Kazakhstan’s government was already involved in a $15 billion arbitration over production costs at the giant field, which has been beset by delays, technical difficulties and cost overruns since development began more than 20 years ago. The additional claim is for as much as $138 billion in lost revenue, reflecting the calculation of the value of oil production that was promised to the government but not delivered by the field developers, the people said, asking not to be identified because the information isn’t public.
Kazakhstan’s government was already involved in a $15 billion arbitration over production costs at the giant field, which has been beset by delays, technical difficulties and cost overruns since development began more than 20 years ago. The additional claim is for as much as $138 billion in lost revenue, reflecting the calculation of the value of oil production that was promised to the government but not delivered by the field developers, the people said, asking not to be identified because the information isn’t public.
There is a further compensation claim related to contracts in the Kashagan development that were allegedly tainted by corruption, the people said.
The row underscores the difficulty of operating in Central Asia’s largest oil-producing nation, where major international companies face challenging environmental and geological conditions, plus a government that takes a robust approach to maximizing value from its production-sharing agreements.
Still, in earlier disputes with oil majors the government of Kazakhstan has demonstrated a certain degree of flexibility, on occasion settling for less than was initially claimed. Last year, the nation signaled it could consider resolving its disputes with the Kashagan partners through direct talks.
Companies including Eni SpA, Shell Plc, Exxon Mobil Corp. and TotalEnergies SE invested about $55 billion to develop Kashagan, which currently produces just under 400,000 barrels a day of oil. While the field was one of the biggest discoveries in decades, it also brought numerous technical challenges, from a sea that was frozen for almost half the year to a reservoir that contained high concentrations of poisonous gas.
Photo source: picture from an open source