EDICT WHICH HAS FORCE OF LAW OF THE PRESIDENT OF THE REPUBLIC OF
KAZAKHSTAN The 28th of June, 1995 No 2350
Concerning Petroleum
In accordance with Article 1 of the Law of the Republic of Kazakhstan, dated December 10, 1993 "Concerning the Temporary Delegation of Additional Powers to the President of the Republic of Kazakhstan and the Heads of Local Administrations", for the purposes of ensuring protection of the interests of the Republic of Kazakhstan and its natural resources in the course of Petroleum operations, I am issuing this Edict.
CHAPTER 1. GENERAL PROVISIONS
Article 1. General Concepts and Terms
In this Edict:
"Block" means any territory on land and on water situated completely or partially in the Republic of Kazakhstan and designated as a Block on a specially compiled map of Blocks.
"Internal Water Bodies" means lakes, artificial water bodies, and other water-surface resources.
"Production" means any operations associated with the lifting of Petroleum to the surface and it shall include among other things:
construction and operation of underground and surface industrial equipment and installations;
lifting of Petroleum to the surface, organisation and maintenance of the working process in operational wells;
processing and refining of Petroleum;
extraction of components associated with Petroleum.
"Competent Body" means a governmental authority to which the Government of the Republic of Kazakhstan delegate the rights directly related to conclusion of Contracts.
"Contract" means an agreement between a Contractor and the Competent Body for conducting of Petroleum operations.
"Contract territory" means a territory allocated for conducting of Petroleum operations and which is defined by geographical co-ordinates.
"Commercial discovery" means a discovery in the Contract territory of one or several Deposits [fields] worth of development.
"Licensee" shall a mean a User of the subsurface which became a holder of a Licence.
"Licence" means a permission granted by the Government of the Republic of Kazakhstan to a User of the subsurface for conducting Exploration and Production for a fixed term within a Contract Territory.
"Sea" means the surface and layer of water, the surface of the bottom of the Caspian and Aral Seas (lakes), from the initial coastline of its entire extent within the boundaries of the Republic of Kazakhstan to its exterior marine frontiers which are established on the basis of the treaties between the Republic of Kazakhstan and the Seaboard States.
"Marine Scientific Research" means scientific research work associated with conducting of Petroleum operations at sea.
"Deposit [field]" means one or several natural accumulations of hydrocarbons in a geological reservoir of any type.
"Main pipeline" means an engineering installation consisting of the linear part and associated overland facilities, communications, telecontrol and communication facilities intended for transport of Petroleum from the place of Production (processing) to the place of transfer to other types of transport or the place of processing and utilisation. A pipeline which operates in a regime of a storage collector shall not be referred to as a Main Pipeline.
"User of the subsurface" means any legal entity or a physical person, states, and (or) international organisation which carry out Petroleum operations in the Republic of Kazakhstan in accordance with this Edict.
"Petroleum" means Crude oil, Natural gas and also the hydrocarbons which are extracted after refining Crude oil, Natural gas, and after processing of oil shale or tar sand.
"Petroleum operations" means all types of work relating to Exploration, Production and associated with them in a single technological cycle, storage of Petroleum and its pumping by pipeline transport.
"Contractor" means a User of the subsurface which concludes the Contract with the Competent Body in accordance with this Edict.
"Good Petroleum deposit development practice" means practice usually employed by entities which are engaged in conducting of Petroleum Exploration and Production in countries of the world, as being reasonable, safe, efficient, and necessary for conducting of Petroleum operations.
"Associated compounds in Petroleum" means various types of metallic and other compounds contained in Petroleum and in the formation waters of a Deposit.
"Seaboard States" means the states of the Caspian and Aral Seas (lakes) basin, both adjacent and situated on the opposite coast.
"Applicable law" means the law of the Republic of Kazakhstan, provided it is directly stipulated in legislative acts or where the provisions of the Contract do not define applicable law. In any other cases, the law of the Republic of Kazakhstan or the law of any other country may be used as applicable law subject to provisions of the Contract.
"Natural gas" means hydrocarbons which exist in gaseous state under normal atmospheric temperature and pressure, including enriched gas, dry gas, associated gas, and residual gas which remains after the extraction or separation of liquid hydrocarbons from the enriched gas, and non-hydrocarbon gas produced together with liquid and gaseous hydrocarbons.
"Exploration" means any operations which are associated with the prospecting and Exploration of Petroleum, and which includes: field geological and geophysical studies, structure drilling, drilling of pioneer and research wells, and also test commercial Production work in the fields which are explored.
"Crude oil" means any hydrocarbons, irrespective of their unit weight, which are extracted from the subsurface in a liquid state under normal atmospheric temperature and pressure, including liquid hydrocarbons, known under the names of distillate or condensate which are formed of Natural gas through the process of natural condensation.
Article 2. The Sphere of Application of the Edict
1. This Edict shall regulate the relations which arise in conducting of Petroleum operations in the territory which is under the jurisdiction of the Republic of Kazakshtan, including at Sea and Internal water bodies.
2. This Edict shall apply in combination with the Code of the Republic of Kazakhstan Concerning the Subsurface and Processing of Mineral Raw Materials and other legislative acts of the Republic of Kazakhstan.
3. In the case of a contradiction between this Edict and any other legislative acts in respect of regulating Petroleum operations the provisions of this Edict shall apply.
4. When an international treaty to which the Republic of Kazakhstan is a party establishes rules which are different from those contained in this Edict, then the rules of the international treaty shall apply.
5. The Licences issued and Contracts concluded prior to the enactment of this Edict and also any other acts of state bodies of the Republic of Kazakhstan which are related to those Contracts and Licences shall remain in force.
Article 3. The Right to Own Petroleum
1. Any Petroleum in its natural condition in the subsurface of the Republic of Kazakhstan shall be the exclusive property of the Republic of Kazakhstan.
2. The owner of Petroleum lifted to the surface shall be defined in the Contract. The right to dispose of the Petroleum brought up to the surface shall belong to the owner, unless it is otherwise stipulated in the Contract.
3. Petroleum returned into the subsurface for storage shall be considered the same way as Petroleum lifted to the surface, and its owner shall be defined in the Contract.
Article 4. Openness in Conducting Petroleum Operations
At the licensing body any interested parties shall have the right to peruse the following:
1) terms of holding the competitive bid (tender) of investment programmes and contents of the decision on its results;
2) contents of the Licence and Contract, except for its Articles which are recognised by the parties as confidential;
3) the map and the Blocks of the Contract territory.
CHAPTER 2. THE AUTHORITY OF THE STATE ADMINISTRATION BODIES IN THE
SPHERE OF CONDUCTING PETROLEUM OPERATIONS
Article 5. The Authority of the Government of the Republic of Kazakhstan
The Government of the Republic of Kazakhstan shall:
1) elaborate the strategies for the use, the rates of recovery and of further expansion of Petroleum resources;
2) establish the rules for the use of the subsurface and protection thereof and uniform rules for development of oil and gas deposits;
3) supervise the compilation of the balance sheets of Petroleum reserves of the Republic and organise the State accounting for studies of the subsurface (Blocks);
4) ensure the formation of strategic Petroleum reserves and accounting for their location in the territory of the Republic;
5) introduce restrictions to the use of subsurface in individual sites, and also conservation of deposits, for the purpose of ensuring the national security, environmental protection, public safety, and the interests of the future generations;
6) define price policies;
7) hold tenders of investment programmes and licensing of Petroleum operations;
8) exercise supervision of the course of implementation of Contracts;
9) exercise any other powers in the sphere of Petroleum operations, granted to it by the legislative acts of the Republic of Kazakhstan.
Article 6. Functions of the Competent Body
1. The functions of the Competent Body shall include the following:
1) carrying out negotiations with Contractors concerning the terms of Contracts and preparing in conjunction with Contractors draft Contracts;
2) organisation of conducting of independent expert evaluations of draft Contract documents;
3) signing of Contracts;
4) submitting Contracts for the registration to the Licensing body;
5) obtaining a land plot, mining and geological allotment for the Contractor;
6) submitting an annual report to the Government of the Republic of Kazakhstan on progress in the implementation of Contracts;
7) conducting negotiations and concluding agreements in accordance with the instructions of the Government of the Republic of Kazakhstan, with the relevant bodies of any other states, which ensure the possibility of implementing Contracts, construction and operation of pipelines and of any other means of transport in their territory for the export of Petroleum.
2. The Competent Body shall be obliged as follows:
1) to ensure the observance of the interests of the Republic of Kazakhstan;
2) to conclude Production Contracts only after an expert evaluation of the reserves of the Deposit by a Government authority.
Article 7. The Authority of the Local Representative and Executive Bodies
The local representative and executive bodies shall:
1) upon the issue of a Licence, allocate land plots to Contractors in accordance with the land legislation of the Republic of Kazakhstan;
2) participate within their territory in implementing of the State Programme for the development of the oil and gas sector of the Republic of Kazakhstan subject to economic and ecological considerations in the region;
3) within the bounds of authority granted to them by legislative acts, exercise the supervision of the protection of land and water localities allocated for conducting of Petroleum operations, of the compliance with ecological safety rules, and of preservation of archaeological monuments and any other items of historic and cultural heritage;
4) participate in negotiations with Contractors in order to make decisions on issues related to the observance of social, economic, and ecological interests of the public and the territory.
CHAPTER 3. TENDERS OF INVESTMENT PROGRAMMES FOR THE RIGHT TO CARRY
OUT PETROLEUM OPERATIONS
Article 8. The Forms of Granting the Rights to Carry out Exploration and Production
1. The right to carry out Exploration and Production shall be granted on the basis of a tender. Where there is not sufficient a number of participants for conducting a tender (less than two) it shall be allowed to grant the indicated right on the basis of direct negotiations.
2. The Government of the Republic of Kazakhstan shall have the right to carry out direct negotiations with Users of the Subsurface concerning performance of Petroleum Operations without conducting a tender.
Article 9. The Terms for Conducting a Tender of Investment Programmes for the Right to Carry out Petroleum Operations
1. A tender for the right to carry out Petroleum Operations may be open or closed.
The Terms for conducting an open tender must be published, and in the case of a closed tender they must be brought to the attention of all potential participants not later than 90 days prior to its taking place.
Any entities who desire to participate in a tender shall have the right to receive information relating to the conducting of the tender.
2. Notice of a tender must contain the following:
1) time and place of the tender as well as the deadlines for submission of applications;
2) principal terms of the tender;
3) indications of location and descriptions of the Blocks indented to be granted for conducing Petroleum operations;
In a tender notice also there shall be indicated the starting amounts of payment to the Budget (lease payments, bonuses, royalty, taxes and other), the price of the package of geological information, amount of contribution for the right to participate in the tender.
Article 10. An Application for the Right to Participate in a Tender of Investment Programmes
1. An application to participate in a tender must contain the following:
1) applicant"s name, applicant"s address, nationality (for legal entities), citizenship (for physical persons);
2) information on the managers or owners of the applicant which is a legal entity and on the persons which will represent the applicant when obtaining the Licence;
3) information concerning technical, managerial, institutional and financial capacities of the applicant.
2. Competitive bid proposals shall be attached to the application.
Article 11. Competitive Bid Proposals
1. An applicant within the deadlines established by the terms of the competitive bid shall compile the competitive bid proposal which shall be recognised as an application for the right to conduct Petroleum operations. Evaluation of the conformity of technical and economic estimates prepared by the applicants with the terms of the competitive bid shall be carried out by a commission of experts and it shall be documented as a protocol. Formation of the number of applicants which received positive expert evaluations by the commission shall be carried out by the licensing body.
2. A competitive bid proposal for the right to carry out Exploration must contain the following:
1) information concerning previous activities of the applicant, including the list of states in which the applicant carried out activities during the last 5 years, reference from the bank concerning financial condition of the applicant;
2) intentions of the applicant with regard to the terms of conducting Petroleum operation, including the programme of operations and the costs associated with their performance;
3) intentions of the applicant in respect of the protection of the natural environment, including re-cultivation and reclamation of the territory;
4) numbers of the Blocks for which the application is submitted;
5) sources of financing for Petroleum operations (owned or borrowed resources);
6) the term which is required for implementation of the investment programme;
3. A Production Application must also contain the following:
1) the information from the Exploration Licence and the results of its use, if the applicant has one;
2) plan for development of deposits including among other items: the amount of Petroleum which the applicant intends to extract;
3) planned starting date for Production and for attainment of its maximum level;
4) projected estimates of costs associated with Production and of Petroleum sale revenues;
5) proposed cash flow to the Republic of Kazakhstan and the capital investment into development of the industrial and social infrastructure of the Contract Territory.
4. An application to obtain the combined right to Exploration and Production must, as a rule, contain the provisions which are required for applications for obtaining the right to carry out Exploration and the right to carry out Production.
Article 12. The Procedure and Deadlines for Considering Applications
1. An application shall be accepted for consideration after the payment by the applicant of the free for participation in the tender, the amount of the free shall be established by the Licensing body. Within one month from the date of receipt of an application the applicant shall be officially notified of acceptance of the application to participate in the competitive bid. Expert evaluations of applications shall be carried out in the course of the competitive bid.
2. After the acceptance of an application for participation in a competitive bid, for a fee the applicant shall be given a package of geological information concerning the locality of the Contract territory which is of interest to the applicant. A package must contain a volume of geological, mining and technical, technological and any other information which is of necessity to the applicant for developing the programme of work and technical and economic indicators relating to conducting of Petroleum operations.
Article 13. Drawing the Results of a Competitive Bid
The winner of a competitive bid shall be determined on the basis of a set of the following principal criteria:
1) date of beginning and the intensity of conducting of exploration operations;
2) date of beginning Production and of attainment of its maximum level, and also of the maximum coefficient of Petroleum extraction;
3) estimated amounts of the initial and subsequent payments to the Budget;
4) the amount of investments, periods and terms of financing of the project and the capital investments into development of the production and social infrastructure of the Contract territory;
5) compliance with the requirements associated with the protection of the subsurface and the natural environment, and with the safe conduct of operations.
Article 14. The Denial of the Right to Participate in a Competitive Bid of Investment Programmes
The denial of the right to participate in a competitive bid of investment programmes may take place in the following cases:
1) submission of the application in violation of the requirements of Articles 10 and 11 of this Edict, and also in violation of the terms of the competitive bid;
2) deliberate submission by the applicant of false information;
3) when the applicant fails to present documentary proofs of having or going to have the technical, organisational, managerial, and financial capacities which are necessary for conducting of Petroleum operations indicated in the application.
CHAPTER 4. LICENSING OF EXPLORATION AND PRODUCTION
Article 15. The Terms and Procedure for Issuing Licences
1. To an entity which due to the results of a competitive bid or negotiations is granted the right to conduct Petroleum operations, in accordance with the procedure established by Edict Which Has Force of Law "Concerning Licensing", the Licence shall be granted subject to additional requirements stipulated by this Edict.
2. As a rule, to the Users of the subsurface which had occupied the Contract territory prior to enactment of this Edict, Production Licences shall be issued on the basis of negotiations.
3. In the case of a Commercial Discovery, a holder of an Exploration Licence shall have an exclusive right to be granted a Production Licence subject to compliance with the requirements of the Exploration Licence.
4. Applications to obtain Licences which are issued on the basis of negotiations of the Applicant with the licensing body shall be considered for two months from the date of their receipt. The period of considering an application may be extended up to six months, of which the applicant shall be notified in writing. Issuing of Licences on the basis of negotiations shall be carried out with a compulsory conducting of an expert evaluation of the application.
Article 16. The Purpose of a Licence
1. No one shall have the right to carry out Exploration and Production without appropriate Licences.
2. A Contract must be in conformity with the terms of the Licence. Provisions of a Contract which contradict the Licence shall be invalid.
3. Prior to conclusion of a Contract the contents of the Licence may be amended only with the reciprocal consent of the Licensor and the Licensee. After conclusion of the Contract the Licence may only be amended with the reciprocal consent of the Licensor and the parties to the Contract.
Amendment of a Licence shall entail the necessity to amend the relevant Contract.
4. A Licence for the right to conduct Exploration and Extraction shall be the basis for the formulation of the geological, mining and land allotments.
Article 17. The Licensing Body (Licensor)
Issuing of Licences for the right to conduct Petroleum operations shall be carried out by the Government of the Republic of Kazakhstan.
Article 18. Types of Licences
Licences shall be divided into Exploration Licences and Production Licences. It shall be allowed to issue a combined Licence i.e. a Licence for Exploration and Production.
Article 19. The Term of a Licence
1. An Exploration Licence shall be granted for a period of up to 6 years. A Licensee shall have the right to extension of the Licence term subject to completion of the work programme and execution of other obligations envisaged by the Licence and the Contract. An Exploration Licence term may be extended twice by periods up to 2 years each. In the case of a discovery of Petroleum, the Licensee shall have the right to extend the Licence for a period which is required for the Commercial discovery evaluation. In the case where an Exploration Licence holder submitted an application to obtain a Production Licence, the term of the Exploration Licence shall be extended by the period of processing of the application for obtaining the Production Licence.
2. A Production Licence shall be granted for a term of up to 25 years. A Production Licence may be issued for a term of up to 40 years for deposits where recoverable reserves are greater than 100 million tonnes of Crude oil and/or 100 billion cubic meters of Natural gas. The term of an Extraction Licence may be extended, provided the Licensee applied for the extension of the term not later than 12 month prior to the Licence expiry date.
3. An application for an extension of a Licence term must be considered not later than 3 months after its receipt by the Licensor. When extending a Licence term, the Licensee shall make a payment in the amount established by the Government of the Republic of Kazakhstan for issuing of Licences (a Licence levy). Licences which are revoked by the Licensor shall not be subject to extension. The continuation of Petroleum operations by a holder of a revoked Licence shall only be possible on the conditions of issuing a new Licence in accordance with the procedure established by this Edict.
4. A combined Licence shall be issued for a term which includes the Exploration period and the Production period, subject to possible extension periods.
5. The validity term of a Licence shall begin on the date of its registration.
Article 20. The Territorial Sphere of Licence Validity
1. The territory of the Republic of Kazakhstan shall be divided into Blocks of a rectangular shape, except for the cases where a Block boundary coincides with the frontier of the Republic of Kazakhstan. The size of Blocks shall be limited to 10 minutes of the geographic co-ordinates grid. The map of Blocks wherein each Block is assigned its serial number, shall be approved by the Government of the Republic of Kazakhstan.
2. A Contract Territory may comprise one Block or a system of Blocks, which may be both adjacent and separate. A Block allotted as a Contract territory may be limited to a certain depth. When a Licence is granted for the right to conduct Petroleum operations at Sea, the Contract territory shall be defined as the area of the sea floor with indication of the geographic co-ordinates of its boundaries within which the activities are permitted which are indicated in the Licence.
3. When in the course of Petroleum operations it is discovered that the geographic boundaries a Field Deposits extend beyond the boundaries of the Contract Territory indicated in the Licence, then the issue of its expansion shall be resolved additionally by the Licensor.
4. The conditions for the return of a Contract Territory shall be defined in the Contract. In that respect, during the validity term of an Exploration Licence (prior to its extension) not less than fifty percent of the Contract Territory must be returned, except for the territory in which a Commercial discovery is made.
Article 21. Rights and Obligations of a Licensee
Licensees shall enjoy all the rights which are stipulated in the Licence and which ensue therefrom, and they shall bear the responsibility for a failure to comply with its conditions.
Article 22. Cessation of Licence Validity
A Licence shall cease as follows:
1) upon expiry of the term of the Licence which is indicated in it;
2) when it is revoked by the licensing body in accordance with Article 23 of this Edict;
3) in the event of termination of or amendments to the Contract which is concluded on the basis of the Licence;
4) in the case of the liquidation or reorganisation of the legal entity to which the Licence is issued.
Article 23. Suspension of the Effect of a Licence
1. The Licensing Body shall have the right to suspend the effect of a Licence in the following cases, when a Licence holder:
1) carries out Petroleum operations which are not envisaged by the Licence;
2) carries out activities within the framework of the Licence, but under a programme which is not envisaged by the Contract;
3) in the course of its activities, systematically violates the legislation of the Republic of Kazakhstan concerning protection of the subsurface, the natural environment and concerning safe conduct of operations.
2. In the event of suspension of the effect of a Licence, the Licensing Body shall notify the Licensee in writing of the reasons for such suspension and it shall establish a reasonable period for their elimination.
3. Upon elimination of the causes which brought about the suspension of the Licence, it shall be renewed immediately, of which the Licence holder shall be notified in writing.
4. Suspension of the effect of a Licence shall entail suspension of the Contract concluded on the basis of that Licence.
Article 24. Revokation of a Licence
1. The licensing body shall have the right to revoke an issued Licence only in the following cases:
1) when a Licence holder refuses to eliminate the causes which brought about the adoption of the decision to suspend the Licence, or fails to eliminate those causes within the established period which is sufficient for their elimination;
2) when a fact is established of a deliberate submission to the Licensing Body of false information which decisively affected its decision to grant the Licence to that entity;
3) when in a judicial procedure, the fact is established of unlawful advantages to candidates or liberalising the terms and reducing the amount of payments to the Budget;
4) when the Contractor fails to make the efforts which are contemplated by Article 38 of this Edict.
2. Revokation of a Licence shall entail the dissolution of the Contract concluded on the basis of that Licence and levying of indemnification from the Licence holder for losses caused by the premature dissolution of the Contract.
CHAPTER 5. CONTRACTS
Article 25. Types of Contracts
1. The following types of Contracts shall be employed for conducting Petroleum operations in the Republic of Kazakhstan:
on Production sharing;
on rendering of services;
on joint activities (with or without formation of legal entities).
2. In relation to the conditions of specific Petroleum operations and to any other circumstances, combined Contracts shall be allowed as well as any other pro-formas of Contracts.
Article 26. Validity Periods and Terms of Contracts
The periods of validity and terms of Contracts shall be defined by agreement of the parties in accordance with the Applicable Law, the Licence, and subject to provisions of the model Contract approved by the Government of the Republic of Kazakhstan.
Article 27. The Procedure for Concluding and Registering of Contracts
1. In an obligatory procedure Contracts prior to their signing shall be approved by the state bodies which have authority in the issues of health protection and sanitation, ecology, subsurface protection, and the rules for safe conduct of mining operations. The approvals period must not exceed 15 days from the date of receipt of the Contract documents by the relevant body.
2. In an obligatory procedure Contracts prior to their signing shall be subject to economic and legal expert evaluations. The period for conducting expert evaluations must not exceed 30 days from the date of submission of the Contract documents for expert evaluation.
3. The Contract shall be registered by the Government of the Republic of Kazakhstan. The Contract shall enter into force from the date of its registration, unless any other later dates for its entering into force are stipulated in the Contract.
4. The procedure for concluding Contracts shall be determined by the Government of the Republic of Kazakhstan.
Article 28. Recognition of a Contract as Invalid
1. A Contract shall be recognised as invalid when the Licence issued to the Contractor is recognised as invalid; in the event that a Contract is concluded without prior obtaining of the Licence; and also for any other reasons stipulated by the legislative acts of the Republic of Kazakhstan.
2. A Contract for conducting Petroleum Operations to which the Competent Body is not a party, shall be invalid.
Article 29. Alteration and Termination of Contracts
1. Alterations of provisions a Contract may be carried out only where there is the consent of both the Contractor and the Competent Body in writing, and provided alterations conform with the Licence provisions. 2. The Contractor and the Competent Body may terminate the effect of the Contract only on the bases of and in accordance with the procedure stipulated in the Contract. The revokation of the Licence shall entail the termination of the Contract. The parties shall not be released from the execution of [their] current obligations which remain outstanding at the time when the notice is given of the termination of the Contract.
3. In the case of a premature termination of a Contract, the Contractor shall have the right to independently dispose of the assets owned by the Contractor, unless it is otherwise stipulated in the Contract. In that respect, the Competent Body shall have the pre-emption right to acquire the indicated property. Issues relating to the conveyance of the right to own the assets which belonged to a Contractor during the time of the Contract"s validity, and also upon the expiry of its effect, shall be stipulated in the Contract. A Contractor shall be obliged to leave the Contract territory in a condition which meets the requirements of the Rules For Mining and Sanitary Supervision, Protection of the Subsurface and the Natural Environment approved in accordance with the established procedure.
4. In the event that provisions of the Contract are altered in pursuance of the Contractor"s proposal because of the formation of a new legal entity or consortium (membership of the consortium participants), formulation of the Licence for the newly-created legal entity or cosortium participants shall be carried out in the procedure stipulated in this Edict after the termination of validity of the Licence issued earlier.
CHAPTER 6. CONDUCTING PETROLEUM OPERATIONS
Article 30. Terms for Conducting Petroleum Operations
1. Terms for conducting Petroleum operations including the compulsory work programme, shall be determined in the Contract in accordance with the legislation of the Republic of Kazakhstan. When as a result of Exploration a Deposit (Deposits) are discovered, the Contractor shall be obliged to notify the Competent Body of the discovery, to make an assessment of the Deposit, and to prepare a summary of its commercial or non-commercial significance. The deadlines for the notification of a discovery, assessment, and the procedure for discussing and adopting decisions on the commercial value of a discovery shall be defined in the Contract.
2. In the event of a Commercial Discovery, the Contractor shall be granted the right to entire or partial reimbursement of expenditures in accordance with the provisions of the Contract.
3. In the event of the Contractor"s refusal to develop a Commercial Discovery, the Licensing body shall have the right to grant that discovery to another Contractor.
4. When Exploration does not result in a Commercial Discovery, the Contractor shall not have any rights to reimbursement of the invested resources.
Article 31. Joint Development of a Deposit
1. Joint development of a Deposit means co-ordination of Production operations between Contractors in different parts of the same Deposit.
2. Contractors may conclude written agreements with one another for joint development of a Deposit. Those agreements shall be subject to approval by the Competent Body.
Article 32. Artificial Islands, Dams, Structures, and Installations
1. The Republic of Kazakhstan shall have the exclusive right to permit and regulate the construction, operation, and use of artificial islands, dams, structures, and installations intended for conducting of Petroleum operations at Sea, scientific research, and other purposes on the condition of protection and preservation of the environment and bioresources.
2. Safety zones shall be established around such artificial islands, dams, structures, and installations, which extend to a distance of 500 meters from any point of their external outline. Islands, dams, structures, and installations, and also the safety zones which surround them, shall be situated in locations where they may not become an obstacle to the customary sea routes having substantial significance for international navigation and fishing.
3. The enterprises responsible for the maintenance and use of artificial islands, dams, structures, and installations must ensure their safety and the maintenance of permanent facilities warning of their location.
4. Abandoned or unused artificial islands, dams, structures, and installations, when they may not be utilised for business or any other purposes, must be dismantled to such an extent as not to create a hazard for human safety, nor any interference with navigation and fishing.
