Kazakhstan is endowed with significant oil and gas resources and is expected to become one of the world's top 10 oil producers within the next decade. The high cost of doing business in the country, however, means that Kazakhstan will need to improve its institutional framework to successfully compete for Western investment. A large degree of risk and uncertainty continues to plague the oil and gas sector as the government makes significant changes to the petroleum tax legislation and takes an aggressive approach in "rebalancing" contractual arrangements with industry. High levels of bureaucracy, regulatory burden, and corruption persist, and economic factors appear to be subordinated increasingly to geopolitical objectives aimed to strengthen relationships with China and Russia. The rapid pace of change and the high degree of uncertainty present significant challenges and risk to foreign investment. The purpose of this paper is to review the oil and gas sector in Kazakhstan and highlight recent developments in the petroleum legislation, business climate and government policy. (c) 2006 Elsevier Ltd. All rights reserved.