Kazakhstan has a well-established and strategically vital upstream oil and gas industry with a history of production spanning over a century. Since 1991, the sector has been the primary engine of the national economy with foreign direct investment into the industry reaching a historic zenith of over USD 12 billion in 2019. Currently, the upstream oil and gas industry accounts for roughly 8% of Kazakhstan’s GDP and constitutes approximately 50% of its total export revenue.

According to the OPEC Annual Statistical Bulletin 2025, Kazakhstan holds proven crude oil reserves of 30 billion barrels. In addition, the Committee of Geology of the Ministry of Industry and Construction of Kazakhstan (“Geology Committee”) reports that recoverable gas reserves have reached 3.8 trillion cubic metres.

Geology Committee data reveals approximately 360 hydrocarbon deposits identified across the country, most of which are concentrated in Western Kazakhstan and in the offshore areas of the Caspian Sea. The industry is dominated by three “super-giant” fields: Tengiz, Karachaganak, and Kashagan, which together account for a significant portion of the nation’s total output.

The primary legislation relating to exploration and production of oil and gas is the Code on Subsoil and Subsoil Use (“SSU Code”), which was adopted on 27 December 2017 and became effective on 29 June 2018.

Subsoil use rights for the exploration and production of hydrocarbons are granted pursuant to contracts entered into with the Ministry of Energy of Kazakhstan (“MoE”):

• primarily through auctions; and
• through direct negotiations in exceptional cases.

Obtaining subsoil use rights through direct negotiations is available to the national oil and gas company, KazMunayGas NC JSC (“KMG”), which may also engage a strategic partner that undertakes the investment financing of the project, as prescribed by the SSU Code.

Moreover, pursuant to recent amendments to the SSU Code, holders of geological study licences issued prior to 1 January 2025 in respect of subsoil plots located entirely within underexplored territories are entitled to enter into hydrocarbon exploration and production contracts. These amendments were introduced to stimulate hydrocarbon exploration activities in Kazakhstan.

For offshore operations, a so-called “improved model contract” (“IMC”) regime may apply, as activities in the Kazakhstan sector of the Caspian Sea are classified as “complex projects” eligible for a package of regulatory and fiscal incentives (please also see question 4).

In addition, newly concluded offshore subsoil use contracts are subject to a mandatory participation requirement, under which KMG must have a minimum 50% of share participation as a subsoil user under the contract in the field of hydrocarbons.

The model contract for hydrocarbon exploration and production (which also applies, where relevant, to contract for hydrocarbon production) generally contains the following key features:

• the exploration period usually up to six years;
• the production period is typically up to 25 years;
• no limit on the number of contracts per person/company. Transferable, subject to national security review and MoE consent;
• includes a work programme setting out the subsoil user’s annual physical obligations (for example, production volumes) and financial obligations;
• a reclamation security must be provided (see question 11 for further details on reclamation security);
• an obligation to supply produced crude oil to the domestic market for subsequent processing under Oil Supply Schedule (see question 10 for further details on domestic crude oil supply);
• contains provisions governing liability and penalties for breach of contractual obligations.

In addition to contract for hydrocarbon exploration and production and contract for hydrocarbon production, Kazakhstan also has up to nine production sharing agreements (“PSAs”) currently in force. The terms and features of these agreements are undisclosed due to their confidentiality.

Grandfather clause

Most subsoil use contracts contain a so-called “grandfather clause”, which provides that legislative amendments adversely affecting the entrepreneurial activities of a subsoil user do not apply to contracts concluded prior to the enactment of such amendments. However, these stabilisation guarantees do not extend to legislative changes relating to national security, defence capability, environmental safety, healthcare, taxation and customs regulation.

Currently there is no significant development or production of unconventional hydrocarbon resources in Kazakhstan. However, Kazakhstan has potential for the development of such resources, and early-stage activity has been identified in relation to shale oil, shale gas, natural bitumen, coal bed methane and gas extracted from gas hydrates.

To stimulate the sector, the SSU Code was amended in 2022 to introduce the IMC regime, which is intended to incentivise the exploration and production of “complex projects”, including unconventional hydrocarbon resources that qualify as such projects.

The IMC regime provides, among other things, the following regulatory and fiscal incentives:

• exemptions from property tax and specific rules for asset depreciation;
• an alternative subsoil use tax (please see question 9 for further information regarding alternative tax);
• exemption from export customs duties on hydrocarbons, in accordance with the terms of the customs regulation;
• extended durations for both the exploration and production periods;
• disputes may be resolved in international arbitration under UNCITRAL rules, seated in Kazakhstan, including at International Arbitration Centre of Astana International Financial Centre, or outside Kazakhstan.

MoE is responsible for state policy in the hydrocarbon industry, concluding and terminating exploration and/or production contracts for hydrocarbons and overseeing subsoil users’ compliance with the conditions of their contracts and requirements of the SSU Code.

The Ministry of Environment and Natural Resources (“MENR”) is responsible for environmental oversight of upstream oil and gas operations, issuing environmental permits required for upstream oil and gas activities, and conducting state environmental expert reviews.

Geology Committee reviews applications for confirmation of new hydrocarbon discoveries and is responsible for managing the state fund of geological information.

Yes, the state participates in Kazakhstan’s upstream oil and gas sector both in its regulatory capacity (see question 5 above) and through state-owned entities.

Kazakhstan designates certain entities as national hydrocarbon companies, in particular KMG, which engages in the exploration and production of oil and gas, and QazaqGaz NC JSC (“QazaqGaz”), which conducts exploration and production of natural gas and also holds a pre-emptive right to purchase raw and commercial gas from subsoil users.

Through these national hydrocarbon companies, the state also retains a priority right to acquire any transferred subsoil use rights, or objects, related to subsoil use rights, in projects involving strategic subsoil plots. These include areas containing significant hydrocarbon reserves (oil reserves exceeding 100 million tonnes and/or natural gas reserves exceeding 50 billion m³) and fields located entirely within Kazakhstan’s sector of the Caspian Sea.

There are no restrictions on participation of foreign companies in upstream oil and gas industry, except that in offshore projects subsoil use contracts are subject to a mandatory requirement for KMG to hold not less than 50% participation interest (please see question 2). Moreover, to obtain offshore subsoil use rights, an applicant must have a proven track record of conducting subsoil use operations either on the continental shelf of Kazakhstan or offshore outside Kazakhstan.

Any individual or legal entity, including foreign individuals and entities, that complies with the requirements of the SSU Code may obtain subsoil use rights for hydrocarbons in onshore through the auction procedure. However, the application for participation in such auction may be refused based on national security grounds.

The principal features of the environmental and health and safety regulatory framework include the following:

Environmental Impact Assessment

Before commencing operations, a subsoil user must conduct a screening process to determine whether the proposed activity is subject to an environmental impact assessment (EIA). Where an EIA is required, the process involves a more comprehensive review, including the preparation of an environmental impact report and the organisation of public hearings.

Environmental permits

Upstream oil and gas activities are classified as Category I facilities under Environmental Code dated 2 January 2021 (“Environmental Code”) and are therefore subject to environmental permitting requirements. Depending on the applicable regulatory criteria, subsoil users engaged in upstream operations must obtain either an integrated environmental permit or an environmental impact permit.

The environmental permits for Category I facilities are issued by the Committee for Environmental Regulation and Control of MENR or its territorial departments in electronic form through the e-government web portal. To obtain a permit, a subsoil user must apply to the permitting authority with supporting documents such as project documentation for the operation of facilities, draft emission limits, a draft waste management programme, a draft programme of industrial environmental control and other documents. As part of issuing an environmental permit, the permitting authority conducts a state environmental expert review of the project documentation for the operation of the facility concerned.

“Polluters-pays” principle

Pursuant to the Environmental Code, subsoil user whose activity causes or may cause environmental pollution or degradation of the natural environment, resulting in environmental damage in any form or harm to human life and/or health, bears all the costs required to comply with Kazakhstan’s environmental legislation and to prevent and remedy adverse impacts.

The most notable example of the application of this principle involved the North Caspian Operating Company, against which the MENR claimed approximately USD 5.1 billion in connection with the storage of sulphur volumes exceeding permitted limits at the Kashagan field.

Industrial safety

The Ministry for Emergency Situations of Kazakhstan is the regulator responsible for industrial safety. Upstream oil and gas operations are required to be covered by an industrial safety declaration and to implement an emergency response plan. In addition, all technologies, technical equipment and materials used at such facilities are subject to mandatory industrial safety expert review.

Kazakhstan benefits from oil and gas resources through both participation in upstream operations and the application of fiscal mechanisms. Furthermore, pursuant to PSAs, the state receives a share of production once the investor has recovered its costs.

Oil and gas producers are subject to the following taxes under Tax Code dated 18 July 2025 (“Tax Code”):

Signatory bonus

A signature bonus is a one-time payment made to the state for the subsoil use right. The base amount of the signature bonus is prescribed by the Tax Code and is calculated by reference to estimated reserves, the economic value of the deposit and other relevant factors with the final amount specified in the subsoil use contract.

Mineral extraction tax (MET)

MET is imposed on the volume of hydrocarbons produced and represents the primary subsoil-use tax applicable to the oil and gas industry. Through 1 January 2027, crude oil is subject to MET at rates ranging from 5% to 18%, with the applicable rate determined by cumulative annual production volumes. Oil supplied to the domestic market may benefit from a 50% reduction in the applicable MET rate.

For raw gas, the standard MET rate is 10%. However, raw gas sold domestically is subject to preferential rates ranging from 0.5% to 1.5%, depending on the volume extracted during the calendar year.

Rent export tax

Exporters of crude oil, gas condensate and crude petroleum products are subject to a rent export tax calculated by reference to the global oil prices, with rates ranging from 0% to 32%.

However, subsoil users operating under PSAs or under subsoil use contract approved by the President of Kazakhstan are exempt from this tax.

Excess profit tax (EPT)

EPT applies on a per-subsoil use-contract basis where a subsoil user’s annual net income exceeds 25% of deductible expenditure. The tax is levied on a sliding scale, with rates ranging from 10% to 60%, depending on the ratio of net income to deductible expenditure.

Corporate income tax

Oil and gas companies are subject to corporate income tax at the standard rate of 20% on taxable income derived from hydrocarbon activities.

Alternative tax

Certain categories of subsoil users are eligible to apply an alternative tax regime instead of MET, EPT and historical cost reimbursement. This regime applies to projects on the continental shelf of the Caspian Sea, deep-well projects and depleting fields, with rates determined by reference to global oil prices and ranging from 0% to 42%.

For subsoil users operating under exploration and production contracts or production contracts for hydrocarbons in respect of complex offshore projects, the alternative tax is calculated based on global oil prices at rates ranging from 0% to 14%.

Historical cost reimbursement

Subsoil users are required to reimburse the state for the expenses incurred in connection with geological exploration and the development of deposits. The amount payable is determined by the state and specified in a confidentiality agreement concluded between the state and subsoil user.

Incentives

As a general rule, oil and gas companies do not enjoy tax incentives in Kazakhstan. Only a limited range of incentives is available, primarily under the IMC regime and in the form of tax stabilization applicable to PSAs entered into prior to 1 January 2009 that have undergone review by the tax authorities, as well as subsoil use contracts approved by the President of Kazakhstan.

Restriction on export

While crude oil exports are generally permitted, a temporary ban remains in place until 21 November 2026 on the export of petrol, diesel fuel and certain petroleum products by road, as well as certain petroleum products by rail. The ban may be extended in order to maintain domestic market stability and energy security.

Moreover, subsoil users are required to comply with domestic supply obligation.

Local content obligations

The legislation obliges oil and gas companies to conduct competitive tender processes for the procurement of goods, works, and services (GWS) used for theirs subsoil use operations in Kazakhstan, and to accord priority to domestically sourced GWS where applicable.

As a general rule, subsoil use contracts establish local content requirements for personnel, goods, works, and services, typically expressed as prescribed minimum percentage thresholds. The contractual minimum local content requirement for works and services must be expressly stipulated, and such threshold may not be set below 70% in-country value.

Domestic supply obligations

To secure the domestic supply of petroleum products, subsoil users are required to supply crude oil for refining within the territory of Kazakhstan in volumes specified in the Oil Supply Schedule prepared by the MoE. In practice, subsoil users are frequently required to supply up to 100% of their total production.

This obligation does not apply to “complex projects”, PSAs, and subsoil use contracts approved by the President of Kazakhstan.

QazaqGaz pre-emptive right

The state holds a pre-emptive right to acquire raw gas and so-called “commodity gas” produced by subsoil users, which is exercised through QazaqGaz. Before disposing of any raw gas or commodity gas, a subsoil user must submit a commercial offer to QazaqGaz, which then determines whether to exercise its pre-emptive right. In practice, QazaqGaz rarely declines to purchase gas offered under this mechanism.

The pre-emptive right does not apply in certain cases expressly provided for in the Law on Gas and Gas Supply dated 9 January 2012 (“Law on Gas and Gas Supply”).

Decommissioning (i.e. liquidation) of subsoil use operations is governed by the SSU Code and the Environmental Code.

Decommissioning is undertaken with the objective of restoring production facilities and land plots to a condition that ensures the safety of human life and health and the protection of the environment, while recognising that, due to technical and operational complexities, full restoration may not always be achievable.

The decommissioning process is carried out in accordance with a technical document – liquidation plan, which is subject to mandatory state environmental and industrial expert reviews.

The subsoil user under the relevant subsoil use contract bears primary responsibility for carrying out decommissioning of subsoil use operations.

Subsoil users are also required to provide financial security for future decommissioning liabilities:

• during the exploration phase, such security may be provided in the form of a pledge over a bank deposit, a bank guarantee, and/or insurance;
• during the production phase, financial security is required to be provided in the form of a pledge over a bank deposit.

There is no distinction between offshore and onshore oil and gas pipelines under Kazakhstan law.

Instead, the regulatory framework differentiates between two categories of pipelines based on their purpose and scale:

• general pipelines, which are used for the transportation of oil and gas within the boundaries of the subsoil user’s (owner’s) or lawful possessor’s facilities for internal (intra-field) needs, including connections to main pipelines; and;
• main pipelines, which are designed for long-distance transportation, including delivery to refineries, export routes, or seaports.

General pipelines are not subject to a dedicated regulatory regime governing their construction. Instead, their development is regulated under the general provisions of the Law on Architectural, Urban Planning and Construction Activities, along with other applicable technical and safety requirements.

In contrast, main pipelines are governed by the Law on Main Pipelines dated 22 June 2012, which establishes a significantly more comprehensive and stringent regulatory regime. In particular, the construction of new main pipelines is subject to the state pre-emptive right to participate in such projects with a minimum share of 51%.

The operation of main pipelines is typically carried out by operators. Operator services for main pipelines are performed by national companies:

• Intergas Central Asia JSC (“ICA”), in respect of main gas pipelines; and
• KazTransOil JSC, in respect of main oil pipelines.

Main pipelines operators must obtain a license for operation of main pipelines from MoE.

There are no large-scale LNG liquefaction plants or LNG import terminals in Kazakhstan. Overall, LNG development in Kazakhstan remains at an early stage, limited to small-scale domestic projects in select regions.

However, pursuant to the Resolution of the Government of Kazakhstan “On Approval of the Comprehensive Plan for the Development of the Gas Industry for 2025-2029” (“Plan for Gas Industry”), the construction of the country’s first LNG plants is envisaged in order to support the development of the domestic LNG market (for example, a 75,000 tonnes per annum LNG plant is planned in Astana).

The construction of LNG liquefaction plants are subject to general regulatory requirements, including environmental impact assessment, compliance with industrial and safety standards, and the obtaining of relevant construction permits.

In addition, once operational, LNG plants would be subject to licensing requirements. In particular, a license for the operation of petrochemical production facilities would be required under the Law on Permits and Notifications dated 16 May 2014.

Gas storage in Kazakhstan is regulated under the Law on Gas and Gas Supply, the SSU Code, and the Law on Natural Monopolies dated 27 December 2018. The latter is of particular relevance in respect of tariff-setting for the storage of commodity gas, which is treated as a regulated service.

Gas storage activities are also subject to generally applicable environmental, health and safety, and industrial regulation.

Gas storage requires subsoil use contract or license for use of subsurface, in accordance with the SSU Code.

Kazakhstan currently operates three main underground commodity gas storage facilities: Bozoi (up to 4,000,000 thousand cubic metres), Poltoratskoye (up to 350,000 thousand cubic metres), and Akyrtobe (up to 300,000 thousand cubic metres). These facilities are operated by ICA.

Tariffs for commodity gas storage are regulated. The current interim tariff for storage services provided by ICA is KZT 405.58 (approx. USD 0.8) per 1,000 cubic metres per month, effective until 31 August 2026.

According to Plan for Gas Industry, existing storage facilities are expected to be modernised to address seasonal supply shortages, and additional storage capacity is envisaged.

Yes, Kazakhstan has an extensive gas transmission and distribution system connecting major upstream gas production areas to domestic consumers and export markets through main gas pipelines. In addition, Kazakhstan has an established rail transportation system for liquefied petroleum gas (“LPG”)

Ownership and regulation

The centralized gas transmission infrastructure is mainly operated by QazaqGaz, which manages the main gas pipeline network with a total length exceeding 21,000 km. Gas produced predominantly in western Kazakhstan is supplied to the southern regions of the country via the Beineu-Bozoi-Shymkent main gas pipeline, which is operated by a joint venture between QazaqGaz and Trans-Asia Gas Pipeline Company Limited (China). QazaqGaz also exports gas to China through the Kazakhstan-China main gas pipeline.

The gas transmission and distribution sector is primarily regulated by the MoE, which is responsible for policymaking, the Committee for Regulation of Natural Monopolies of the Ministry of National Economy (“Committee of Natural Monopolies”), which oversees tariff regulation, and QazaqGaz, which participates in the implementation of state policy in the gas supply sector.

Third party access

The Law on Gas and Gas Supply establishes a third-party access regime for (i) producers of commodity gas, (ii) subsoil users who own commodity gas produced as a result of processing raw gas extracted by them, and (iii) owners of commodity gas produced outside the territory of Kazakhstan who intend to transport such gas through Kazakhstan.

Gas transmission operators are required to grant non‑discriminatory access to main pipeline capacity, gas storage facilities and distribution networks, subject to available capacity and technical feasibility. In practice, gas transportation is predominantly carried out by QazaqGaz, as it holds a pre‑emptive right to purchase gas and regularly exercises this right.

The downstream gas market in Kazakhstan is subject to strong state control and is treated as a strategic sector aimed at ensuring affordable access to gas for the population. The market is highly concentrated and dominated by state and quasi‑state entities, with private sector participation permitted only within a strictly regulated framework. For environmental protection and public health reasons, end‑consumers are supplied exclusively with commodity gas and/or LPG.

Customer choice

Under the current market structure, end-consumers are required to contract with the gas distribution organisation to whose network they are physically connected, most commonly a regional branch of QazaqGaz Aimaq JSC (wholly owned subsidiary of QazaqGaz). Although such contracts are formally governed by general civil law, consumers have no practical ability to choose an alternative supplier, as gas supply is determined by physical network connection rather than commercial choice.

The LPG market operates mainly on a market basis, however, it remains subject to regulated pricing and state oversight.

The downstream gas market is regulated by the MoE, which sets maximum wholesale price caps for commodity gas and LPG, and establishes rules governing retail sales and technical safety standards for gas systems.

The retail price of gas to end-consumers is not market-driven. It is a regulated aggregate consisting of:

• the wholesale price cap (set by the MoE);
• the transportation tariff (set by the Committee of Natural Monopolies); and
• the supply margin (operating costs of the supplier, also regulated).

Kazakhstan is currently facing challenges related to discovery of new oil and gas reserves. In response, state policy is focused on stimulating exploration activity. Recent legislative and regulatory measures include:

• introduction of a dedicated legal regime for underexplored territories, featuring a specific model contract and tailored exploration requirements;
• holders of geological study licences issued prior to 1 January 2025 in respect of subsoil plots located entirely within underexplored territories are entitled to enter into hydrocarbon exploration and production contracts;
• the IMC regime has also been introduced (see question 4 for further information on regulatory and fiscal incentives under IMC regime);
• auction procedures for underexplored territories have been significantly streamlined and accelerated, including reduced timelines, the possibility of awarding rights to a single bidder, and the removal of certain procedural stages.

Separately, the state is shifting its policy away from the direct use of LPG by end‑consumers and instead intends to redirect LPG volumes towards downstream processing and the development of the petrochemical sector. In this context, a draft law on the petrochemical industry is currently being developed with the aim of accelerating the sector’s growth.

Kazakhstan’s oil and gas sector is undergoing a period of significant structural transformation, driven by vulnerabilities in export routes, a structural deficit in the domestic gas market, the anticipated renegotiation of PSAs concluded in the 1990s, and the expected revision of the Tengiz project framework.

Export-route infrastructure

The Caspian Pipeline Consortium (“CPC”) currently transports more than 80% of Kazakhstan’s crude oil exports, including production from major fields such as Tengiz and Karachaganak. In late 2025, the CPC route experienced a series of disruptions following drone attacks and damage to the Novorossiysk terminal. During the restoration period, Kazakhstan temporarily redirected approximately 300,000 tonnes of crude oil in December 2025 through alternative export corridors using the pipeline network operated by KazTransOil JSC.

These diverted volumes were exported to Germany and China, as well as via the Baku-Tbilisi-Ceyhan (BTC) pipeline, with shipments also handled through the ports of Novorossiysk and Ust‑Luga. Full CPC capacity was restored only in late January 2026. Overall, recent geopolitical developments have created new opportunities for Kazakh crude oil, positioning Kazakhstan as an alternative supplier to Europe and making it the EU’s third‑largest crude oil supplier in 2024.

Gas market

Despite substantial gas reserves, Kazakhstan continues to face domestic gas shortages due to regulated pricing and the government’s focus on ensuring affordable gas supply to the population. Domestic gas sales remain largely unprofitable, resulting in ongoing subsidies by QazaqGaz to support the internal market. To address this imbalance, state policy is currently focused on accelerating exploration of new gas fields, renegotiating gas supply terms with major oil producers, and expanding gas export opportunities, particularly to China.

Energy transition

The authorities in Kazakhstan are actively promoting the agenda for the construction of nuclear power plants (NPPs). At the initiative of the country’s President, a nationwide referendum was held on 6 October 2024 to determine whether the public supports the construction of NPPs in the country. According to official data, about 70% of the voters who participated in the referendum voted in favour of this decision. However, the results also indicate significant concerns among a large section of the population regarding the safety and justification of the country’s transition to nuclear energy.

Following the referendum, Rosatom has been designated as the leader of the international consortium for the construction of NPP project. On 20 June 2025, during the St Petersburg International Economic Forum, an Indicative Roadmap outlining the main stages of the project was approved, from engineering surveys to the signing of an EPC contract and project documentation.

Carbon Neutrality Strategy

At the Summit on Climate Ambition 2020, the President of Kazakhstan announced the goal of achieving net zero greenhouse gas emissions by 2060. On 2 February 2023, the Strategy for Achieving Carbon Neutrality Until 2060 (“Strategy”) was signed by the President.

The Strategy aligns with global climate trends and international obligations and focuses on adapting the national economy through measures such as carbon regulation, the promotion of ESG principles, attraction of green investment and improvements in energy efficiency. In addition, the Action Plan for the Transition to a Green Economy sets out measures for 2030 aimed at climate adaptation, including water‑use reduction, agricultural transformation, infrastructure modernisation, sustainable transport development and ecosystem preservation.

Methane reduction

Recently the regulatory focus in Kazakhstan’s oil and gas sector shifted towards tightening environmental enforcement on methane emissions, driven by the country’s accession to the Global Methane Pledge and commitments under the Paris Agreement. In September 2025, the MoE signed a Memorandum with the Global Methane Hub to implement satellite monitoring of leaks.

Best Available Technologies

The Environmental Code required 50 large enterprises – predominantly in oil and gas, mining, metallurgy, chemicals, and power to adopt best available technologies (BAT).

If enterprises do not switch to BAT, then the rates of payment for emissions will grow.

Hydrogen development

In 2024, Kazakhstan approved the Hydrogen Energy Development Concept until 2030. Key objectives include producing 25,000 tonnes of hydrogen by 2030, with at least 50% being green hydrogen, and developing infrastructure such as hydrogen storage facilities and refuelling stations. The plan also aims to reduce CO₂ emissions, increase hydrogen exports, attract investment, and implement hydrogen transport solutions.