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Kazakhstan rules to boost private investment in oil and gas exploration

Kazakhstan’s President Kassym-Jomart Tokayev has signed legislation designed to simplify rules and regulations governing oil and gas licensing.

The new rules, published on a government web site at the end of December, are geared to attracting more local investors in a domestic industry that has seen few significant discoveries in recent years.

The amendments, approved by the Kazakh parliament last month and set to go into effect in March, apply to oil and gas blocks acquired in auctions or in direct lease negotiations with government authorities.

The changes will not apply to production sharing agreements with western and Chinese energy majors under which the country’s largest oil and gas producing fields are operated, including Tengiz, Kashagan and Karachaganak.

Foreign operators of such projects have been forced to deal with Astana’s increasing tax demands and fines for alleged lack of environmental compliance.

Under the amended rules, authorities will no longer have the right to impose fines on Kazakh or foreign explorers that opt out of acreage after they have conducted initial seismic data gathering.

Currently, Kazakhstan officials typically require licence-holders to drill at least one appraisal or exploration well during the initial exploration period.

The amendments also require authorities to extend the term of an exploration licence if the operator needs to conduct additional appraisal work.

For existing developments, an operator will be able to apply for an extension to a production licence no later than six months before it expires, rather than the previous deadline of 24 months.

The amendments reduce the amount of paperwork potential investors are required to submit in periodic oil and gas lease sales, and also shorten the time from application to start of exploration by eight to 12 months.

The rules also make it harder for authorities to disqualify bidders because of technical errors in applications and other documents.

The amendments envisage future tax breaks for producers that operate mature and depleting oilfields, but details about the size and type of concessions will be spelled out in subsequent legislation.

Authorities also ruled that state-owned KazMunayGaz or one of its subsidiaries should have at least 50% interest in all new major oil and gas developments in Kazakhstan.

The Kazakh government has welcomed the approval of the amendments, saying they “will give an additional impetus to investments in geological hydrocarbon exploration” that authorities hope will reach at least 200 billion tenge ($450 million) per year.(Copyright)

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