Kazakhstan adopted the law “On Introduction of Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Subsoil Use Issues” dated 29 December 2014 No. 271-V. The law introduces a number of important changes to the law “On the Subsurface and Subsurface Use” dated June 30, 2010. The amendments are aimed at attracting increased investment in the oil & gas and mining sectors by way of liberalising and simplifying the regulatory framework. Briefly, the main points are as follows:
- Simpler and faster procedures for granting subsurface rights. A new mode of granting subsurface use rights where more than one party is interested has been introduced – the auction. In the case of an auction, the authorised body publishes the terms for granting the rights and there is only one criteria – the amount of the signing bonus. There is also a simplified procedure for granting exploration rights by direct negotiations with one party. This requires the parties to agree to use the model contract, which should be signed within 10 days upon acceptance of application of prospective contractor. In such case, the subsurface user will be exempt from local content requirements and there will be no need for a work program.
- Fewer hurdles to the transfer of subsoil assets. The state’s priority right to purchase subsurface use rights and shares/interests in subsurface users being alienated now only applies to “strategic deposits.” Thus, transactions for the sale/transfer of rights in non-strategic deposits or shares/interests in entities having rights to non-strategic deposits will no longer require a waiver of the state’s pre-emptive right. Instead only the consent of the Competent Body will be requires for such transactions and the timing to obtain such consent has been reduced to just 20 working days from the prior 70 working days.
- Specific criteria for termination of contracts. As amended, under the Subsurface Law the Competent Authority may terminate a subsurface use contract if a subsurface user has performed less than 30% of the financial obligations under the contract during a period of two years. In the event of such breach, the Competent Authority may send a notice requiring the breach be remedied. Now a breach must be remedied within: (i) 6 months for physical obligations (e.g. fulfilling a specific obligation such as drilling a well); (ii) 3 months for meeting financial obligations and (iii) 1 month for other obligations. These periods are counted from the day of receipt of the notice of breach. Such periods may be extended upon request of the subsurface user subject to consent from the Competent Authority.
- Other improvements to the subsurface legislation have been introduced. A number of other amendments were made including a relaxed procedure for increase of contract area, a reduction of the number of obligatory reviews prior to entering into a subsurface use contract, an increase of the timeframes for preparation of project documents, etc.