18 March 2021
SUBSOIL USE AND OIL OPERATIONS
There are over 250 oil and gas fields and aproximately 204 contracts for subsoil use for hydrocarbon raw materials, including: 63 contracts for exploration of hydrocarbons, 55 contracts for production of hydrocarbons, 71 combined contracts for exploration and production of hydrocarbons and contracts for exploration and production of raw materials.
Today, more than 2,000 companies are represented in the country's oil and gas industry, employing about 200 thousand employees.
Subsoil use right
The subsoil use right is an opportunity on a reimbursable basis to use subsoil use within the allocated area for business purposes for a certain period.
The subsoil use right is paid (reimbursable) and it can be permanent or temporary, alienable or inalienable.
The subjects of the right to subsurface use can be both Kazakhstani and foreign individuals and legal entities, unless otherwise expressly provided by law. In addition, several parties may be holders of the subsoil use right at the same time.
In the Republic of Kazakhstan, the subsoil use right is granted to carry out the following operations:
- geological study of subsoil;
- mineral exploration;
- use of subsoil space;
- artisanal mining.
The subsoil use right is granted:
- on the basis of a subsoil use license (licensed subsoil use regime); or,
- on the basis of a subsoil use contract (subsoil use contract mode).
Licensed Subsoil Use Regime
A subsoil use license is a document issued by an authorized government body and grants its owner the right to use a subsoil plot for the purpose of conducting subsoil use operations within the specified subsoil plot.
The following subsoil use licenses are issued:
- license for geological exploration of subsoil;
- a license for the exploration of solid minerals;
- a license for the extraction of solid minerals;
- a license for the extraction of common minerals;
- license for the use of subsoil space;
- mining license.
In the following cases the license is subject to renewal:
- change of information about the subsoil user;
- for individuals: change of surname, first name, patronymic (if it is indicated in the identity document) and (or) citizenship;
- for legal entities: changes of the name of company or location;
- transfer of the subsoil use right and (or) a share in the subsoil use right;
- extension of the license term;
- changes in the boundaries of the territory of the subsoil plot.
Preemptive right of the state in the field of subsoil use
The Republic of Kazakhstan has a preemptive right over other persons to purchase hydrocarbons at prices that do not exceed the prices applied by the subsoil user, when concluding transactions that have developed as of the date of the transaction, net of transportation costs and cost of selling hydrocarbons. In the absence of information on the prices of hydrocarbons used by the subsoil user in the course of transactions, prices shall be applied that do not exceed the prices prevailing in the world markets as of the date of the transaction for the purchase of hydrocarbons by the government, minus transportation costs and costs of selling hydrocarbons.
The maximum volume of purchased hydrocarbons and the type of payment are determined by the subsoil use contract. The procedure for exercising the preemptive right of the Republic of Kazakhstan to purchase hydrocarbons is determined by the Government of the Republic of Kazakhstan.
Priority right of the government in the field of subsoil use
Newly concluded and previously concluded subsoil use contracts, the government has a priority right over any persons and organizations, including persons and organizations that have preemptive rights on the basis of the laws of the Republic of Kazakhstan or an agreement, to acquire an alienated subsoil use right (share in the subsoil use right) for a strategic site subsoil. As well as issued into circulation on the organized securities market of shares and other securities, which are objects related to the right to subsoil use, for a strategic subsoil plot.
Priority of Kazakhstani goods and Kazakhstani content
A prerequisite for the exercise of the right of subsurface use is the acquisition by the subsurface user and its contractors of works and services from Kazakhstani producers, provided that they comply with the requirements of the project document and the legislation of the Republic of Kazakhstan in the field of technical regulation