GRATA International Lawyer Mikhail Abdulov Commented to Kursiv Newspaper on Oil and Gas Legislation
“The Ministry of Energy of the Republic of Kazakhstan has approved the rules for conducting electronic auctions for the sale of subsoil use rights for hydrocarbon resources.”
Experts interviewed by Kursiv noted both the disadvantages and advantages of the rules for holding auctions and subsoil legislation in general.Mikhail Abdulov, lawyer of the Subsoil Use department of the law firm GRATA International (Almaty), noted the emergence of a program for managing the State Subsoil Fund along with an interactive map as positive changes in legislation.
Entrepreneurs interested in financing geological exploration or mining can view existing vacant subsoil areas on this map even before submitting an application. By clicking on any of the sites, you can find out information about it, as well as contact information through which you can request additional information on the acquisition of geological information.
Among the disadvantages, the expert named that from September 1, electronic auctions will be held on the website of the operator, which is expected to become Information and Accounting Center JSC. The question is how technically reliable the operator’s website is. “We cannot exclude the possibility that during the auction one of the participants’ website or its program will freeze or some other technical failure will occur due to the fault of the auction organizers. And what should an investor do in this case? – asks Mikhail Abdulov.
Although the auction rules contain a separate chapter dedicated to the suspension, postponement and cancellation of the auction due to technical failure, how this will work in practice remains a question.
“It is not clear how this will all work in practice. It seems that the rules stipulate the issue of technical failure and what to do in such cases. But, for example, one of the participants is English-speaking. The operator called him and informed him that there was a failure, but he did not understand. Then, how is it determined whether there is a technical error or not? If someone disappears online, for example, how do they contact him? That is, the procedure itself is unclear.
Therefore, we still have questions about how effectively these provisions of the rules will work in the event of technical problems,” states Mikhail Abdulov.
The rules also state: the winner is the one who offered the larger signing bonus. “Suppose a Kazakh investor offered 100 million tenge, and a foreign one – 90 million tenge.
Accordingly, ours won. But what if, as time passes, it turns out that he did not pay the signing bonus? Then a contract is not concluded with him, and the subsoil plot is re-put up for auction, which will take place no earlier than six months later. And, of course, there is no guarantee that there will be an investor for this site again. How likely is this? – Abdulov models the situation.
According to him, the practice of holding such events in the past demonstrates: from the auction held in 2018 for 31 subsoil plots, 16.9 billion tenge of subscription bonuses were declared, and 133 million tenge were actually paid for 15 subsoil plots. That is, theoretically, some unscrupulous participant could win the auction, but then not pay the signing bonus or not sign the contract, thereby knocking out the bona fide participant from the competition.
This kind of situation also cannot be excluded. Mikhail Abdulov believes that it would be possible to prescribe a procedure according to which, if the auction winner refuses the plot, the second participant who gave the largest amount of the signing bonus could be recognized as the winner.