Tethys Petroleum Faces Increased Excise Tax in Kazakhstan

Tethys Petroleum Limited, a company focused on oil and gas exploration and production activities in Central Asia, has announced an update on its operations in the Republic of Kazakhstan. On September 11, 2026, the Government of Kazakhstan adopted Resolution No. 816, increasing the coefficient used in the price-linked excise tax calculation applicable to gasoline and diesel fuel from 50% to 95%. This amendment applies retroactively to transactions arising from September 1, 2026.

Under the excise framework established by Government Resolution No. 1049, the excise tax payable on gasoline and diesel is linked to an official weighted-average wholesale reference price. The formula uses statutory price thresholds of KZT 214,584 per tonne for gasoline and KZT 284,350 per tonne for diesel. Prior to the September amendment, the coefficient applied to the excess over the relevant threshold was 50%. This has now been increased to 95%.

The official reference price used in the calculation is based on specified wholesale sales at Kazakhstan's major refineries and may differ from the selling price actually realized by an individual producer. As a result, the revised mechanism may increase the excise burden even where a producer is unable to achieve a corresponding increase in its own realized selling prices. According to Tethys Petroleum's current estimates, the gasoline threshold provides relatively limited headroom over normalized operating cash costs, while the diesel threshold provides greater headroom.

The change comes at a time when access to sell to alternative petroleum-product markets remains restricted. Current measures include restrictions through the second half of 2026 on exports of light distillates, jet fuel, diesel fuel, gasoil, and certain other petroleum products outside the Eurasian Economic Union, as well as restrictions on certain petroleum-product exports by road and rail, subject to specified exceptions.

Industry participants, including PetroMining, have raised concerns regarding the impact of the revised excise mechanism on the economics of domestic petroleum-product sales and the potential implications for future investment and production growth. Tethys Petroleum is currently required to refine and deliver its Kul-Bas crude production into refined petroleum products for sale in the Kazakhstan domestic market. The company expects the increase in the excise coefficient to reduce downstream margins and cash generation (where realized selling prices will not increase sufficiently enough to offset the higher tax burden).

Operations at the Kul-Bas field have recently increased, and are currently running at slightly above 400 tons per day. Two gas turbine units are currently in service, including a rental unit, utilizing approximately 35,000 m3 per day of associated gas. Installation of the company's new gas compressor is substantially complete, with commissioning currently expected in early October. Phase II of the Central Processing Facility (CPF) upgrade is substantially complete, and the company expects the upgraded facility and the CPF tie in of KBD-08 to be commissioned by the end of September. These additions are expected to increase associated gas utilization capacity and increase oil production to more than 500 tons per day following successful commissioning.

Natural gas production from the Kyzyloi and Akkulka fields was approximately 269,000 cubic meters per day as of September 16, 2026. The Akkulka production contract has been extended through December 23, 2036. The company continues to advance preparations for the ARD-01 (Kronos) exploration well. Engineering, permitting, and procurement activities are progressing, with the timing of drilling to be determined based on the company's liquidity position and the successful completion of current production-enhancement initiatives.

Tethys shares the industry's concern regarding the impact of the increased excise burden on the economics of domestic petroleum-product supply and will continue to assess the effect of the revised regime on its Kazakhstan operations. The company has announced that it will be updating its internal operating and cash flow forecasts to reflect the revised excise tax regime and current domestic market conditions.

Additionally, the company has been provided with a notice of intention to nominate a director of the company at the annual general meeting of shareholders to be held on September 29, 2026. FG Limited, a wholly owned subsidiary of Fincraft Group LLP, has given notice of its intention to nominate Askar Ismailov as a director. Fincraft has provided to the company biographical information in respect of Mr. Ismailov, which is generally summarized as follows: Executive with 25 years' experience in various industries with leadership roles, business transformation improvement, change management, and stakeholders' management. Leadership experiences gained in diverse roles in multiple countries and cultures. Current experience - Advisor for Central Asia, Switzerland - representative on behalf of the Global Gas Centre. President Advisor for Fincraft Group, Kazakhstan.