ORDER OF THE GOVERNMENT OF THE REPUBLIC OF KAZAKHSTAN

of June 26, 2012 No. 848

About approval of Rules (technique) of determination of market price of the goods realized within production sharing agreements including transactions with the parties registered in the countries with the preferential taxation

According to Item 1 of article 10-1 of the Law of the Republic of Kazakhstan of July 5, 2008 "About transfer pricing" the Government of the Republic of Kazakhstan DECIDES:

1. Approve the enclosed Rules (technique) of determination of market price of the goods realized within production sharing agreements including transactions with the parties registered in the countries with the preferential taxation.

2. This resolution becomes effective since January 1, 2009 and is subject to official publication.

Approved by the order of the Government of the Republic of Kazakhstan of June 26, 2012 No. 848

Governed (technique) of determination of market price of goods, implemented within production sharing agreements, including transactions with the parties registered in the countries with the preferential taxation

1. General provisions

1. These rules (technique) of determination of market price of the goods realized within production sharing agreements including transactions with the parties registered in the countries with the preferential taxation (dalee-Pravila) establish procedure for determination (calculation) for the prices for the transactions made according to contracts for purchase and sale of the oil and gas raw materials extracted on the Karachaganak oil-gas condensate field.

2. The terms used in these rules

2. The terms, determinations and abbreviations used in these rules:

1) fair market price or fair market value - matters, specified in article I OSRP (determinations of terms from article I of the Final agreement about the Section of products which contain in these rules and are given in appendix to these rules);

2) the joint management committee - matters, specified in subsection 6.1 OSRP;

3) the approved transactions - matters, OSRP specified in subsection 9.2 (b) (iv) and Item 7 of these rules;

4) BTU (British thermal unit) means the amount of heat necessary for temperature increase of one pound (in the British system of measures) clear water with 59,0 of degrees Fahrenheit to 60,0 of degrees Fahrenheit with absolute pressure of 14,696 of pound/quarter inch;

5) joint activities - matter, specified in subsection 9.2 (b) OSRP and item 4 of these rules;

6) BSS means the countries or the territories which as of December 31, 1984 were part of the Union of Soviet Socialist Republics;

7) the gas project - matters, specified in article I OSRP;

8) the disputed transaction - the transaction specified in subsection 9.2 (b) (v) of OSRP and Item 8 of these rules;

9) the initiator of the disputed transaction (further - IOS) - matters, OSRP specified in subsection 9.2 (b) (v) and Item 8 of these rules;

10) the delivery point - matters, specified in article I OSRP;

11) the participant or participants - matters, specified in Item 3 of these rules;

12) KTK - matters, specified in article I OSRP;

13) the contractor - the contract companies specified in article I OSRP;

14) oil and gas raw materials - matter, specified in article I OSRP;

15) the share of oil and gas raw materials - matters, specified in article I OSRP;

16) OSRP - the final agreement about the Section of products of the contract site of the Karachaganak oil-gas condensate field of November 18, 1997 (with changes and amendments);

The date of entry into force of OSRP means 17) on January 27, 1998;

18) the authority - matters, specified in article I OSRP;

19) joint committee on sale (further - SKS) - the committee specified in subsection 9.2 (and) of OSRP;

20) the expert - person specified in subsection 30.2 (b) OSRP;

21) the net revenue - matters, OSRP specified in subsection 9.2 (b) (ii);

22) final sale - matters, specified in article I OSRP;

BCh means 23) Big Chagan;

24) FOB concerning any amount of hydrocarbons in any delivery point means that these hydrocarbons are provided for shipment in such delivery point on conditions free on board, but without advance payment or adoption of other obligations concerning further transportation, processing, insurance and any other charges, costs or expenses;

25) the small oil refinery (further - small oil refinery) - matters, specified in article I OSRP.

3. Organization of joint committee on sale and the sphere of its powers approved and the disputed transactions

3. According to article IX OSRP (it is stated in annex to these rules) the parties establish SKS. According to OSRP: about one person from each contract company will be part of SKS (or from each group of the contract companies which agreed to be effective together) and the same number of Participants from authority (or the smaller number determined by its discretion); holding meetings requires quorum which is made by most of persons designated by the contract companies and most of persons designated by authority.

The authority or the contractor (each of which in relation to these rules hereinafter is referred to as the Participant) will have on one voice in decision making process of SKS, and it is necessary for adoption of any such decision that both Participants voted for this decision.

4. According to provisions of article IX OSRP all decisions concerning transportation, processings, exchange and sale (as within final sale, and differently) oil and gas raw materials, except for raw materials from reliable flow as it is provided in Section 9.7 OSRP (joint activities), are accepted by SKS or the contractor if to it powers of SKS were delegated. In order to avoid discrepancies joint activities will include originally in addition:

1) decision making concerning transportation, exchange and sale of the oil and gas raw materials repumped on the KTK system;

2) decision making concerning transportation, exchange and sale of the oil and gas raw materials directed to the city of Orenburg;

3) the oil and gas raw materials realized to the gas project;

4) the oil and gas raw materials which are subject to realization to small oil refinery according to Section 9.13 OSRP.

5. Each Participant has the right to offer transaction SKS provided that such offer (x) will provide the transaction of final sale and (at) will provide or use of the existing commercial arrangements (approved earlier SKS) between delivery point and Item of sale within the offered transaction of final sale so that not to interfere with their use for other joint activities or to use of the offered new commercial arrangements which will not interfere with the existing joint activities. Decisions are made by SKS for the purpose of providing the maximum net revenue taking into account amounts, conditions, reliability and creditworthness of the partner and availability or lack of alternatives.

6. The participant has the right to provide the objections concerning the offered transaction only in the following cases:

1) when other transaction as a result of which higher net revenue can be received can be performed;

2) concerning transactions of final sale - the buyer is not able to provide reliability of payment sufficient for reasons for the transaction;

3) when the offered transaction is integrated to higher risk of default on obligations by the partner, than other available options for the transaction;

4) when cost of production of the oil and gas raw materials necessary for implementation of the offered transaction, above expected net revenue;

5) when in the absence of other directly possible option Participants undertake the obligation for much more long period, than during what it is possible with sufficient degree of probability to expect emergence of more profitable alternative version of the transaction;

6) concerning agreements which effective period exceeds one year when in the offered transaction there are no regulations on price indexation sufficiently reflecting the possible growth of fair market price during the term of implementation of the transaction;

unless the objecting Participant offers alternative version of the transaction which amount does not exceed the share of oil and gas raw materials which is due to this Participant less its pro rata share of the existing contractual commitments, and also those cases when in connection with the existing production capacity or the existing commercial arrangements (which are earlier approved by SKS) these two offered options to some extent mutually exclude each other.

7. The transactions approved by SKS hereinafter are referred to as "The approved transactions". Shares of oil and gas raw materials of both Participants are distributed between the approved transactions, and at the same time both Participants participate in costs and receipts in connection with the approved transactions on pro rata basis.

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