This information will be useful to companies that operate on the basis of contractual agreements with subsoil-user companies which, in turn, have obtained lisences and/or concluded contracts to develop mineral resource deposits with an authorised state agency of the Republic of Kazakhstan.

Basis for Licensing

Licensing of the activities of companies operating in the oil and gas sector in Kazakhstan is basically regulated by the following regulatory legal acts of the Republic of Kazakhstan, which determine the activities subject to licensing and outline the requirements:

1. Law No. 2000 of the Republic of Kazakhstan On Licensing dated 17 April 1995;
2. Resolution No. 556 by the Government of Kazakhstan dated 10 May 1999 On Approval of Qualification Requirements for Industrial Activities Subject to Licensing.

Activities Subject to Licensing

Basically, service companies providing direct services in the oil and gas sector include companies engaged in the following activities:

1. Drilling of oil and gas wells (well servicing and workover, rig up, drilling fluid injection, activities involving chemical reagents, flushing, cementing, testing, well completion, etc.);
2. Design, construction and operation of oil or gas-condensate fields;
3. Design of mining ventures (assessment and commercial development of fields, feasibility studies, etc.);
4. Operation of mining ventures (direct field operations inside and outside wells and mines including servicing of wells and ore deposits);
5. Design and operation of trunk oil or gas product pipelines (maintenance, diagnosis, repair of basic and auxiliary equipment, design and development of engineering documentation, laying trunk pipelines, etc.)
6. Design and operation of industrial ventures involving an explosion or fire risk (geophysical surveys, preparation of designs and process flow diagrams for development of oil or gas fields, design and completion of oil and gas fields, logging, perforating and blasting activities, geophysical and seismic surveys, development of project feasibility studies, etc.);
7. Fabrication, erection, operation and repair of drilling or oil and gas field equipment, exploration and mining equipment;
8. Fabrication, operation, erection and repair of pressure boilers, vessels and pipelines;
9. Erection and repair of explosion-proof electrical equipment (transformers, compensators, reactors, transmission facilities, substations, development of engineering documentation; safety training, personnel training and certification, etc.);
10. Installation and repair of hardware and control, emergency and alarm systems;
11. Mineral processing (ore or raw material grinding, grading, reduction, classification and concentration, oil and oil product gravitation, flushing, receipt and storing, treatment and processing, production from raw materials, salvage, sale of processed products, etc.);
12. Fabrication, erection, operation and repair of lifting equipment;
13. Operation of industrial ventures involving an explosion or fire risk, fabrication, erection, operation, and repair of pressure vessels (operation of oxygen plant);
14. Design of industrial ventures and repair of equipment (development of standard engineering documentation, engineering and consultancy services, appraisal of ventures and equipment, providing assistance, etc.);
15. Other activities directly related to providing services for developing oil or gas wells, ore mines, etc. and servicing these installations.

If a service company is engaged in activities included in the above list, such activities are subject to obligatory state licensing.

It is should be mentioned that if a company uses certain kinds of equipment in the process of operations, the company must obtain a separate licence for operating such equipment.

Information on the Licensor

Resolution No. 1894 of the Government of the Republic of Kazakhstan dated 25 December 1995 designates the Ministry of Industry and Trade of the Republic of Kazakhstan to be an authorised state agency for licensing activities in the oil and gas sector.

One of the problems that service companies may face when carrying out activities in the oil and gas sector is the requirement by other state agencies of the Republic of Kazakhstan to obtain licences for similar activities from the State Construction Committee (Gosstroikomitet). The State Construction Committee basically licences activities directly related to construction, but some of its activities are similar to those subject to licensing by the Ministry of Industry and Trade of the Republic of Kazakhstan. This is currently one of the major legal obstacles in this sphere of legislation in the Republic of Kazakhstan.

Information concerning the Licence

The State Licence issued by the Ministry of Industry and Trade of the Republic of Kazakhstan is a General Licence, i.e. it has no time limit and is valid in all regions of Kazakhstan. So companies working simultaneously in different regions of Kazakhstan are entitled to operate through their separate subdivisions and subsidiaries on the basis of a single licence — it is not necessary to obtain a separate licence for each region.

The licence can only be issued to a legal entity (a foreign company registered outside the Republic of Kazakhstan or a legal entity registered in Kazakhstan) irrespective of whether a foreign company carries out its activities through a subsidiary or a structural subdivision.

Procedures, terms and potential problems when obtaining the Lisence

The procedure for obtaining a licence consists of obtaining basic approvals and permits issued by the following state agencies (depending on the activity being carried out):

1. The Ministry of Health Protection;
2. The Department of State Environmental Appraisal in the Ministry of Environmental Protection of the Republic of Kazakhstan;
3. The Department of the State Management of Emergencies, Engineering and Mining Supervision in the Emergency Agency of the Republic of Kazakhstan;
4. The Ministry of Industry and Trade of the Republic of Kazakhstan (for obtaining the Licence).

It is also worth mentioning that each state body has its own (additional) internal requirements as to the availability and completion of documentation, thus impeding the process of expeditious (timely) issue of a lisence. For instance, in obtaining approval by Gostekhnadzor (the State Engineering Supervisory Body), this agency is entitled to assign a company to carry out an examination of equipment and documentation in the Scientific Methods Centre to check its compliance with established safety requirements, and to examine the company specialists involved in the licensing procedure on their knowledge of safety instructions, etc.

Qualification Requirements on Companies Applying for the Licence

The legislation of the Republic of Kazakhstan establishes the following basic qualification requirements for operating industrial ventures involving explosives, fire risks and mining:

1. Availability of process regulations and an engineering design complying with the regulatory requirements of the Republic of Kazakhstan and international standards concerning subsoil use, labour safety and environmental protection;
2. Availability of the company's production and engineering base (its subsidiaries in Kazakhstan): specialised production buildings, and engineering facilities (machinery, hardware, equipment, boilers, vessels, and process lines);
3. Availability of specially equipped warehouses, rooms and tanks for storing finished products, explosive, flammable, noxious and poisonous substances, and fire-proof materials (a special permit by the internal affairs bodies);
4. Ilability of the following services: operation and maintenance of equipment, machinery, devices and accessories;
• monitoring of labour safety and Aenvironmental protection;
• metrological provision (possible conclusion of a contract with standardisation and certification agencies);
5. Written confirmation by mining, engineering, health and environmental supervisory bodies on the company's compliance with the requirements of labour safety and protection regulations, and with environmental standards;
6. Instructions for safe operation of facilities and a plan for eliminating potential industrial accidents, agreed with the Gostekhnadzor bodies;
7. Permits for recruiting foreign labour (if used);
8. Documents certifying the qualifications of executives and specialists, and their adequate background and practical professional experience;
9. Documents certifying that the company's employees have been examined on their knowledge of operational regulations and safety rules by the Gostekhnadzor bodies.

We hope that this information will be useful and help you to understand and assess the importance and necessity of timely licensing of the relevant activities, and to estimate the approximate scale of the task of preparing and obtaining documentation.

Grata Law Firm is ready to render any assistance that may be required in preparing documents and obtaining the licences and approvals required by any service company working in the oil and gas sector.