Flexible terms are needed for petroleum operations
According to experts, recent amendments to the tax regime will seriously affect the economic efficiency of future oil and gas projects in Kazakhstan and create additional obstacles for the inflow of investments to the oil and gas sector. The experts believe that business risk related to it together with geological risk inherent to the subsoil use may result in the reduction of investment offers and outflow of capital from the country. We asked Uzakbai Karabalin, President of the National Oil and Gas Company to comment on this issue. details >>
INVESTMENT CLIMATE
Investment image is better than profit
At the present time the development of the Kazakhstan sector of the Caspian Shelf is often being discussed. From January 1, 2004, the amendments to the current Tax Code that tighten the tax burden on subsoil users became effective. Oil companies think that these amendments considerably reduce the attractiveness of Kazakhstan projects. First of all, this relates to offshore work where serious ecological risks and the absence of infrastructure are added to traditional risks. The changed tax climate may result in considerable staggering of the investment image of the country to which the leaders of the country paid much attention. As a result, the state might not only fail to attract foreign capital, but it would also fail to invest additional funds to the Kazakhstan capital. We asked Kanatbek Safinov, Managing Director for Legal Support of the National Company KazMunaiGas to share his views on the present situation. details >>
Key Features of the 2004 Fiscal Regime
The Government intends to proceed with a tendering round later this year. That round will clearly determine whether it is the Government or the investors expressing concern that have correctly judged the market price for the resources of Kazakhstan. If there is a lack of investors’ interest, then the Government may well consider restoring some degree of flexibility to the PSA regime, perhaps by designing different sets of terms for different classes of opportunity to take account of particularly high costs, difficult geology, degree of geological risk etc. details >>
The Power of Tax Policy
Ñouldn’t a country actively pursuing billions of dollars in investment benefit from hearing the investment community? There is no question that Kazakhstan has made progress. The more provocative question is: “what exactly is progress?” Where do the lines for collection appetite and tax as a tool for developing an emerging economy intersect? details >>
Rent Tax: Issues Of Application
Amendments to Kazakhstan’s Tax Code came into force on January 1, 2004. During the drafting stage, the government of Kazakhstan made it clear that the amendments were intended primarily to allow the government to reap greater revenues from petroleum operations and to increase the burden on the oil and gas sector. One new feature stands out among the body of amendments, which should play a significant role in increasing the state’s revenues from petroleum operations. This feature is the rent tax on exported crude oil. An entirely new tax as far as Kazakhstan’s tax laws are concerned, the rent tax is the government’s greatest hope for boosting revenues from oil operations. We would like to focus here on some key aspects of calculating this new tax that may cause problems during its practical application. details >>
The Claimed State Priority Right In Petroleum Contracts
In late March 2004 the RK Senate has proposed (as reported in the press) an important further change: The introduction of a supposed priority right of the state, which could be used by the state upon the proposed alienation of either subsoil use rights or an ownership interest in any legal entity (contractor) that has such rights. One may suppose that the adoption of the Draft Amendment could materially harm the investment image of Kazakhstan, cause a falloff of investment activity in the area of subsoil use. details >>
Unique Anticorrosion Coating
A two-component water-base zinc-silicate paint is known since long ago, but was not widely adopted due to high cost of a binding agent. A technology was recently developed in Kazakhstan of producing such binder with costs making this paint economically attractive. The paint is named ¡°Cheral-01¡± and made by LLP Anticorr Paint. details >>
