Conducting due diligence for operating a refinery in Kazakhstan requires a clear understanding of the regulatory landscape, key licenses, and permits, as well as practical steps to ensure compliance. Below is a streamlined and simplified guide to make the due diligence process clearer and easier to execute, based on the provided information and Kazakhstan’s regulatory framework for refineries (downstream oil and gas operations). The focus is on clarity, prioritization, and actionable steps to verify compliance.
Key Licenses and Permits for Operating a Refinery in Kazakhstan or in any other country:
The following table summarizes the essential licenses and permits required, their purpose, issuing authority, and key considerations for due diligence. These are overseen primarily by the Ministry of Energy, the Ministry of Ecology and Natural Resources, and other relevant bodies.
| License/Permit | Purpose | Issuing Authority | Due Diligence Notes |
|---|---|---|---|
| Industrial Safety Permit | Ensures compliance with safety standards for hazardous facilities (e.g., distillation units, pipelines). | Committee for Industrial Development and Industrial Safety (Ministry of Industry and Infrastructure Development) | Verify permit validity, review safety audit reports, and check for past violations or suspensions. Critical for high-risk operations. |
| Environmental Permit (Ecological Permit) | Regulates emissions, waste, and water usage, requiring an Environmental Impact Assessment (EIA). | Ministry of Ecology and Natural Resources | Confirm EIA approval and compliance with emission/waste limits. Request 3-5 years of environmental reports to identify fines or non-compliance. |
| Subsoil Use License | Required if the refinery involves crude oil extraction (upstream operations). | Ministry of Energy | Check if applicable. If so, verify local content compliance and contract terms. Not needed for standalone refineries. |
| Fire Safety Certificate | Ensures fire safety compliance for flammable operations and infrastructure. | Emergency Situations Department (Ministry of Emergency Situations) | Review fire safety audits and training records. Essential due to the risk of fires in refineries. |
| License for Handling Hazardous Substances | Governs safe storage, transport, and processing of crude oil, chemicals, and petroleum products. | Ministry of Industry and Infrastructure Development | Confirm proper handling procedures and storage compliance to avoid spill-related penalties. |
| Energy Efficiency Certificate | Verifies adherence to energy efficiency standards for energy-intensive operations. | Ministry of Energy or accredited bodies | Check audit reports for energy optimization measures. Non-compliance may increase costs. |
| Construction and Operation Permits | Required for building or upgrading refinery facilities, including land use approvals. | Local Akimats and Ministry of Industry and Infrastructure Development | Ensure permits are valid for current infrastructure and any planned expansions. |
| Local Content Compliance Documentation | Proves adherence to rules for hiring local workers and using Kazakhstani suppliers. | Ministry of Energy or National Agency for Local Content Development | Critical for state-linked refineries. Verify compliance to avoid penalties or license revocation. |
| Antimonopoly Approvals | Needed for mergers, acquisitions, or asset transfers involving strategic refinery assets. | Agency for Protection and Development of Competition | Check for approvals in recent transactions to avoid delays or deal cancellations. |
| Foreign Investment Approvals | Required for foreign ownership or investment in strategic refinery assets. | Ministry of Energy or Committee on Regulation of Natural Monopolies | Ensure compliance with national security regulations if foreign investors are involved. |
Additional Requirements
- National Bank Registration:
- Purpose: Register transactions involving foreign currency (e.g., crude imports or equipment purchases over USD 500,000) to comply with currency control regulations.
- Due Diligence: Confirm registration with the National Bank of Kazakhstan and review related financial documentation.
- Kazakhstan-Specific Nuances:
- Refineries (e.g., Atyrau, Pavlodar, Shymkent) are strategic assets, often tied to KazMunayGas, Kazakhstan’s state-owned oil company. Strong government oversight requires strict compliance with local content and supply agreements.
- Special economic zones (e.g., Atyrau) may offer tax or licensing exemptions—verify eligibility during due diligence.
- Renewal and Monitoring:
- Most permits require renewal (annually or every 3-5 years) and ongoing compliance reporting.
- Due Diligence: Request a renewal schedule and compliance reports for the past 3-5 years to ensure no lapses.
Practical Steps for Due Diligence
To make the due diligence process clear and manageable, follow these steps:
- Build a Due Diligence Checklist:
- Request copies of all licenses and permits listed above, including issuance and expiry dates.
- Obtain compliance reports, audit records, and notices of violations or corrective actions for the past 3-5 years.
- Verify documents through issuing authorities (e.g., via Kazakhstan’s e-Gov portal or direct ministry inquiries).
- Engage Local Experts:
- Hire Kazakhstani legal and environmental consultants (e.g., Dentons, Baker McKenzie) to navigate complex bureaucratic processes and verify permit statuses.
- Use local firms to translate and interpret regulatory documents, as some may only be available in Kazakh or Russian.
- Verify Compliance and Risks:
- Cross-check licenses against public records or ministry databases for validity and past penalties.
- Review environmental and safety reports for recurring issues (e.g., emission violations, safety incidents).
- Confirm adherence to local content rules, especially for state-linked refineries, to avoid penalties.
- Assess Regulatory Changes:
- Monitor Kazakhstan’s evolving energy policies, particularly stricter environmental standards and decarbonization goals.
- Ensure the refinery is prepared for future regulations (e.g., carbon emissions limits or green energy requirements).
- Organize a Data Room:
- Collect and organize all documentation in a secure data room, including:
- Licenses and permits (with issuance/expiry dates).
- Compliance and audit reports.
- Records of fines, violations, or corrective actions.
- Contracts related to local content or feedstock supply.
- Use the data room to systematically review and flag any gaps or risks.
- Collect and organize all documentation in a secure data room, including:
- Tailor to Specifics:
- If you provide details about the refinery (e.g., location, size, ownership, or whether it’s in a special economic zone), the due diligence can be customized further. For example:
- Atyrau-based refineries may benefit from tax exemptions.
- Foreign-owned refineries face additional scrutiny under national security regulations.
- If you provide details about the refinery (e.g., location, size, ownership, or whether it’s in a special economic zone), the due diligence can be customized further. For example:
Tips for Simplifying the Process
- Prioritize High-Risk Permits: Focus on the Industrial Safety Permit, Environmental Permit, and Local Content Compliance, as these are critical for operations and heavily scrutinized by authorities.
- Use Technology: Leverage Kazakhstan’s e-Gov portal (egov.kz) to verify license statuses and access public records efficiently.
- Create a Timeline: Map out permit renewal dates and compliance deadlines to avoid operational disruptions.
- Mitigate Risks Early: Address any expired permits or unresolved violations immediately to prevent delays or fines during operations.
