Kazakhstan warned the head of an oil consortium that is developing the huge Kashagan oil field, and includes Shell and Exxon, of possible criminal prosecution for not paying a $5 billion environmental fine, two sources told Reuters on Tuesday.
The move is the latest in a string of disputes which have led to international firms ceding partial control of the country’s giant oilfields to the state or paying cash settlements.
INTERNATIONAL OIL MAJORS IN KAZAKHSTAN:
TENGIZ FIELD
The Tengizchevroil (TCO) consortium operates the Tengiz oilfield which produces around 960,000 bpd. Chevron holds a 50% stake in TCO, while Kazakh state energy company KazMunayGaz has 20%, Exxon Mobil 25% and Lukoil 5%.
KASHAGAN FIELD
The Kashagan oilfield, which produces around 400,000 barrels per day, is operated by the North Caspian Operating Company (NCOC) that includes Eni (16.81%), Shell (16.81%), TotalEnergies (16.81%), ExxonMobil (16.81%), KazMunayGaz (16.88%), Inpex (7.56%) and China National Petroleum Corp (8.33%).
KARACHAGANAK FIELD
The 260,000 bpd Karachaganak gas-condensate field is operated by the Karachaganak Petroleum Operating (KPO) consortium which includes Eni (29.25%), Shell (29.25%), Chevron (18%), Lukoil (13.5%) and KazMunayGaz (10%).
The future of Russia’s Lukoil in Kazakhstan is unclear after U.S. sanctions forced it to sell its foreign assets.
CASPIAN PIPELINE CONSORTIUM
More than 80% of Kazakhstan’s crude is exported via the 935-mile (1,500-km) Caspian pipeline linking TCO, Karachaganak and other fields to the Russian port of Yuzhnaya Ozereyevka. The main shareholders in the Caspian Pipeline Consortium (CPC) are Russian pipeline operator Transneft with a 24% stake, KazMunayGaz with 19%, and the Chevron Caspian Pipeline Consortium Company with 15%.
DISPUTES:
– In 2008, Kazakhstan doubled its stake in Kashagan to around 17% as part of a settlement with international oil majors over delays in development of the field.
– In 2011, the Karachaganak field consortium led by Eni agreed to give the Kazakh government a 10% stake in the field as part of a dispute resolution. It is hard to put a value on a number of other concessions won in Kazakhstan’s legal wranglings, such as the addition of some long-term payments, obligations to sell gas to a state entity or non-reimbursement of some historic costs.
– In 2012, the partners in the Kashagan consortium agreed to cover $1 billion of KazMunayGaz’s extra costs to settle a dispute.
– In 2020, Kazakhstan reached a $1.9 billion settlement with the Karachaganak partners, which brought to an end a years-long dispute over profit sharing from the giant field.
– In 2023, Kazakhstan launched claims against companies developing the Kashagan and Karachaganak oilfields for $13 billion and $3.5 billion, respectively, over disputed costs. – In 2026, arbitrators in the Karachaganak case decided in favour of Kazakhstan with a partial award. A final award calculation has not been made, but is expected to be between $2 and $4 billion. – The Kashagan arbitration is ongoing, with Kazakhstan having increased its claim to $150 billion, according to a government source.
– In a technically separate case, Kazakhstan fined oil majors $4.9 billion in 2023 for failing to store sulphur, a byproduct of oil production, properly at the Kashagan project. The fine, contested by NCOC, was approved by local courts, and then brought into arbitration to enforce collection.
The deadline to pay the fine was July 20. The consortium has said that the fine cannot be enforced while arbitration is ongoing.
(Reporting by Mariya Gordeyeva, America Hernandez, Felix Light and Vladimir Soldatkin, compiled by Shadia Nasralla; Editing by Susan Fenton)