Kazakhstan to Press Ahead with $16.5B Claim Against Oil Majors

Kazakhstan plans to press 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 Tuesday.

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

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, Shell, TotalEnergies, ExxonMobil, KazMunayGas, Inpex, and CNPC. The consortium has invested $50 billion in the project.

Eni, Shell, and KazMunayGaz are also partners in Karachaganak, alongside Chevron and LUKOIL , with investments at more than $27 billion.

The two consortia’s offices in Kazakhstan did not immediately reply to requests for comment.

The Astana government has already had a series of disputes with its partners about 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 firm KazMunayGaz’s extra costs to settle a dispute over the project. 

It is harder to put a value on other concessions won by Kazakhstan in legal wranglings, such as the addition of some long-term payments, obligations to sell gas to a state firm, or non-reimbursement of some historic costs.

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

(Reuters – Reporting by Mariya Gordeyeva and Olzhas Auyezov; writing by Vladimir Soldatkin; editing by David Evans and Mark Potter)