Dear readers,

At this moment, a draft Law of the Republic of Kazakhstan “On Amendments and Additions to the Code of the Republic of Kazakhstan “On Subsoil and Subsoil Use” on the issues of improving the sphere of subsoil use is being considered in the Mazhilis of the Parliament of the Republic of Kazakhstan.

The draft Law provides for various amendments to the Subsoil Use Code, including amendments that provide for obtaining permission from the competent authority to encumber (pledge) the right of subsoil use (share in the right of subsoil use) for hydrocarbons, as well as encumbrance (pledge) of shares (participation interests in the charter capital) of organizations directly or indirectly controlling an entity that has the right of subsoil use for hydrocarbons, will be carried out in accordance with a separate procedure. It should be noted that currently the procedure for obtaining a permit for encumbrance (pledge) is carried out according to the procedure for issuing a permit for the transfer of the right of subsoil use and (or) objects related to the right of subsoil use.

In addition, the draft Law provides for simplification of the process of liquidation of technologically uncomplicated wells for subsoil users due to the need to liquidate these wells according to the liquidation plan approved by the subsoil users themselves and not the liquidation project as established currently.

Further, the draft Law eliminates the need for annual author’s supervision for the purposes of monitoring the execution by the subsoil users of the field development project.

The draft Law additionally provides for an increase in the size of the threshold from 10% to 30% for the purpose of determining the materiality of discrepancies between the actual and design indicators of the development of small fields and, as a consequence, for the purpose of determining the need to amend project documents.

In conclusion, we would like to note that the draft Law provides for the approval of the procedure for amending subsoil use contracts for hydrocarbons and uranium concluded before the entry into force of the Subsoil Use Code. The procedure establishes specific steps that subsoil users have take to amend such subsoil use contracts and is aimed at reducing the time for consideration of the draft amendments by the competent authority.

Based on these amendments, subsoil use contracts for hydrocarbons, uranium, concluded before the entry into force of the Code "On Subsoil and Subsoil Use", by agreement of the parties, as well as in cases provided for by the laws of the Republic of Kazakhstan or contracts, may be amended.

Please note that this draft Law has not yet been adopted and is under consideration in the Parliament of the Republic of Kazakhstan, which implies its further amendment.

KPMG Caucasus and Central Asia specialists monitor the process of consideration and approval of this draft Law and are always ready to provide the necessary advice and services on issues related to changes in the legislation of the Republic of Kazakhstan on subsoil and subsoil use, to help make correct and competent decisions and actions taking into account the individual characteristics of the company and its activities, risk analysis and their degree and other aspects.