Twelve years of transparency: Kazakhstan EITI pours into the veins of government systems

Kazakhstan published its 12th EITI Report in October 2017, keeping its leading position in timely reporting.  The 2016 EITI Report covers the biggest mining, oil and gas companies which account for almost 99% of the extractive revenues. The report shows that the government received USD 27 billion from the sector, constituting over one third of their revenue and more than half of the total exports in 2016. Total social payments reported by the companies amounted to USD 114 million.

Western Kazakhstan continues to lead in oil and gas extraction. One of the biggest Caspian oil fields – Kashagan – started its oil production in October 2016. After eight years of delay, sixteen years of development and more than USD 50 billion of investment from NCSPSA (the North Caspian Sea Production Sharing Agreement) Consortium, operated by NCOC, the Kashagan oil field production, together with Tengiz and Karachaganak, is expected to be one of the main contributors to economic growth in Kazakhstan in the upcoming years.

Transparency leads to reforms

“Kazakhstan is currently finalising reforms to improve the legal basis for the subsoil use. Along with the EITI principles, Kazakhstan will apply best international practises of granting subsoil use rights and international standards of estimating geological reserves.”

Elvira Dzhantureyeva, Head of the National Secretariat, Kazakhstan

For twelve years, EITI reporting has served as a diagnostic tool to identify the strengths and weaknesses of natural resource governance in Kazakhstan, and led to innovative ways of addressing the challenges. For example, the government has introduced a new budget code for the social payments to ensure better oversight of what communities received; transposed EITI reporting from paper-based to an online system – EGSU – enabling greater public access to the information; and developed a new legal framework for the extractive industries.

The draft Code on Subsoil and Subsoil Use, expected to be adopted in early 2018, introduces a simplified process for allocation of licenses by providing the extractive companies with fairer bidding opportunities, including through online services; and more liberal technical and financial criteria. The draft Code addresses the issue of hidden ownership by introducing a concept of control over a company, allowing the government and business partners to see who they work with.

According to the EITI Report, more than 90% of the explored natural resources in Kazakhstan have already been developed. Only 2.5% of the companies chose to invest into the geological exploration. Updating the geological database according to internal standards and attracting investment are therefore among other government priorities addressed through the new Code on Subsoil and Subsoil Use.   

EITI Standard in the government systems: mainstreaming

The Government of Kazakhstan has turned to online EITI reporting since 2012. The government used its Unified State System for Subsoil Use Management of Kazakhstan (EGSU portal) to incorporate the requirements of the EITI Standards. The extractive companies upload their financial data to the EGSU portal, once their financial states are assured with an external independent audit. The last five years of reporting have proved that the government and company data reliability is strong, as illustrated by insignificant discrepancies and audited financial statements published online.  The Committee of Geology and Subsoil Use has developed an interactive online map, enabling public access to comprehensive license information. According to the results of  a recently completed EITI mainstreaming feasibility study , Kazakhstan’s government systems successfully integrated requirements on license register and revenue transparency. The Kazakh National Stakeholder Council will now explore options to have all the EITI requirements disclosed through government systems without a need for an EITI report in the next few years.

Read the full Kazakhstan 2016 EITI Report (PDF).

For more information about extractives transparency in Kazakhstan, visit Kazakhstan’s EITI website or see Kazakhstan’s country page on eiti.org.