Natural Resources and Energy
As you know, on June 29, 2018, the new Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use” came into force, instead of the previous law. It includes the main provisions in the legislation of Kazakhstan on subsoil use. The exception is the norm governing the particular case of inclusion of information in the state management program of a subsoil fund at the request of a subsoil user (part 3, clause 4 of article 278 of the Code), which entered into force on January 8, 2018. Three regulatory standards will be enforced in 2020 and 2021.
Currently, there are two subsoil use regimes: licensed mode and contract mode.
Licensed mode. Licenses are issued for the following types of subsoil use operations:
- geological study of the subsoil;
- exploration of solid minerals;
- mining of solid minerals;
- mining of common minerals;
- use of subsurface space;
Contract mode. The subsoil use contract is for exploration and production of hydrocarbons, as well as for uranium mining.
Individuals and legal entities (not national companies) are granted subsoil use rights under the contract based on the results of the auction. Subsoil use rights are granted to national companies on the basis of direct negotiations.
One of the main conditions for granting the right to use subsoil is the presence of a subsoil plot in the State Subsoil Fund Management Program.
If a subsoil plot has already been included in the program, the applicant must apply to the competent authority with a request to initiate an auction for the hydrocarbon raw material site, and for the site with solid and common minerals, apply to the competent authority with a request for the issuance of an exploration license and (or ) production.
The competent authorities are:
– Ministry of Energy,
– Ministry of Industry and Infrastructure Development,
– akimats of regions.
Investors are given the opportunity to get acquainted with the general part of the geological report free of charge to determine the need for a copy of the full geological report.
The national operator for the collection, storage, processing and provision of geological information is the Republican Center for Geological Information Kazgeoinform LLP, which, based on the application of the interested party, provides access to open geological information.
However, it is important for new investors to remember the following obligations of a subsoil user in relation to:
- local content in work, services (at least 50% of the total volume of acquired work during the calendar year) and personnel;
- financing the training of Kazakhstani personnel during the production period;
- expenses for research, scientific and technical and development work in Kazakhstan during the mining period;
- expenses for the socio-economic development of the region and the development of its infrastructure during the mining period.
At the same time, administrative barriers from the competent and authorized bodies are possible. To improve the interaction between market participants, it is advisable to contact specialists with extensive experience in the field of subsoil use.
Our law firm offers the following services in the sphere of Natural Resources and Energy:
- advising clients on all issues related to petrochemical, energy and mining Sector;
- giving advises in respect to petrochemical, energy and mining transactions and disputes;
- assistance with the state registration of the immovable property related to petrochemical, energy and mining assets and production facilities;
- providing of LDD of local companies engaged in petrochemical, energy and mining business and issuing of a relevant legal opinions;
- consulting on various legal issues related to international merger and acquisition of the legal entities, involved in petrochemical, energy and mining activity in Kazakhstan.