Kazakhstan Subsoil Use Procurement Contracts: Allowed Revisions

Many international companies work in Kazakhstan as contractors to oil and gas and other mineral resources producers. Such producers are referred to in the Kazakhstani legislation as "subsoil users".

Subsoil users are obliged to purchase goods, works and services for their operations through open tenders or one of other methods (such as purchase "from one source" and purchase through requests for proposal - such other methods have limited application). Contractors of subsoil users are also obliged to follow the same procurement rules. Legislation contains detailed regulation of the procurement procedures. The procedure is very formalistic and a potential provider has to strictly follow it, failing which it may be disqualified.

Once a potential provider wins the tender, it is required to enter into a "procurement contract" within ten business days following evaluation of the tender. The procurement contract has to reflect terms and conditions of the tender documents. Normally, a draft of the procurement contract is made available by the tendering organization and potential for after-tender negotiations of the draft contract for the provider is fairly limited - due to time constraints and also due to the fact that the contract is viewed as a part of the tender request.

The tender is already won, manpower, equipment and other resources are already allocated by the provider and it signs the procurement contract almost as it is hoping to amend it as and when necessary - in the process of performance. And here you have an unpleasant surprise: the procurement contract, once entered into, may be amended only in an exhaustive number of cases and if you try to request other revisions, you will fail even if your counterparty commercially agrees to revise the contract, simply because the legislation does not allow such revisions.

What revisions in a subsoil procurement contract are allowed?

First of all, you may amend terms which are not "material". Material terms include subject-matter of the contract; deadlines and...