JOINT ORDER OF THE MINISTRY OF THE OIL AND GAS INDUSTRY OF THE REPUBLIC OF KAZAKHSTAN AND MINISTRY OF GEOLOGY AND PROTECTION OF THE SUBSOIL OF THE REPUBLIC OF KAZAKHSTAN

of June 2, 1995 No. 63/121-P

About enforcement of the Regulations on procedure for liquidation of oil, gas and other wells and write-off of costs for their construction

For the purpose of increase in the economic responsibility of the oil-and-gas and prospecting production enterprises which are engaged in operation of oil fields, gas and other liquid minerals and construction of deep wells, streamlinings of questions of observance of rules and methods of development of oil fields, gas iodine-bromine, heat power, etc. waters, and also strict accomplishment of legal acts of the Republic of Kazakhstan on use and protection of subsoil of PRIKAZYVAYU:

1. Enact Regulations on procedure for liquidation of oil, gas and other wells and write-off of costs for their construction.

2. To the oil-and-gas and prospecting production enterprises and the organizations, the State-owned Holding Companies (SOHC), the joint-stock companies (JSC), the joint businesses (JB), offices of the ministries to accept the enclosed Provision to management and execution.

3. Declare invalid Provisions, regulating and instructive documents on these questions approved by Minneftegazprom, Mingeo and Gosgortekhnadzor of the former USSR.

4. To the oil-and-gas and prospecting production enterprises to develop (in a month) the standard projects of insulating and liquidating works tied to specific geological specifications and approved with local authorities of the Komgortekhnadzor.

5. To impose control of execution of this order on the relevant services of the office of the ministries, and also territorial administrations of protection and use of subsoil of the Ministry of geology and protection of subsoil of the Republic of Kazakhstan.

Regulations on procedure for liquidation of oil, gas and other wells and write-off of costs for their construction

1. Procedure for reference to categories of the wells which are subject to liquidation.

1.1. All wells finished with construction or which are in construction in the territory of the Republic of Kazakhstan or on the continental shelf of the Caspian Sea, etc. reservoirs for the purpose of search, investigation or development of oil and gas deposits, iodine-bromine, mineral, geothermal waters, underground gas storages, condensate and oil products, for liquidation of griffins, open gas-oil fountains and the fires, special purpose and other purposes are divided in case of liquidation and cost description into their construction on six categories.

1.2. The basic, parametrical, search and exploratory wells pledged for the purpose of studying of geological structure, searches and exploration of liquid and gaseous minerals, fields of heat power underground waters and structures for underground storage warehouses belong to the I category.

a) the terminations of construction which executed the appointment and appeared later in adverse geological conditions "dry" or water on oil and gas fields and "dry" at underground gas storages and on fields of heat power waters;

Note: To executed the appointment belongs the wells which opened the project horizon in the set point or reached project depth which section is completely lit with geologic-geophysical researches according to the project on construction and in which all opened horizons are qualitatively tested.

b) the deepenings which did not open the project horizon, not brought to project depth and stopped by drilling owing to inexpediency for the geological reasons and also got to the serious complications which are not provided by the project (rapoproyavleniye, narrowings of trunk, catastrophic absorption of drilling mud fluid, smyaty columns);

c) not opened the project horizon, but brought to project depth or not brought to project depth, but opened the project horizon if in case of further deepening there were complications (accident) which liquidation becomes impossible in case of this design of well, the applied technologies and the equipment;

d) the this inflows of oil, gas, mineral, geothermal water on fields which inventories on all horizons are carried in accordance with the established procedure to off-balance;

e) the oil or gas which were this in case of approbation of the lower horizons, and - water if return on the lower productive horizons for the purpose of its operation is impossible for technical reasons, and further works (descent of additional columns, drilling of the second trunk, insulating works, operation by means of packer of N etc.) is proved in overlying by the companies performing construction of wells economically inexpedient;

e) the this inflows of oil, gas, hydrothermal waters or other fluids, but exploitation of whom in case of development is proved by the company not profitable and use of these wells for other purposes (delivery, control, etc.) it is not provided by the project (scheme) of development;

g) the seas and water areas of reservoirs from the floating drilling rigs (FDR) which executed the appointment and this industrial inflows of oil and gas in case of impossibility of ensuring operation of wells drilled on the shelf. The wells drilled from the figurative removable sea stationary platforms (SSP) established at small depths for conducting seasonal works and intended for drilling only of exploratory wells can be referred to this category.

1.3. Treat the II category:

a) the operational wells drilled for the purpose of oil and gas extraction, which opened the horizons in the set point but which were "dry" or this water, and such operational appraisal wells which executed the appointment and not suitable for development;

b) wells are the delivery, observation, operational, iodine-bromine, mineral, geothermal and other waters, and also the wells drilled for dumping of trade waters and industrial wastes, operation of underground gas storages and which appeared in adverse geological conditions when opening the project horizon and if the overlying horizons or for other purposes cannot be used.

1.4. The wells which are subject to liquidation for technical reasons belong to the III category:

a) owing to low-quality posting or severe accidents in the course of construction (drilling and testing);

Note: In cases when in operational part of trunk of well (above emergency part) there are productive horizons of industrial value, only emergency part of trunk is liquidated in accordance with the established procedure, and operational it is transferred to the oil-and-gas or gas production enterprise.

b) as a result of accidents in use in case of the running or capital repairs of operational well;

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