Since 2018, about 7 trillion tenge of investments attracted to subsoil use of Kazakhstan

At the regular government session chaired by the Prime Minister of the Republic of Kazakhstan Alikhan Smailov, prospects for the development of the geological industry were considered. Minister of Ecology, Geology and Natural Resources of the Republic of Kazakhstan Serikkali Brekeshev, Minister of Industry and Infrastructure Development Kairbek Uskenbayev, Vice Minister of Energy Askhat Khasenov presented their reports.

Brekeshev spoke about the current state and main prospects for the development of the geological industry.

In terms of proven reserves of most types of minerals, the republic is among the top ten leading countries in the world. In this regard, it is required to intensify the state geological study of the subsoil, which is one of the main methods for identifying promising areas and objects for subsequent transfer to subsoil use.

“The volume of state investments in 2020-2022 amounted to only 30 billion tenge. At the same time, there has been an increase in public investment in recent years,” the Minister of Ecology said.

At the same time, Kazakhstan is characterized by a low rate of public investment in exploration per 1 km2. It is 11 dollars. For comparison, in Australia - $167, in Canada - $203.

As world experience shows, investors invest in exploration of deposits in those countries where the state has already carried out or is conducting early stages of work at its own expense, where a base of promising areas with predicted resources has already been formed.

In this regard, the geological industry, as part of the execution of the instructions of the Head of State, faces the following main tasks:

First. Increased geological knowledge and identification of promising areas.

Second. Development of the infrastructure of the geological industry and geological science. Work on these tasks is carried out as part of the implementation of activities in the direction "Development of the geological industry" of the National project "Sustainable economic growth aimed at improving the welfare of Kazakhstanis".

Third. Digitalization and automation of production and technological processes.

Fourth. Improving legislation to increase the investment attractiveness of geological exploration, reproduction of the mineral resource base.

“I would like to note that we have developed a draft concept for the development of the geological industry until 2025, which reflects the solution of the above issues,” said Brekeshev.

There are significant prospects for new discoveries in Kazakhstan. So, in terms of hydrocarbons, geologists identify 15 sedimentary basins with predicted equivalent fuel resources of about 76 billion tons and varying degrees of exploration. Today, the entire volume of oil and gas production falls on 5 developed basins. Of these, the Caspian is considered the largest, which accounts for about 80% of the country's resource base.

At the same time, there are potential opportunities for the development of the mineral resource base of gold and the copper ore industry in Central, Eastern and Southern Kazakhstan. There are prospects for the discovery of new deposits of tungsten, molybdenum, aluminum, tin, as well as rare metals.

Within the framework of the National Project, at the expense of the state budget, geological additional study of areas, geological and mineralogical and deep geological mapping are carried out. In total, the total research area will be 680 thousand km2 by 2026. This will make it possible to cover up to 2.2 million km2 of the country with geological and geophysical knowledge.

As Brekeshev noted, taking into account the situation in the Kyzylorda region, it is planned to assess the raw material potential of the Aral Sea basin. In addition, projects are being drawn up for the study of the Shu-Sarysu, Severo-Torgai and Syrdarya poorly explored basins.

As part of the execution of the instructions of the Head of State, to ensure the stable functioning of the city-forming enterprises, exploration work is being carried out at 7 promising sites located near the single-industry towns of Ridder, Khromtau, Zhezkazgan, Temirtau and Balkhash, the basis of the economy of which is the mining and metallurgical complex.

In addition, given the current trends in the world market and the increased demand for rare and rare earth metals, as well as lithium, special attention is paid to identifying promising areas for these types of raw materials. In particular, this year, work continues to identify rare metals at the Kara-Ayak and Muncha sites. Competitive procedures are being carried out to start work to determine the prospects for the identification of rare earth metals in 12 sites.

In order to study the deep structure of the Caspian depression, work has begun on the Eurasia project. Last year, the implementation of the 1st stage of the project began. It includes the analysis, generalization and reinterpretation of geological and geophysical materials using modern technology. Implementation of the 2nd and 3rd stages is envisaged at the expense of investments.

Based on the results of the research, it is planned to drill a well up to 10-15 km deep at the expense of private investment. This will allow studying the geological section and assessing the potential of the basin for hydrocarbon exploration.

Thus, the state will create a database of geological and geophysical studies of deep horizons and ultra-deep drilling, and will be able to discover large oil and gas fields.

The Minister of Ecology stressed that the discovery of new deposits every year is becoming more difficult and expensive. Geological science plays an important role in strengthening the mineral resource base. Only its advanced development is able to substantiate the predictive fund for the discovery of deposits.

“In this regard, in the next 5 years, within the framework of program-targeted financing, it is planned to conduct scientific research to predict deep-seated objects and discover new deposits based on modern scientific achievements. As part of the digitalization and automation of processes, work is underway to create and implement the information system “National Data Bank of Mineral Resources,” said Brekeshev.

At the same time, the Ministries of Digital Development, Ecology, Geology and Natural Resources, Energy, Industry and Infrastructure Development have begun work on creating a single Kaznedra platform by combining and migrating all existing information systems in the field of subsoil use.

A single platform will facilitate the provision of comprehensive service support to investors by consolidating all processes and services in a single window.

In addition, on behalf of the President, the National Geological Service was established in December last year on the basis of subordinate organizations of RCGI Kazgeoinform and JSC NGK Kazgeology. In June of this year, the reorganization of these organizations and other organizational measures will be completed. At the same time, an analysis of world experience in the field of state regulation of the geological industry shows that in all leading countries national geological surveys have been created and are successfully functioning. The main tasks of geological services are the collection, analysis and provision of geological information, as well as systematic geological research, including the compilation of maps of geological content.

In general, the Service will be a comprehensive service support to investors through open access to geological information, operation of the National Data Bank of Mineral Resources, generalization, systematization and analysis of geological information.

According to Brekeshev, as part of the creation of the National Geological Service, it is planned to build a fund storage facility, 2 core storage facilities, repair and modernize 4 core storage facilities and create a data processing center. As a result, the level of state infrastructure provision will reach 100%.

“In order to improve investment attractiveness in exploration, we, together with interested state bodies, are working out relevant proposals for amending the current legislation,” said the Minister of Ecology.

First. This is the approval of the Agreement on the geological study of the subsoil in little-studied sedimentary basins. In the event that promising hydrocarbon resources are discovered, an opportunity will be provided for a guaranteed transition from the stage of geological study of the subsoil to the stage of exploration and production under the Improved Model Contract.

“The approach will be provided through the introduction of the License for the geological study of the prospects for oil and gas resources in the underexplored territories, which is a new tool. This will provide higher legal protection and investment stability and will allow investors to receive certain tax and other preferences, which will be reflected in the Enhanced Model Contract. The relevant amendments have been developed and submitted to the Ministry of Energy within the framework of the draft law on amendments to the Subsoil Code,” Brekeshev explained.

Second question. This is the improvement of legislation in the field of geology to increase the investment attractiveness of the geological study of the subsoil, the reproduction of the mineral resource base.

Currently, legislative amendments are being worked out with government agencies, which will reduce administrative procedures and improve the investment climate for attracting funds for exploration. As part of the implementation of the 74th step of the National Plan of the Nation "100 Concrete Steps", Kazakhstan joined the CRIRSCO family. The "Kazakhstan Association for Public Reporting on the Results of Geological Exploration, Mineral Resources and Mineral Reserves" (KAZRC) and the "Professional Association of Independent Subsoil Experts" (PONEN) have been established.

According to the head of the Ministry of Ecology, all the necessary regulatory and technical documents have been developed. The transition to international standards for accounting for mineral reserves ensures the transparency and reliability of the information provided for entering international stock exchanges. It is the CRIRSCO standards that are recognized by the leading stock exchanges and banks around the world and contribute to increasing the investment attractiveness of the country.

The legislation provides for a transition period using the current system of the State Commission for Mineral Reserves until January 1, 2024.

Brekeshev stressed that an important issue requiring attention is the oil pollution of a large groundwater deposit Kokzhide in the Aktobe region.

“The field is unique in the western region, and its potential can be used to provide water to the population of Aktobe, Atyrau and Mangystau regions, which are experiencing a shortage of high-quality drinking water. At the same time, within the boundaries of the Kokzhide field, 8 subsoil users are working on the exploration and / or production of hydrocarbon raw materials,” the Minister of Ecology said.

It should be noted that at different times, state bodies and local executive bodies revealed facts of groundwater pollution with oil products in the area of ​​the Kokzhide field. In this regard, the following activities were carried out:

First. Works on additional exploration of the Kokzhide deposit were carried out. Groundwater reserves were approved in the amount of 173.4 thousand m3/day and the boundaries of the Kokzhide deposit were determined.

Second. Samples and analyzes were taken from the wells of the departmental network of subsoil users, which showed the presence of impurities, but at the same time, no excess of the MPC for oil products was detected.

The Minister of Industry and Infrastructure Development Uskenbayev noted that the department is pursuing a policy in the field of subsoil use for solid minerals.

“In order to replenish the mineral resource base, increase geological knowledge, as well as provide existing industries with raw materials and create new ones, we are granting subsoil use rights. At the end of 2021, despite the pandemic, more than 1,700 licenses were issued and about 800 domestic junior companies were formed. Since 2018, about 7 trillion tenge of investments have been attracted to the sphere of subsoil use,” Uskenbayev informed.

The industry has attracted such major players in the global market as Rio Tinto (Rio Tinto), Fortescue (Fortescue), Silver Bullet (Silver Bull).

In order to provide the existing industries with a raw material base, representatives of domestic business ERG, Kazakhmys, KazMinerals, Polymetal, Polyus also assumed obligations for exploration of deposits. 38.6 million tons of iron ore, 1.4 million tons of alumina are mined annually, 2.7 million tons of copper and 193 thousand tons of lead concentrate are produced.

To date, 499 contracts and 1,738 licenses are in force in the field of subsoil use for solid minerals.

“According to the instructions of the Head of State, we are now conducting an audit of all deposits. We analyzed all existing contracts and licenses previously issued for subsoil use. This is more than 2 thousand documents. The Ministry considered 202 contracts for solid minerals. As a result, 52 contracts were terminated and 43 notifications about the elimination of violations were sent. 118 licenses have been terminated. Based on the results of the analysis, appropriate measures will be taken on the current 1620 licenses. The audit will ensure full coverage of subsoil users with less than 100% fulfillment of obligations. We are currently reviewing the terms of contract extensions. Counter obligations are established for subsoil users. First of all, we focus on social returns,” Uskenbayev explained.

Each subsoil user, according to the new conditions, will participate in regional social projects, create new production facilities, modernize existing ones, develop local content, create additional jobs, and provide domestic production enterprises with raw materials as a matter of priority. To date, the amount of accepted minimum investment obligations under licenses exceeds 15 billion tenge annually.

It should be noted that in order to intensify geological exploration, as well as the development of unused deposits of solid minerals (TPI) and common minerals (OPI), together with the Ministry of Ecology, the issue is being worked out to include the entire territory of the Republic of Kazakhstan available for subsoil use in the State Subsoil Fund Management Program.

To date, more than 1 million 65 thousand square kilometers are available, about 260 thousand square kilometers remain to be included.

“The opening of the entire territory available for subsoil use will increase the geological knowledge of the subsoil, replenish the mineral resource base, and also attract additional investment in the industry. Why do we propose to speed up the delineation of deposits. In order to stimulate exploration, we are also working on a mechanism for an accelerated transition to the production stage for estimated reserves,” said the Minister of Industry and Infrastructure Development.

In order to improve legislation in the field of subsoil use, taking into account the experience gained over the period of implementation and implementation of the Subsoil Code, the Ministry is developing a draft Concept of the Law on Amendments and Additions to Certain Legislative Acts on Subsoil Use Issues.

The following amendments are proposed:

  • regulation of the procedure for the formation of the Program for managing the state subsoil fund,
  • extension of the auction regulations until 2025,
  • guarantee fee for auction participants,
  • withdrawal of licenses, in case of default,
  • issues of pilot production during the exploration of solid minerals (solid minerals),
  • improvement of procedures for eliminating the consequences of subsoil use.

The draft Concept is currently under discussion.

“In order to ensure transparency in granting the right to subsoil use and to eliminate corruption risks, this year we plan to automate the process of issuing licenses. Automation of the process will eliminate the human factor, as well as reduce the review time to 5 days. Now the review process takes more than 30 days,” Uskenbayev added.

In turn, Vice Minister of Energy Askhat Khasenov reported on the ongoing work of the department for the development of the geological industry in the field of hydrocarbons.

To date, the total number of subsoil use contracts for hydrocarbons is 281, of which 40 are for exploration, 135 for exploration and production, 96 for production, and 10 for PSA (Production Sharing Agreement).

“In 2020-2021, about 173 billion tenge were invested in geological exploration by subsoil users, of which 95 billion tenge in 2020, and 78 billion tenge in 2021,” Khasenov informed.

In order to increase the investment attractiveness of geological exploration, the Ministry is working in two areas:

1) Introduction of a new mechanism - the Improved Model Contract;

2) Amendments to the Code of the Republic of Kazakhstan "On Subsoil and Subsoil Use" to further stimulate exploration.

In the first direction, the Head of State was instructed to ensure the adoption of legislative norms for the approval of the Improved Model Contract. In pursuance of this instruction, the Ministry of Energy, together with the Association "Kazakhstan Council of Foreign Investors" and other interested state bodies, determined and agreed on the categories of fields to which the CMC (Improved Model Contract) will apply, as well as a package of regulatory and fiscal preferences.

In particular, the CMC will cover offshore projects, complex onshore projects and gas projects. It should be noted that the CMC will not apply to existing producing fields, including large projects - Tengiz, Korolevskoye, Kashagan, Karachaganak.

“Currently, the developed amendments on the provision of regulatory preferences within the framework of the CMC are at the final stage, almost all the amendments have been agreed upon,” the Vice Minister of Energy specified.

In terms of fiscal preferences, the Ministries of National Economy and Finance are considering the provision of an alternative tax regime for subsoil use (ANN), an uplift on capital, exemption from land tax and property tax, and a number of other benefits.

It is expected that the adoption of the CCM will have a positive effect on:

1) increase in geological knowledge;

2) development of hard-to-recover reserves;

3) transfer of new technologies;

4) improving the conditions for conducting activities of subsoil users on gas and offshore projects;

5) attracting additional investment in exploration.

In the second area, in order to ensure transparency in granting subsoil use rights and simplify procedures to stimulate geological exploration, the Ministry of Energy has developed a number of legislative amendments that provide for:

  • reduction of the list of requirements for participation in the auction;
  • conclusion of a contract for subsoil use with the auction participant who took the second place at the end of the auction, in case of non-payment of the final signature bonus by the first winner;
  • integration of the electronic auction with existing information systems (do not require documents and information that can be obtained from information systems);
  • transition to a notification procedure for the development of an exploration project at the search stage (excluding appraisal, offshore projects, exploration projects involving the expansion of a subsoil plot);
  • the possibility of a subsoil user refusing to drill a well at the exploration stage without paying a fine for failure to fulfill a contractual obligation, provided that seismic surveys have been carried out;
  • the possibility of providing, as a security for the liquidation of the consequences of subsoil use at the stage of exploration, alternative methods of security, such as a guarantee, insurance, pledge of a bank deposit. This measure will allow the subsoil user to involve additional funds in geological exploration.

The developed package of legislative amendments also includes other changes that will reduce the time for approval of project documents for the subsequent transition to practical exploration.

Since the entry into force of the Subsoil Code (since June 29, 2018), the Ministry has held 3 electronic auctions for granting the right to subsoil use for hydrocarbons.

“As a result, 39 new standard contracts for exploration and production of hydrocarbons were signed. The amount of the signature bonus paid to the state budget amounted to 12.8 billion tenge, the volume of investment in exploration is 237.4 million dollars. It should be noted that the auction procedure is fully automated, which makes it as open and transparent as possible. On April 21 of this year, the Ministry announced the next auction for granting the right to subsoil use for hydrocarbons for 40 subsoil plots. The auction is scheduled for July 22 this year,” Khasenov informed.

The Ministry conducts relevant information and explanatory work on an ongoing basis. As a result of this work, potential investors showed great interest in the announced auction for granting the right to subsoil use. For comparison, 47 subsoil plots were put up for three previous auctions, this year interest was shown for 40 subsoil plots within one auction.

“The total starting signing bonus for all exposed subsoil plots is 2.9 billion tenge. According to the current rules, the auction will be held to increase prices,” the Vice Minister of Energy added.

The Ministry will continue systematic work to improve state support measures for the development of the country's geological industry in the field of hydrocarbons, ensuring clear and transparent procedures for granting subsoil use rights at each stage.

Stay updated about the events of the Prime Minister and the Government of Kazakhstan - subscribe to the official Telegram channel