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The agreement between the Government of the Republic of Kazakhstan and the Government of the Russian Federation on cooperation in creation of economic society based on the Orenburg gas processing plant

of October 3, 2006

The government of the Republic of Kazakhstan and the Government of the Russian Federation which further are referred to as with the Parties

being guided by the Agreement between the Government of the Republic of Kazakhstan and the Government of the Russian Federation on cooperation in the gas industry of November 28, 2001,

proceeding from regulations of the Mutual declaration of the President of the Republic of Kazakhstan and the President of the Russian Federation on development of long-term cooperation in the field of conversion and gas sale of the Karachaganak field of July 17, 2006, for the purpose of approval of actions of the Parties for its realization,

wishing to promote development of long-term cooperation in the gas industry and to creation of mutually advantageous conditions in the field of conversion of hydrocarbonic raw material of the Karachaganak field of the Republic of Kazakhstan and fields of the Orenburg region of the Russian Federation,

agreed as follows:

Article 1

The parties render assistance to joint-stock company "The KazMunaiGas national company and to Gazprom open joint stock company (further - authorized organizations) in creation on the parity basis of economic society based on the Orenburg gas processing plant which is part of the Unified gas supply system of the Russian Federation (further - joint business).

Form of business of joint business, and also procedure for forming and the size of its authorized capital are determined in constituent documents on the conditions approved by competent authorities of the Parties.

In case of replacement of authorized organizations of the Party without delay notify on this each other through diplomatic channels and take measures for ensuring the corresponding legal succession.

Article 2

Joint business is created on condition of the conclusion long-term (at least 15 years) the commercial contracts providing according to subject and the purposes of this agreement purchase and conversion on capacities of joint business of the sour gas extracted on the Karachaganak field of at least 15 billion cubic meters a year on the terms of the specified contracts and realization of the gas of the Karachaganak field processed by joint business in the market of the Republic of Kazakhstan and its export through single export channel of Gazprom open joint stock company.

Country of source of the products received from hydrocarbonic raw material of the Karachaganak field transferred to conversion to joint business is the Republic of Kazakhstan.

Article 3

Treat field of activity of joint business:

- conversion of hydrocarbonic raw material of the Karachaganak field of the Republic of Kazakhstan;

- conversion on contractual basis of the hydrocarbonic raw material extracted in the Russian Federation Gazprom open joint stock company, its subsidiaries and other organizations;

- reconstruction, upgrade existing and creation of new competitive refinery capacities for effective conversion of the hydrocarbonic raw material got on the Karachaganak field of the Republic of Kazakhstan and fields of the Russian Federation, and also production infrastructure of joint business with attraction of necessary investment resources.

From signature date of this agreement and before creation of joint business conversion of hydrocarbonic raw material of the Karachaganak field is performed under the direct agreement signed between KazRosGaz limited liability partnership and Orenburggazprom limited liability company.

For this period, and also before receipt by joint business of permission to conversion of gas of the Karachaganak field on customs area of the Russian Federation, this permission is provided to the Russian affiliated organization of KazRosGaz limited liability partnership.

Article 4

Joint business is registered in the city of Orenburg (Russian Federation) and performs the activities in accordance with the legislation of the Russian Federation.

The head office of joint business and its governing bodies are placed in the city of Orenburg (Russian Federation).

Article 5

For the purpose of optimum loading by raw materials of capacities of Joint business and increase in efficiency of its activities of the Party render assistance to Authorized organizations in the conclusion with the interested organizations of long-term contracts about delivery to conversion to joint business of unstable gas condensate from the Karachaganak field.

Article 6

Authorized organizations determine procedure and delivery conditions of the gas of the Karachaganak field processed by joint business on the market of the Republic of Kazakhstan on priority basis, including counter deliveries on mutually advantageous conditions according to legislations of the states of the Parties and on the basis of long-term agreements between Authorized organizations of the Parties and/or the business entities determined by them.

Such counter deliveries are performed in equal amounts and at the identical price. At the same time the gas price on counter deliveries, including according to purchase and sale agreements, is not subject to adjustment for the purposes of the taxation and determination of customs value.

Article 7

The acquisitions of gas of the Karachaganak field, work and service connected with its conversion and transportation and also acquisition of gas from other sources and its transportation for the purpose of priority ensuring domestic market of the Republic of Kazakhstan, are not subject of the public procurements regulated by the legislation of the Republic of Kazakhstan.

Article 8

Coordination and observation of accomplishment of this agreement are performed by competent authorities of the Parties:

     с Казахстанской Стороны             с Российской Стороны
Министерство энергетики и Министерство промышленности
минеральных ресурсов и энергетики
Республики Казахстан Российской Федерации

In case of change of the competent authorities, the Parties notify on this each other through diplomatic channels.

Article 9

The parties provide each other information on the questions connected with this agreement according to legislations of the states.

Provision by the Parties of confidential information on activities of joint business to the third parties is performed only from mutual consent of the Parties.

Article 10

Disagreements in interpretation and application of this agreement which cannot be eliminated by consultations between competent authorities are permitted through diplomatic channels or by negotiations between the Parties with execution of the relevant protocols.

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