Draft Law. Dossier On The Draft Code Of The Republic Of Kazakhstan 'On Subsoil And Subsoil Use'

On December 22, 2016, a dossier on the Draft Code of the Republic of Kazakhstan "On Subsoil and Subsoil Use" ("Draft Code") was submitted for consideration to the Mazhilis of the Parliament of the Republic of Kazakhstan.

The Draft Code introduces the following key new amendments:

  1. A special licensing regime for the geological study of subsoil; use of subsoil space; and the prospecting, exploration, and extraction of solid minerals.

  2. Conditions for Mineral Extraction:

    No extraction volume and limitation requirements; Statutory fixed payments for social and economic development of the region, Kazakhstan personnel training, research and development works; Mandatory registration of the title to the land plot located within the extraction area; The duration term for solid mineral production is set for up to 20 consecutive years with unlimited opportunities for extension for no more than 20 years per extension. In addition to the foregoing general terms, exploration of hydrocarbons provides for the following:

    Production term is set for up to 25 years or up to 45 years on large-scale and (or) unique fields; Extension of the exploration term requires the subsoil user to file an application with the competent body absent any unfulfilled contractual obligations; De minimis requirement for annual production expenses is set in the MCI1 3. New Method of Mineral Extraction

    The Draft Code introduces the manual extraction concept, which is a manual method for extracting minerals and solid minerals by permitted means of mechanization and other equipment in the designated areas. The use of chemical reagents for extraction of useful substances is not permitted.

  3. Exploration

    The Draft Code envisages the following general conditions for carrying out exploration works:

    Hydrocarbons and solid minerals are separately regulated by the law; Exploration areas will be formed by blocks; There is an annual increase of lease rates per block; Periodic reporting on contract fulfillment by subsoil users; There is unlimited scope of exploration works; Test samples and mineral materials can be taken outside of Kazakhstan for only analysis and laboratory research purposes; There is no financial obligation for social and economic development of the region, Kazakhstan personnel training, or research and development works unless directly related to the exploration operations. Exploration of solid minerals provides for the following aspects:

    general increasing requirements to...

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