It is now almost two years since Kazakhstan’s new Law on Gas and Gas Supply (the “Gas Law”) came into force on 29 January 2012. The most significant piece of legislation since the 2010 Subsurface Law, the Gas Law overhauled the legal regime of Kazakhstan's gas sector.
The Gas Law established a Unified System for Supply of Commercial Gas (“USSCG”), which includes the majority of Kazakhstan's gas infrastructure, and created a National Operator to supervise the USSCG and exercise the State's priority right to purchase commercial gas and gas infrastructure. The Gas Law also established a new public private partnership, and expanded the powers of the Ministry of Oil and Gas (the “MOG”). These new legislative changes were meant to strengthen the Government's grasp over the sale and transport of Kazakhstan's gas.
Under the Gas Law, however, much of the gas infrastructure is now placed under the supervision and control of the USSCG, regardless of ownership. The USSCG includes all main gas pipelines, gas distribution systems, gas storage facilities, gas compressor stations, industrial consumers of natural gas, and other technological facilities dedicated to production, transportation, storage, sale and consumption of commercial gas. Only field pipelines, household and domestic consumers and some facilities dedicated to LNG and LPG are not included in the USSCG.
A legal entity appointed by the Government “to ensure in the area of gas supply the objective of meeting Kazakhstan's internal requirements for commercial gas”, the National Operator (Kaztransgas JSC) controls the USSCG as its central dispatcher and through its exercise of pre-emptive rights to purchase commercial gas and gas infrastructure.
The National Operator has a pre-emptive right of purchase over: (i) USSCG facilities; (ii) shares in a right of common ownership of USSCG; and (iii) shares (participating interest) in the owners of the USSCG facilities.
Under the 2010 Subsurface Law, all associated gas is owned by the State unless otherwise stated in the subsurface use contract. The Gas Law introduces the concept of a “Public Private Partnership in the Area of Gas Supply” (“PPP”), an agreement between the State and a private investor under which the investor processes the associated gas owned by the State. Under the Gas Law, such gas can now only be transferred either to a PPP or to the National Operator by a decision of the MOG.