Getting the Subsoil Use Right in
Kazakhstan
Zhanara Iskhakova
GRATA Law Firm,
March, 2014
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.
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
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;
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.
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
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.
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.
THANK YOU!
GRATA LAW FIRM
Kazakhstan, Kyrgyzstan, Uzbekistan,
Tajikistan, Turkmenistan, Azerbaijan,
Russia, Mongolia
United Kingdom, USA
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How to get the subsoil use rights