Kazakhstan’s Parliament Approved Changes into Joint North Caspian Sea Usage with Russia Legal Issues
Kazakhstan’s Parliament Approved Changes into Joint North Caspian Sea Usage with Russia
On June 29, the Parliament of the Republic of Kazakhstan approved the bill of “Ratification of the Protocol to the Agreement on Delimitation of the Bottom of the Northern Part of the Caspian Sea to Realize Sovereign Rights of Using the Subsoil dated July 6 1998.”
The Protocol itself was signed in Astana on October 15 2015 and is aimed at perfecting the legal base for Russian and Kazakh development of the Northern Caspian Sea’s fossil fuel deposits.
The Protocol includes details of subsoil usage, taxation and other requirements for operations at the Central geological structure. For nearly two decades, the lack of a unified legal basis has prevented the parties from the deposit’s development.
In 1997, CentrCaspNeftegaz – a joint venture of Gazprom and LukOil, began conducting exploration operations at the location, but due to the fact that part of the field lies within the territorial water of Kazakhstan, an agreement between the two countries on joint development was necessary to proceed.
In 2013, Gazprom, LukOil and KazMunaiGaz restructured CentrCaspNeftegaz in order to operate on the basis of a co-production agreement.
This, however, prevented the joint venture from obtaining an exploration and production license due to a compliance problem with Russian laws, as only companies, in which the state owns 50%, are allowed to perform the above activity.
The new bill should effectively deal with the issue.
In particular, the joint venture is allowed the usage of the Central field subsoils for geological studies, exploration and production of minerals for a term of 25 years on the general taxation basis.
The bill was sent for the Russian President’s approval in April.
The Central field is located in the Northern Caspian Sea, roughly between Russia’s Makhachkala and Kazakhstan’s port of Aktau. According to preliminary data, the field holds about 90 million tons of extractable crude oil reserves and 1.765 trillion cubic feet of natural gas.