Kazakhstan’s Minister of Energy and Mineral Resources Karim Masimov discussed at a ministry meeting held in Astana last week a heavier tax load for subsurface users and an audit of fulfilment by them of their contractual obligations. “To put them back, under the auspices of the government,” the verdict of the head of the cabinet of ministers said, referring to the future of all of Kazakhstan’s fields and deposits - oil, gas, crushed rock, coal, bauxite, and others alike.
Given away in their time, these fields will be nationalised by transferring them to the state holding Samruk and SPK. The basis for such drastic measures will be the failure to fulfil their contractual obligations by the current owners of the fields. Such a course of action has been recently approved by the head of the state himself, when he spoke in the parliament delivering his annual address to the people of Kazakhstan.
“The head of the state (President Nursultan Nazarbayev) has very clearly expressed his view on this matter, and, in fulfilment of his directions, all subsurface use contracts for the fields where the contractual obligations have not been met will be terminated, and the fields will be returned to the government,” Masimov said. “If an investor has failed to comply with a contract, friendly negotiations will be held like in the case of the Kashagan project,” the prime minister mentioned, emphasising that Kazakhstan will remain committed to the stability of contracts. Masimov also directed a stop to all negotiations the Kazakh national oil and gas company KazMunaiGas was conducting with the investors on subsurface use contracts until a new tax code is adopted. The new code will have rules that promise a serious tax load for many producing companies.
“The time for preparation of a new tax code is very limited – in September we must submit it to the parliament. The position for some subsurface users is not going to be very good. It is clear that the new tax code will reduce the number of tax privileges, the tax load on the enterprises outside the mineral resources industry will be lightened, and as a result of it, a part of the mineral rent in taxation will be increased for the extractive industries,” Masimov said.
A working group is going to be set up shortly in the government to tackle the expedited development of a new tax code.