The petroleum tax regime for oil exploration and development projects is currently undergoing change through the legislative process in Kazakhstan. The current tax regime is anticipated to be updated by a new tax regime on January 1, 2009. This new tax code has already been published in draft form and is believed to be, in all material respects, the same as the final tax regime that will be approved on November 1, 2008. However, once the new tax regime goes into effect on January 1, 2009, the Government of Kazakhstan (the "Government") maintains the right to make further changes and adjustments taxes and rates on an annual basis.
It is widely understood, as a general guideline, that the Government will strive to maintain a balance between maximizing the Kazakhstan tax-take and minimizing the level of profitability sufficient to attract (and maintain) foreign investment in oil exploration and development projects. As a result, aside from the actual commercial discovery of oil, understanding the Kazakhstan tax regime defines the most significant economic impact on the Block 36 project operated by Gentech International Kazakhstan, LLP ("GIK").
GIK will pay three types of taxes: "Contract" taxes that are paid based on the agreed Exploration Contract (a.k.a. "Subsurface User Contract"), "Production" taxes that are paid based on operations, and "Profit" taxes that are paid based on income and profits.
Depending on the size of a commercial discovery, the subsequent rate of production, the price of oil, and the general efficiency of operations, and taking into account all taxes and burdens on the project the total Government take will be in the range of 60%. This is comparable to many other fiscal regimes around the world for international oil production.
Of the total Government tax-take, it is believed that the Government target for all taxes (excepting Contract taxes, the anticipated requirement to sell 20% of oil production domestically at half the exported price, and "up-stream" dividend taxes) is approximately 60%. This is the anticipated situation for GIK in the Block 36 project.
Gentech International Kazakhstan has conducted considerable research into the new tax regime utilizing the advice of world class experts in Kazakhstan law and petroleum economic evaluation. Full detailed disclosure regarding each of these taxes and the subsequent economic impact on the Block 36 project are available to qualified investors upon signing the Confidentiality Agreement.