Kazakhstan Adopts New Subsurface Use Code: A Summary Of Key Novelties

February 2018 - On 27 December 2017, the long anticipated Code "On Subsurface and Subsurface Use" (No. 125-VI ZRK) was adopted (the "Code"). The text of the Code was published on 28 December 2017 and, with certain exceptions, it will come into force six months after its publication, i.e. on 29 June 2018. The Code will replace the currently effective Law of the Republic of Kazakhstan "On Subsurface and Subsurface Use" (No. 291-IV, dated 24 June 2010, as amended) (the "Subsurface Law"), subject to transitional provisions of the Code pursuant to which certain provisions of the Subsurface Law will survive.

The Code is a comprehensive piece of legislation, which contains many new provisions and requirements. As such, it will impact not only those who are only planning to invest in the natural resources sector in Kazakhstan, but also those subsurface users who are already acting on the basis of existing contracts/licenses since a number of provisions of the Code will have retroactive effect.

Unlike the current Subsurface Law which regulates all subsurface use operations under one legal framework, the Code stipulates separate regulatory regimes for different types of minerals, i.e. it establishes separate norms for subsurface use operations related to:

extraction of hydrocarbons, hard minerals, uranium, and commonly occurring minerals. Under the Code, certain rights, particularly those for exploration and production for hard minerals will now require a license but not a subsurface use contract. Exploration and production of hydrocarbons as well as production of uranium will continue to be regulated through execution of contracts with the competent authority.

The Code still requires consent of the competent authority and, if applicable, the waiver of the State's priority right for the transfer of subsurface use rights. However, it introduces a number of changes and clarifications in this regard. Among others, changes...