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Unlocking Subsoil Use Rights in Kazakhstan: Key Information & Guidelines

Understanding the subsoil use regulations in Kazakhstan is crucial for foreign entities seeking to explore or develop natural resources. This article outlines the basic principles and types of subsoil use contracts, providing insights on obtaining rights directly from the primary owner or through secondary market transactions such as M&A. It emphasizes the importance of due diligence, selecting the right jurisdiction, obtaining necessary permits, and complying with tax requirements. Recent news and criteria for granting subsoil use rights are also explained. Stay informed to navigate the subsoil use landscape effectively in Kazakhstan.

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Unlocking Subsoil Use Rights in Kazakhstan: Key Information & Guidelines

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  1. Getting the Subsoil Use Right in Kazakhstan Zhanara Iskhakova GRATA Law Firm, March, 2014

  2. BACIS PRINCIPALS • All subsoil deposits are the property of the Republic of Kazakhstan; • Foreign legal entities and persons have the same rights and obligations as Kazakhstani legal entities and persons (if other are not specified by the law); • Guarantees for subsoil users: • Protection of the rights is guaranteed; • Stability of the contract (except of changes into the laws related with national security, ecology, health protection, taxes, customs duties). • Pre-emptive right of the State.

  3. TYPES OF SUBSOIL USE CONTRACTS • Exploration Contract (term is 6 years with a right to extend for 2 years for oil development on sea); • Development Contract (term is stipulated by the project document with the right to extend); • Contract for combined exploration and development; • Contract for construction and maintenance of underground facilities which are not related with subsoil use; • Contract for state geological subsoil survey. MODEL CONTRACT

  4. How to get the subsoil use rights: Direct from the “primary owner” • Tender procedures; • Without tender (direct negotiations): • Subsoil user announced the commercial discovering under the Exploration; • Subsoil user is planning to construct and maintain of underground facilities which are not related with subsoil use; • Company which is going to execute contract with the Kazakhstan National Company for exploration and/or production;

  5. How to get the subsoil use rights: Direct from the “primary owner” (cont’ed) • Without tender (direct negotiations): • Company which will perform an industrial and innovation project in exploration and/or development; • With the sole qualified participant of tender process if all other participants were announced as unqualified; and • With company planning to develop underground water for internal use of the company’s activities.

  6. On secondary market • M&A transaction: • Direct or indirect purchase of shares of existed subsoil use company; and • Purchase of subsoil use contract Important: • Do due diligence of subsoil use contract and/or subsoil use company; • Choose right jurisdiction and governing law; • Obtain a state waiver and other required permits (for example from Antimonopoly Agency); • Taxes (for example, VAT in case of buying assets). • On stock exchange

  7. News: • Cancellation of moratorium from 2007 for granting the subsoil use rights The main criteria for granting rights are: • to provide raw material for existing businesses; • to support new industrial projects, were to be the introduction of new technologies and energy efficiency; • to increase of local content in goods, works and services, improvement of environment, etc.

  8. News (cont’d): • Amendments into current law • Pre-emptive right will be applied to the blocks having strategic importance (the list of the blocks will be defined by the Government); • Two types of tenders: • Tender as it is now; and • Auction where the winner will be the company proposed the highest amount of signing bonus (English auction). • Developing a New Subsoil Use Code.

  9. THANK YOU! GRATA LAW FIRM Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, Turkmenistan, Azerbaijan, Russia, Mongolia United Kingdom, USA

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