Local Content Requirements: Potential Liability

Ministry of Oil and Gas for the first time to impose the fines on the companies which are in breach of local content requirements.

Dear Sirs,

We would like to inform you on the intention of the Ministry of Oil and Gas for the first time to impose the fines on the companies which are in breach of local content requirements. As Mr. Kanatbek Safinov, the responsible secretary of the Ministry of Oil and Gas of the RK has informed on Oil and gas: Local content – 2012 forum held on 20 March 2012, 80 companies will be penalized for 400 million tenge as per results of 2011 year.

The responsible secretary clarified that meanwhile it is the first strike action to bring the violators to administrative fine while termination of subsurface use contract will serve as the second strike action.

As Mr. Zhan Nurbekov, director of the branch of contractual agency of Oil and Gas informational and analytical center JSC informed, the case with these fines refers to violations for 2011 when numeral indicators on local content were introduced into subsurface use contracts for the first time. To his knowledge, 80 notifications will be addressed to violators at first days of April.

In order to minimize possible liability, we would strongly recommend you to review internally the fulfillment of local content requirements for 2011 and address the competent bodies with relevant clarifications.

Our natural resources team would be glad to help you to develop the strategy and prepare all the necessary documents. In case you have any questions on concerned matter, please contact Sofiya Zhylkaidarova (ssz@signumlaw.com), Abylkhair Nakipov (amn@signumlaw.com) and Gaukhar Kudaibergenova (gbk@signumlaw.com).

Information contained in this Client Update is of general nature and cannot be used as legal advice or recommendation. Please seek for a specific advice in relation to any questions. Please note that Kazakhstan and Turkmenistan are emerging economies and their legislation and legal systems are in constant development. Should you have any questions or would like to discuss subjects addressed in this Client Update please contact us.