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KazMunaiGas EP Oil Output Drops as Labor Strikes Curb Operations

Jan. 9 (Bloomberg) -- KazMunaiGas Exploration Production, the London-listed unit of Kazakhstan’s state energy company, said oil output fell 7 percent last year after labor strikes curtailed operations.

KazMunaiGas EP produced 12.3 million metric tons of crude, 944,000 tons less than in 2010, the Astana-based producer said today in a statement. It attributed most of the decline to its Uzenmunaigas unit in the west of the country, where a work stoppage over pay began in May.

The strike capped gains from oil sales in Kazakhstan, the biggest producer in the former Soviet Union after Russia, as prices rose from October. KazMunaiGas EP, which said the stoppage was illegal, fired about 1,300 workers involved in protests in Mangistau, its biggest production region, in August. The unrest has persisted, with violence erupting on independence day last month, killing 16 and leaving about 100 injured.

The labor conflict resulted in the resignation of KazMunaiGas EP Chief Executive Officer Askar Balzhanov on Dec. 22. President Nursultan Nazarbayev also replaced the head of parent company KazMunaiGaz National Co., Bolat Akchulakov, and fired his own son-in-law Timur Kulibayev, who headed the country’s sovereign-wealth fund.

Nazarbayev, who has been in power since 1989, said during a Dec. 22 visit to Mangistau that the oil workers’ demands were “just” and the government and KazMunaiGas EP hadn’t solved the dispute in a “timely manner.”

KazMunaiGas EP agreed to set up two so-called service companies with more than 2,000 employees in Mangistau. Capital spending is forecast to be 19 percent higher this year, reaching 126.5 billion tenge ($850 million), it said. The company plans to raise crude output 6 percent to 13.06 million tons this year.

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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