This content is from: Local Insights

Kazakhstan

In August 2003 the Kazakh government approved a plan for the development of the Kazakh sector of the Caspian Sea for the period from 2003 until 2015.

The development plan is part of a state program adopted by the Kazakh government in May 2003 for the development of hydrocarbon resources in the Kazakh sector of the Caspian Sea. The program is broken down into three stages, the first of which, from 2003 to 2005, is aimed at evaluating the potential of hydrocarbons in the region and generating a program for their development.

A central goal of the development plan is the improvement of the existing legislative framework governing subsoil use. In particular, it provides for the introduction of the law On Production Sharing Agreements for Subsurface Operations in the Caspian Sea, which would be Kazakhstan's first law on production sharing agreements as well as the first law governing development of the Caspian region. While the official text of the draft law has not yet been made publicly available, unofficial preliminary drafts have raised a number of concerns. The proposed provisions provide for mandatory operatorship by the state-owned KazMunaiGas in all oil and gas projects and a minimum 50% state interest in such projects. In addition, subcontractors must be Kazakh entities and all goods purchased must be produced in Kazakhstan, raising significant quality concerns. A new law setting stricter ecological requirements for enterprises engaged in activities in the Caspian shelf is also expected to be adopted.

The development plan also calls for improvement of the tax regime as well as for new certification and standardization requirements in the oil and gas sector. The Kazakh Parliament is at present in the course of debating proposed tax amendments.

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