The following discussion is intended to assist you in understanding our results of operations and our present financial condition. Our Consolidated Financial Statements and the accompanying notes included in this Form 10-Q contain additional information that should be referred to when reviewing this material and this document should be read in conjunction with the Form 10-K of the Company for the year ended March 31, 2008.

Statements in this discussion may be forward-looking. These forward-looking statements involve risks and uncertainties, including those discussed below, which could cause actual results to differ from those expressed.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Rule 175 promulgated thereunder, that involve inherent risks and uncertainties. Words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "seek," "could," "should," "predict," "continue," "future," "may" and variations of such words and similar expressions are intended to identify such forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions, estimates and other factors that could cause actual results, performance or events to differ materially from any results, performance or events expressed or implied by such forward-looking statements. All forward-looking statements are qualified in their entirety by reference to the factors discussed in this report and identified from time to time in our filings with the SEC including, among others, the following risk factors:

• substantial or extended decline in oil prices;
• inaccurate reserve estimates;
• twenty-two percent of our proven properties are undeveloped;
• inability to enter a new contract with the Republic of Kazakhstan;
• drilled prospects may not yield oil or natural gas in sufficient quantities;
• substantial losses or liability claims as a result of operations;
• complex laws that could affect the cost of doing business;
• substantial liabilities to comply with environmental laws and regulations;
• the need to replenish older depleting oil and natural reserves with new oil and natural gas reserves;
• inadequate infrastructure in the region where our properties are located;
• unavailability or high cost of drilling rigs, equipment, supplies, personnel and oil field services;
• unavailability or high price of transportation systems;
• competition in the oil and gas industry; and
• adverse government actions, political risks, expropriation of assets and risks of civil war, primarily in the Republic of Kazakhstan.

This list of factors that may affect future results, performance, events and the accuracy of any forward-looking statement. This list is illustrative but not exhaustive. In addition, new risks and uncertainties may arise from time to time. Accordingly, readers should not place undue reliance on any forward-looking statement.

Any forward-looking statement speaks only as of the date on which it is made and is expressly qualified by these cautionary statements. Except as may be required by law, we undertake no obligation to publicly update or revise any forward-looking statement for any reason or to update the reasons actual results could differ materially from those anticipated in such forward-looking statements, even if new information becomes available in the future.

Overview

BMB Munai is an independent oil and natural gas company engaged in the exploration, development, acquisition and production of crude oil and natural gas properties in the Republic of Kazakhstan (sometimes also referred to herein as the "ROK" or "Kazakhstan"). We hold a contract that allows us to explore and develop approximately 460 square kilometers in western Kazakhstan. Our contract grants us the right to explore and develop the ADE Block and an area adjacent to the ADE Block referred to herein as "the Extended Territory", which includes the Kariman, Borly and Yessen oil and gas fields. The ADE Block and Extended Territory are collectively referred to herein as "our properties."

Exploration Stage Activities

Under the statutory scheme in Kazakhstan prospective, oil fields are developed in two stages. The first stage is exploration stage. During this stage the primary focus is on the search for commercial discoveries, i.e., discoveries of sufficient quantities of oil and gas to make it commercially feasible to pursue execution of, or transition to, a commercial production contract with the government.

As discussed above, we are currently engaged in exploration of our properties and are working to satisfy the requirements to move to commercial production. Based on discussions with the MEMR, the MEMR expects a contract holder to engage in three primary activities during exploration stage before it will be granted commercial production rights. These activities fall within three primary areas:

• fulfillment of minimum work program commitments;
• establishment of the existence of commercially producible reserves; and
• preparation, submission and receipt of approval of a development plan prepared by a third-party petroleum institute in Kazakhstan for the exploitation of the established commercial reserves.

Minimum Work Program Requirements

In order to be assured that adequate exploration activities are undertaken during exploration stage, the MEMR establishes an annual mandatory minimum work program to be accomplished in each year of the exploration contract. Under the minimum work program the contractor is required to invest a minimum dollar amount in exploration activities on the contract territory, which may include geophysical studies, construction of field infrastructure or drilling activities. During the exploration stage, the contractor is also required to drill sufficient wells in each field to establish the existence of commercially producible reserves in any field for which it seeks a commercial production license. Failure to complete the minimum work program requirements for any particular field during the term of the exploration contract could preclude the contractor from receiving a longer-term production contract for such field, regardless the success of the contractor in proving commercial reserves during the partial fulfillment of the minimum work program.

The contract we hold follows the above format. The contract sets the minimum dollar amount we must expend during each year of our work program. Under our exploration license our work program year ends on July 9 each year until July 9, 2009. Thereafter our work program year will end on January 9 of each year. Therefore our work program year does not coincide with our fiscal fear. As a result these timing differences, the amounts reflected in this table as "Actually Made" may differ from amounts disclosed elsewhere in our Management's Discussion and Analysis or Consolidated Financial Statements, which present figures based on our fiscal year rather than our work program year.

         Amount of Expenditure        Mandated by Contract Actually Made

         Prior to July 2007                    $40,200,000  $104,750,000

         July 2007 to July 2008                 $8,480,000 $115,040,000*

         July 2008 to July 2009                    $70,000           $ -

         July 2009 to January 2010              $6,790,000           $ -

         January 2010 to January 2011          $12,690,000           $ -

         January 2011 to January 2012          $18,690,000           $ -

         January 2012 to January 2013           $6,270,000           $ -

         Total                                 $93,190,000  $219,790,000

* Investment as of June 30, 2008.

As reflected in the above table, in connection with the extension of the term of our exploration contract, we agreed to expend not less than $44.5 million dollars in additional work program activities through January 9, 2013.

Under the rules of the MEMR there is an option for expenditures above the minimum requirements in one period to be carried over to meet minimum obligations in future periods. As the above chart shows we have significantly exceeded the minimum expenditure requirement in each period of the contract and have more than doubled the total minimum capital expenditure requirement during the exploration stage.

In addition to mandatory minimum capital expenditures in each year, exploration contracts typically require the contract holder to drill a certain number of wells in each structure for which it plans to seek commercial production rights.

In Kazakhstan, typically, one exploratory well and two appraisal wells are sufficient to support a claim of commercially producible reserves in a particular field, although in some cases, commercial reserves have been demonstrated with fewer wells. The total number of wells the MEMR requires during exploration stage is generally determined by the number of fields or structures identified by the seismic studies done on a territory. The 3D seismic studies of our contract territory, as extended, have identified six potential fields or structures. Therefore, if we wish to apply for commercial production rights on all six fields we anticipate the need to drill at least three wells in each field, or at least 18 wells during exploration stage, as reflected in the top half of the following chart:

Structures         Aksaz Dolinnoe Emir Kariman Borly Yessen
Exploratory Wells    1      1      1      1      1     1
Appraisal Wells      2      2      2      2      2     2

Existing Wells       3      5      3      9      0     0
Wells in
Progress             2      1      0      1      0     0
Remaining Wells to
Drill by
2013                 0      0      0      0      3     3

The bottom half of the above chart shows our current drilling progress. As the chart shows, we have completed drilling of twenty wells in four fields and are currently drilling four additional wells.

Pursuant to the terms of the extension of our exploration contract, we are required to drill not less than seven new wells, in addition to those that are currently in progress, by January 9, 2013, to determine the existence of commercially producible reserves within the various structures in our license territory.

Establishing the Existence of Commercially Producible Reserves

Establishing the existence of commercially producible reserves is accomplished through drilling wells and engaging in test production of those wells during the exploration stage. We have established the presence of oil and/or natural gas in each of the Aksaz, Dolinnoe, Emir and Kariman fields and are engaged in testing to gather the necessary data and to determine whether commercially producible reserves exist in each of those fields. We have not drilled wells in the Borly and Yessen fields. The failure to establish commercially producible reserves within any particular field would not preclude us from applying for commercial production rights to other fields within our contract territory where we establish commercially producible reserves.

Preparation, Submission and Approval of a Development Plan

Our goal during exploration stage is to study the geology and geophysical characteristics of each field and individual well, with a view to qualifying for a longer-term production contract. Once we complete drilling of a well, our emphasis focuses on an extended period of testing the well's production characteristics and capacities to determine the best method for producing oil from the well and to gain insight into the further development of the entire field. During this stage of exploration, oil production is subject to wide fluctuations caused by varying pressures commonly experienced by new wells and by significant periods of well closure to accommodate various mandatory testing. The data gathered during these testing procedures will be submitted by us to a third-party independent petroleum institute in Kazakhstan and will be the basis for preparing a development plan. The development plan, which is submitted to the MEMR for review and approval, sets forth the parameters and guidelines for the future commercial production and ongoing development of each field.

Taxes, Royalties and Duties

During exploration stage, we have the right to sell the oil and natural gas we recover during test production. As noted above, under our old exploration contract, we had been granted tax stability and were not required to pay rent export tax. We were, however, required to pay a royalty of 2%. In connection with the extension of the term of our exploration contract and the adoption of a new tax code in the Republic of Kazakhstan, we will be require to renegotiate the taxes and royalties we pay. We expect we will lose our tax stability and will be required to pay rent export tax on all sales outside of the Kazakhstan domestic market. Until the new tax code is adopted, it is difficult to predict the rate at which we will be taxed and what royalty we will be required to pay. Under the current tax regime, however, rent export tax rate is tied to the Brent oil price. Rent export tax also increases on a sliding scale. At the present time the rate is 33% of net revenues. Royalty rates are established by the taxing authorities of the ROK and are based on production rates. The rate increases on a sliding scale. Current royalty rates range from 2% to 6%.

As noted above, in June 2008 we became subject to a crude oil export duty on all oil sold outside the Kazakhstan domestic market. The formula for determining the amount of the crude oil export duty is based on a sliding scale that is tied to several factors, including the world market price for oil. The amount of export duty can change with fluctuations in world oil prices. In June 2008 we paid export duty of $1,352,917.

We anticipate the imposition of the crude oil duty and the rent export tax will have a significant impact on our results of operations in the future.

Drilling Operations

We completed drilling operations on three wells: Kariman 7, 8 and 10 during the quarter ended June 30, 2008 and have commenced testing operations and test production.

During the quarter ended June 30, 2008, we have been engaged in drilling operations on 2 wells: Aksaz 2 and Dolinnoe 7. We also spudded two new wells, Aksaz 6 and Kariman 11, during the quarter ended June 30, 2008. We plan to complete drilling of these wells and commence testing operations during the second and third fiscal quarters 2009.

We completed drilling of the Kariman 6 well in February 2008 and Dolinnoe 5 well in March 2008 and have commenced extensive testing operations coupled with geophysical and geological studies on the wells.

Well Performance and Production



The following table sets forth the number of oil and natural gas wells in which
we owned an interest as of June 30, 2008.



             Company-operated      Non-operated       Total
              Gross       Net      Gross     Net   Gross   Net

Oil                20        20         -      -      20    20
Natural Gas         -         -         -      -       -     -
Total              20        20         -      -      20    20

As noted in the chart above, as of the fiscal quarter ended June 30, 2008, we had twenty wells in workover, testing or test production

According to the laws of the republic of Kazakhstan, we are required to test every prospective target on our properties separately, this includes the completion of well surveys on different modes with various choke sizes on each horizon.

In the course of well testing, when the transfer from target to target occurs, the well must be shut in; oil production ceases for the period of mobilization/demobilization of the workover rig, pull out of the hole, run in the hole, perforation, packer installation time, etc. This has the effect of artificially diminishing production rates averaged over a set period of time.

Following is a brief description of the current production status of each of our 20 wells.

              Current Single Interval
   Well           Production Rate       Diameter Choke Size

Aksaz -1                  63 -132 bpd                  4 mm
Aksaz -3                      352 bpd                  4 mm
Aksaz -4                       63 bpd                  4 mm
Dolinnoe -1               145- 214bpd                  8 mm
Dolinnoe -2                    57 bpd                  2 mm
Dolinnoe -3               126-302 bpd                  5 mm
Dolinnoe -5                    -0-(1)                     -
Dolinnoe -6                57-101 bpd                 14 mm
Emir -1                        -0-(2)                     -
Emir - 2                       -0-(3)                     -
Emir -6                      6-12 bpd                     -
Kariman -1              44-120 bpd(4)                     -
Kariman -2                717-849 bpd                  5 mm
Kariman -3                 6 - 57 bpd                     -
Kariman -4                352-380 bpd                 14 mm
Kariman -5                     38 bpd                 12 mm
Kariman -6                642-818 bpd                  5 mm
Kariman -7                535-660 bpd                  8 mm
Kariman -8                    475 bpd                 10 mm
Kariman -10               377-503 bpd                  7 mm

(1) A first target was tested on 27th of March, 2008. A first week's production was 110 bpd and in April it dropped to 63 bpd. For a couple of days the well was shut-in for a pressure build-up. After that the production was 26 bpd. We carried out an acid injection and hydro-impulsive cleaning and aeration, however, it hasn't showed any result. We plan to make a bottom-hole zone cleaning to stimulate oil flow in August, 2008.

(2) This well currently is not producing because it is undergoing workover operations. Single interval production from this well prior to workover was 5 to 6 bpd.

(3) This well was completed during the quarter ended March 31, 2008. We have done testing activities and currently it is undergoing workover operations for a bottom-hole zone cleaning to stimulate oil flow.

(4) We carried out a hydraulic fracturing (breakdown) on this well during the quarter ended June 30, 2008. Production from this well prior to the breakdown was 3-6bpd. We plan to make a bottom-hole zone cleaning to stimulate oil flow in July 2008.

Pursuing Profitable Acquisitions

While our emphasis in fiscal 2009 is anticipated to focus on the further development of our existing properties, we continue to look for properties with both existing cash flow from production and future development potential. We intend to pursue acquisitions of properties that we believe will provide attractive rates of return on capital invested. We work with consultants and our staff of experienced geological/geophysical engineers and financial managers to identify and evaluate acquisition opportunities.

Three months ended June 30, 2008, compared to the three months ended June 30, 2007.

Revenue and Production



The following table summarizes production volumes, average sales prices and
operating revenue for our oil and natural gas operations for the three months
ended June 30, 2008 and the three months ended June 30, 2007.



                                                                   Three months ended
                                                                     June 30, 2008
                                                               to the three months ended
                                                                     June 30, 2007
                               For the three    For the three       $               %
                                  months           months        Increase        Increase
                                   ended            ended
                               June 30, 2008    June 30, 2007   (Decrease)      (Decrease)

Production volumes:
Natural gas (Mcf)                          -                -              -             -
Natural gas liquids (Bbls)                 -                -              -             -
Oil and condensate (Bbls)            328,369          199,172        129,197           65%
Barrels of Oil equivalent
(BOE)                                328,369          199,172        129,197           65%

Sales volumes:
Natural gas (Mcf)                          -                -              -             -
Natural gas liquids (Bbls)                 -                -              -             -
Oil and condensate (Bbls)            327,757          197,573        130,184           66%
Barrels of Oil equivalent
(BOE)                                327,757          197,573        130,184           66%

Average Sales Price (1)
Natural gas ($ per Mcf)                    -                -              -             -
Natural gas liquids ($ per
Bbl)                                       -                -              -             -
Oil and condensate ($ per
Bbl)                                $ 106.26          $ 58.62        $ 47.64           81%
Barrels of Oil equivalent
($ per BOE)                         $ 106.26          $ 58.62        $ 47.64           81%

Operating Revenue:
Natural gas                                -                -              -             -
Natural gas liquids                        -                -              -             -
Oil and condensate              $ 34,827,224      $11,580,958   $ 23,246,266          201%
Gain on hedging and
derivatives (2)                            -                -              -             -

(1) At times, we may produce more barrels than we sell in a given period. The average sales price is calculated based on the average sales price per barrel sold, not per barrel produced.

(2) We did not engage in hedging transactions, including derivatives during the three months ended June 30, 2008, or the three months ended June 30, 2007.

During the three months ended June 30, 2008 we realized revenue from oil sales of $34,827,224 compared to $11,580,958 during the three months ended June 30, 2007. One contributing factor to the 201% increase in revenue was a 66% increase in sales volume. Another factor contributing to the increase in revenues was an 81% increase in the price per barrel we received for oil sales during the three months ended June 30, 2008 compared to the three months ended June 30, 2007. During the three months ended June 30, 2008 and 2007 we exported 93% and 100% of our oil, respectively to the world markets and realized the world market price for those sales. Revenue from oil sold to the world markets made up 99% and 100% of total revenue, respectively, during the three months ended June 30, 2008 and 2007. We anticipate production to remain fairly constant until we complete the new wells that are currently being drilled and begin test production at those wells.

As discussed above, our revenue is sensitive to changes in prices received for our oil. Oil prices fluctuate in response to many factors that are outside our control. Imbalances in the supply and demand for oil can have a dramatic effect on the price we receive for our production. We have been exporting most of our oil to the world markets. In connection with our contract extension, however, the MEMR may now require us to sell up to 20% of our oil production to the domestic market in Kazakhstan. If the MEMR enforces this provision of the addendum to our exploration contract, if we were denied an export quota or if our export quota were significantly reduced and we are required to sell a significant portion of our production to the domestic market in Kazakhstan, we anticipate the price we would receive per barrel of oil would be much lower than the price we currently realize which would lead to a significant decrease in revenues. Political instability, the economy, weather and other factors outside our control could also impact supply, demand and market prices.

Costs and Operating Expenses

The following table presents details of our expenses for the three months ended June 30, 2008 and 2007:

--------------------------------------------------------------------------------
                                  For the three months      For the three months
                                  ended June 30, 2008       ended June 30, 2007
Expenses:
Export duty                                $  1,352,917                $        -
Oil and gas operating(1)                      2,340,843                 1,039,889
General and administrative                    4,337,641                 3,306,325
Depletion(2)                                  3,333,289                 1,250,637
Accretion expenses                               95,958                    28,668
Amortization and depreciation                    63,659                    55,848
Consulting expenses                          11,727,500                         -
Total                                      $ 23,251,807               $ 5,681,367
Expenses ($ per BOE):
Oil and gas operating(1)                           7.14                      5.26
Depletion (2)                                     10.17                      6.33

(1) Includes transportation cost, production cost and ad valorem taxes.

(2) Represents depletion of oil and gas properties only.

Export Duty. On April 18, 2008 the government of the Republic of Kazakhstan introduced an export duty on several products (including crude oil). We became be subject to the duty in June 2008. The export duty for June 2008 amounted to $1,352,917. The formula for determining the amount of the crude oil export duty is based on a sliding scale that is tied to several factors, including the world market price for oil. The amount of the export duty can change with fluctuations in world oil prices. We anticipate that the accrual of export duty for the future fiscal quarters will lead to a significant increase in operating expenses.

Oil and Gas Operating Expenses. During the three months ended June 30, 2008 we incurred $2,340,843 in oil and gas operating expenses compared to $1,039,889 . . .