Kazakhstan Mulling Changes in Oil Sector R&D Contributions - Expert

Kazakhstan may change the rules governing how oil companies contribute to research and development (R&D), Orda.kz reports.

According to oil and gas expert Nurlan Zhumagulov, authorities are considering redirecting these mandatory R&D payments — equivalent to 1% of capital expenditures — straight into the state budget. These payments amount to roughly 15 billion tenge annually. However, Zhumagulov noted that the system has failed to advance scientific research.

The requirement was introduced back in 2012, but we still haven’t managed to significantly advance scientific development in the oil sector. Most oil companies used the funds for their own purposes: for example, classifying seismic surveys as R&D or directing money to affiliated educational institutions. One of the few exceptions is the Center for BioEnergy Research, which successfully worked to improve oil recovery at fields like Zhalgyztobe, Tabynai, PetroKazakhstan Kumkol, Turgai, Karazhanbas, Ozen, and Aidan-Munay. The company now collaborates with NCOC (Kashagan) on a different focus,said Nurlan Zhumagulov 

Nearly half of all R&D contributions come from KazMunayGas and QazaqGaz, with their payments funneled into the Samgau Fund under the Samruk-Kazyna National Welfare Fund. However, transparency remains an issue: companies like the CNPC consortium reportedly spend R&D funds through their subsidiaries without publicly disclosing how the money is used.

Apparently, due to the lack of tangible results, the government has decided to redirect these obligations into the state budget. But this is money from subsoil users, who are allowed to claim deductions with a 1.5 coefficient (the goal was to encourage scientific development: you spend 100, write off 150). It would make more sense to channel these R&D funds toward the socio-economic development of the regions where oil is being produced, said Nurlan Zhumagulov.  

Concerns about the misuse of R&D funds are not new.

At the end of last year, American investor Dorin Baru told Orda.kz that R&D spending in Kazakhstan often amounts to a formality, with little actual research taking place.

Original Author: Nikita Drobny