corruption Manual, or compliance with applicable law.

Every year in order to build workplace ethical culture NCOC conducts ethics and compliance trainings for its staff and major contractors. In 2020, 588 NCOC staff members and 4 contractors of major contracts received training on ethics and compliance, and investigations in some cases have led to dismissals from the Company.

NCOC supports a good practice of open dialogue with External Advisory Board (EAB) in developing its Sustainability Report. The Board led by Shynar Izteleouva of the Zhayik Aarhus Center in Atyrau, consists of the leading environmental and social NGOs representatives, academicians and Kazakhstan Business Council for Sustainable Development.

Throughout the Report development, NCOC met several times with EAB to discuss the content of the Report. We received recommendations on the best reflection of NCOC performance and the most transparent way of disclosing it to the public.

The joint discussions enabled to highlight the positive outcomes of NCOC activities in environmental and social areas as well as to identify the issues that require more attention and improvement.