Focus of the issue: replenishment of stocks
Government Takes Initiatives to Change Subsoil Use Laws
Valentina I. Lebed, Ph. D. in Law, Chief Lawyer, Centre of Legal Research and Analysis LLPI’ve accepted the proposal to inform the readers of Petroleum about the changes to the law “On subsoil and subsoil use” (hereinafter referred to as the Law), prepared by the Government as I was a member of the working group and I participated in its development.
These changes are very important for the subsoil users. However, we should come back to this issue after adoption of the Law and its signing by the President of the Republic of Kazakhstan (RoK). It is not a secret that the Parliament, representative authority of the Republic, becomes more mature and ready for a rational discussion and adoption of important decisions on statement of one or another law statue. Very often the members of Parliament introduce the corrections and improvements to the Government’s proposals, even at conceptual level.
In this respect, the draft law ‘On Amendments and Additions to Some Legislative Acts of the Republic of Kazakhstan on Subsoil Use’, of course, reveals a great interest. The approaches, proposed by the Government after cancellation of the moratorium and in accordance with the tasks, set by the Head of State, shall affect the essential interests of the stakeholders and it explains everything.
It is stipulated in the Address of the President of the RoK to the People of Kazakhstan: Kazakhstan-2050 Strategy: New Political Course of the Established State” (Astana, December 14, 2012): “We should use the resources as a significant strategic advantage of Kazakhstan for ensuring the economic growth, major foreign policy and foreign economic agreements. Kazakhstan should become a regional target for the investments. Our country should become the most attractive place in Eurasia for investments and transfer of technologies. This is fundamentally important. We should show the investors our advantages”.
At the opening of the third session of the fifth convocation of the Parliament in Astana on September 2, 2013, the Head of State highlighted that the most important and priority task is to adopt the amendments to the law ‘On Subsoil and Subsoil Use’, where the system of granting rights for exploration should be dramatically simplified to protect from the practice of “unproductive” speculation of the fields.
In this regard, the Ministries of Industry and New Technologies (MINT) and Oil and Gas (MOG) have produced the proposals for legislative simplification of the procedures for granting rights of subsoil use by implementing the competitive biddings as a form of competition together with traditional tenders and granting the right of subsoil use through a simplified procedure for the areas, previously approved by the Government, based on the principle “first come, first served” with annually increasing rental rates for the area, granted for subsoil use purposes. In this case, the conclusion of a model contract (without the approval of project documents and passing expertise in the State bodies) is foreseen.
The competent authority for study and use of subsoil shall provide the geological information regarding such areas from the date of commencement of the Governmental decision on approval of the subsoil use area coordinates, provided for the exploration through a simplified procedure. The geological information on such areas should be divided into the blocks.
The payment will be charged for each block separately (Clause 6, article 11 of the Law). The basis for such innovations is the Australian experience in the field of geological exploration and therefore, the new article, 57-1, Special features of direct negotiations on granting subsoil use right through the simplified procedure for exploration, shall be provided.
A major conceptual innovation in the Law is consolidation of the priority right of the State only for subsoil areas and fields of strategic importance (Article 12 of the Law). This will facilitate the removal of excessive administrative barriers for business, and there will be no need for subsoil users to pass the additional procedures that suspend the moment of alienation of subsoil use right and (or) the objects associated herewith.
Of not less importance is the decision to reduce the number of obligatory expertise procedures for drafting the subsoil use contracts. Legal expertise shall remain and the economic expertise is suggested to be used only for parts of production contracts (Article 62 of the Law).
The draft law makes an effort to establish a mechanism for extension of the contract territory (Clause 4, Article 70 of the Law) for the subsoil user at the stage of production to perform the further study and evaluation of the resources at the adhering territory.
At the same time, it is proposed to grant a right to combine the several subsoil sites in one contract to a subsoil user, who works with solid minerals, ,if these sites are located close to each other, or to separate a part of the contractual territory (sites) from one contract to another. The appropriate procedure is provided (Article 70-1 of the Law). Refusal to grant permission for conversion of the contractual territory can be appealed in accordance with the legislation of the RoK.