Comment to Paragraph 2. Contractual regime of subsurface use to the Code of the Republic of Kazakhstan “On Subsurface and Subsurface Use”
__________________________________________________________________________________________
(Nogaibai Z.M., Zhursunov R.M.)
1. Contractual subsurface use regime – means that the right to use a subsurface area is granted on the basis of a subsurface use contract.
The exception is Article 108 of the Subsoil Code (trust management, which gives rise to the right to carry out subsurface use operations without entering into a contract).
The Code provides for a contractual regime for the following types of subsurface use/mineral resource operations: exploration and production, hydrocarbon production, and uranium mining.
2. With respect to other types of subsurface use operations provided for in Article 22 of the Subsoil Code (geological exploration of the subsoil, use of the subsoil space, prospecting), as well as with respect to exploration for mineral resources and extraction of mineral resources (with the exception of uranium mining), a licensed subsurface use regime is provided.
3. The reform carried out in relation to the above-mentioned types of subsurface use operations and types of minerals, which resulted in the transition to a licensed regime, was aimed at speeding up and simplifying investors' access to obtaining a subsurface use permit (in the form of a license).
4. Previously, the following were used in the Kazakh legislation: contractual regime, license-contractual regime of subsurface use. Starting from the Law on Mineral Resources of 1996 (as amended on 08/11/1999), the contractual regime was established.
5. The general directions of the reform in the preparation of the Subsoil Code, which affected the contractual regime of subsurface use of hydrocarbons, were aimed at simplifying access to contracts, eliminating administrative barriers, and raising standards for the protection of investors (subsurface users). In particular, compared to the previous regulation, the following conceptual innovations have been implemented:
1) only the model contract has been retained (according to the 2010 Law on Subsoil, model contracts were provided for, and model contracts had a limited scope of application), see the commentary to art. 36 of the Subsoil Code;
2) as a general rule, all additional examinations of the draft contract have been abolished before it is signed by the competent authority (according to the 2010 Law on Subsoil, mandatory ones were provided for model contracts
expertise, which caused complaints from investors, as it delayed the process of signing contracts);
3) the need to prepare an appropriate project document and its expertise has been eliminated as a condition for further drafting a subsurface use contract (an integral part of which is the work program, previously compiled on the basis of these project documents);
4) as a general rule, with regard to the exploration of UVS (with one exception, clause 38 of Article 278 of the Subsoil Code) provides only for a combined form of contracts (i.e. exploration and production contracts, without separate exploration contracts) to protect the interests of investors who have invested, as a rule, significant funds at the stage of exploration and those interested in an unconditional transition to mining if there is a detection of UVS.
Constitution Law Code Standard Decree Order Decision Resolution Lawyer Almaty Lawyer Legal service Legal advice Civil Criminal Administrative cases Disputes Defense Arbitration Law Company Kazakhstan Law Firm Court Cases
Kazakh Association of Organizations of the Oil and Gas and Energy Complex KAZENERGY
Nur Sultan 2022
The Kazenergy Association expresses its sincere gratitude for the support in preparing the commentary to the following companies: North Caspian Operating Company NV, NC KazMunayGas JSC, Mangistaumunaygas JSC, Karachaganak Petroleum Operating BV, White & Case Kazakhstan LLP, Haller Lomax LLP)", "Erlicon CG" LLP, "Signum Law Firm" LLP. © Kazenergy Association, 2022 © team of authors, 2022 © authors, 2022
Dear readers!
We offer you a scientific and practical commentary prepared by a group of Russian specialists with extensive practical experience in legislation on subsoil and subsoil use and who participated in the preparation of the Code on Subsoil and Subsoil Use.
Subsurface use is a very complex and specific area of public relations, the regulation of which has its own historical background and takes into account the technological specifics of the process of subsurface development, as well as environmental, commercial, legal and other features of exploration and development of deposits.
Kazakhstan's legislation on subsoil and subsurface use has passed through several stages in its development, and has always been based on a balance of interests between the state and subsurface users, transparency, striving for the maximum possible degree of protection of the rights and legitimate interests of investors, ensuring sustainable social, economic and environmental development of the country.
The Code "On Subsoil and Subsoil Use", adopted at the end of 2017, was developed taking into account many years of accumulated experience and law enforcement practice, as well as the results of extensive discussions with experts working in the industry.
It reflects specific, important measures on the part of the state to increase the investment attractiveness of exploration and further reduce administrative barriers.
Nevertheless, practice and legislation do not stand still, constantly evolving, taking into account new challenges facing both the subsurface use industry and the economy as a whole.
In this regard, this commentary is intended to serve as an aid for a wide range of interested persons – specialists working in the industry, in
understanding the meaning of the norms, their historical context, the interrelationship and mutual influence of the various provisions of the Code.
We also hope that studying the commentary will serve as an incentive for new generations of young domestic specialists to work scientifically and practically in this important industry, for the benefit of the development of our country, current and future generations of Kazakhstanis.
Sincerely, U. Karabalin, Deputy Chairman of the Kazenergy Association, Hero of Labor of Kazakhstan
