Kazakhstan presses ahead with $16.5 billion claim against oil majors

REGION  06 June 2023 - 17:59

Kazakhstan is pressing ahead with $16.5 billion in claims against international oil majors over disputed project costs and has no plans for a possible out-of-court settlement, Energy Minister Almasadam Satkaliyev said on June 6.

The legal wrangling underscores the risks for foreign companies operating in the former Soviet Union state and is one of many court battles between the international majors and the government, Reuters reports.

In April Kazakhstan started arbitration proceedings against companies developing its Kashagan and Karachaganak oilfields over $13 billion and $3.5 billion respectively in costs deducted as part of profit-sharing deals.

"There are working procedures. Arbitrators are being appointed, consultations are underway," Satkaliyev said.

He also replied negatively to a question about a possible out-of-court agreement.

The offshore Kashagan field, one of the biggest discoveries in recent decades, is being developed by Eni (ENI.MI), Shell (SHEL.L), TotalEnergies (TTEF.PA), ExxonMobil (XOM.N), KazMunayGas (KMGZ.KZ), Inpex (1605.T) and CNPC (CNPC.UL). The consortium has invested $50 billion in the project.

Eni, Shell and KazMunayGaz are also partners in Karachaganak, alongside Chevron (CVX.N) and LUKOIL (LKOH.MM), with investments at more than $27 billion.

The Kazakhstan offices of the two consortiums did not reply immediately to requests for comment.

A Chevron spokesperson said it would not comment "on matters related to ongoing disputes".

The Astana government has already had a series of disputes with its partners over the terms of oil deals, which typically ended with settlements.

The current claims cover the period from 2010 to 2018 for Kashagan and from 2010 to 2019 for Karachaganak.

Previous legal battles

In its most recent high-profile arbitration case, Kazakhstan reached a $1.9 billion settlement with the Karachaganak partners in 2020.

In 2012 the Kashagan partners agreed to cover $1 billion in Kazakh state energy company KazMunayGaz's extra costs to settle a dispute over the project.

It is harder to put a value on 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.

Kazakhstan doubled its stake in Kashagan to 16.8% as part of a 2008 settlement with oil majors over delays in development of the field. It also received a 10% stake in Karachaganak from that project's consortium in a 2012 settlement.

Caliber.Az