Kazakhstan simplifies conditions for investors

By Azernews

By Kamila Aliyeva

The Code on Subsoil and Subsoil Use submitted to Kazakhstan’s Majilis provides for the blurring of tax boundaries between exploration and production and is aimed at creating conditions and an attractive investment climate in the country.

This was stated by Kazakh First Vice-Minister of Energy Makhambet Dosmukhambetov at a briefing on Friday, Kazakh media outlets reported.

"The costs that were made by the investor at the exploration stage as risky costs may be made up from the revenues for extraction. The tax boundaries between the two contracts will be blurred. There are issues of exploration on the Caspian shelf. When investors and large companies raise this issue, we are ready to go for these costly and risky projects in case of the change in tax conditions, so that the estimated profitability exists," he said.

The entire Code is aimed at simplifying and creating better conditions for investors, according to the official.

At the end of September, the draft Code was submitted to the Majilis for consideration. The main novelties of the Code were simplification of the competitive procedure and tax preferences for foreign investors.

The new Code has developed norms that significantly simplify the granting of subsoil use rights by analogy to the Australian model through the introduction of a licensing procedure.

It is also planned to combine exploration and production of minerals. This will become a kind of guarantee that the subsoil user will have the absolute right to extract the reserves that he will find.

Oil and gas sector is the major and most rapidly growing industry in Kazakhstan which brings the country a lion's share of its incomes.

Kazakhstan is among the top 15 countries in the world for proven oil reserves, with three percent of the world's reserves of ‘black gold’.

Oil and gas bearing areas occupy 62 percent of the country's area and have 172 oil fields, of which more than 80 are under development. More than 90 percent of the oil reserves are concentrated in the 15 largest fields.

Tengiz, Karachaganak and Kashagan are the largest oil fields in Kazakhstan. Three oil giants will be able to bring Kazakhstan's oil production to a new level in the coming years even if new oil fields are not discovered.

A majority of Kazakhstan’s proved natural gas reserves and natural gas production is possible thanks to the Karachaganak field. The Karachaganak field's gas reserves are estimated at 1.35 trillion cubic meters while oil and liquid condensates around 1.2 billion tons. About 49 percent of Kazakhstan's gas production and 18 percent of its produced oil are extracted from this field. 

With the start of oil production at the Kashagan field, the forecasts of several international organizations on oil production in Kazakhstan immediately grew. Analysts from the International Energy Agency (IEA), OPEC, the Energy Information Administration of the US Department of Energy (EIA) link the increase in oil production namely with the Kashagan field. 

Kazakhstan’s Energy Ministry reported growth of production in eight months of the year compared to the same period of the previous year. The Ministry reported oil production volume to be at the level of 56.9 million tons (112.2 percent compared to 2016).