Court dismisses $5.1 billion environmental claim against biggest Kazakh oil project

A regional court in Kazakhstan has dismissed a claim of $5.1 billion brought by the Kazakh Environmental Protection Ministry against North Caspian Operating Company (NCOC), the operator of the largest offshore oil project in the country, Kashagan.

The court’s ruling in favor of the consortium comprising supermajors, including ExxonMobil, was made public after hearings were held in May and June, Upstream reported on June 21.

Kazakhstan’s massive oilfield Kashagan, which pumps around 400,000 barrels per day (bpd), is operated by a consortium of firms, North Caspian Operating Company (NCOC), which includes Kazakhstan’s state firm KazMunayGas, as well as Italy’s Eni, U.S. ExxonMobil, UK-based Shell, France’s TotalEnergies, China National Petroleum Corporation (CNPC), and Japan’s Inpex.

Earlier this year, the Kazakh Environmental Protection Ministry asked the court to fine the operator of Kashagan with $5.1 billion for violation of environmental standards. The consortium was accused of keeping larger volumes of sulfur at its onshore facility in Bolashak than the amount permitted by law.

The Environmental Protection Ministry inspected the site in early March and cited the exceeding of the amount of sulfur stored as the basis for the fine it was seeking. The regional court, however, dismissed that key claim, which would have served as a basis for the fine.

Kazakhstan and the NCOC consortium are locked in another legal dispute in which the country is seeking a court ruling on its claim that it is owed as much as $16.5 billion by NCOC and Karachaganak Petroleum Operating, the operator of another huge Kazakh oilfield, Karachaganak.

In April, Kazakhstan took to court the oil majors developing the Kashagan and Karachaganak oilfields. The country began arbitration proceedings to claim $13 billion in costs deducted as part of profit-sharing agreements for Kashagan and another $3.5 billion for Karachaganak. Under the profit-sharing agreements, the companies can deduct some costs from the income before sharing it with the government of Kazakhstan. The Karachaganak consortium includes Eni and Shell as joint operators, U.S. supermajor Chevron with 18%, Russia’s Lukoil, and KazMunayGas.