Kazakhstan Now Seeks $160B from International Oil Companies
Kazakhstan’s legal battle against international oil majors involved in the Kashagan oil field has intensified, with the nation’s claims now exceeding $160 billion. The dispute centers around allegations of corrupt deals and financial mismanagement, adding another $10 billion to the already massive demands.
The Kashagan project, a massive offshore field in the Caspian Sea, has been plagued by delays and cost overruns since its inception over two decades ago. Major players in the industry, including Eni SpA, Shell Plc, ExxonMobil Corp., and TotalEnergies SE, are caught in the crossfire as Kazakhstan seeks compensation for what it claims are lost revenues and broken promises.
The arbitration tribunal recently decided to consolidate the claims into a single case, rejecting the companies’ requests to handle them separately. This has put additional pressure on the firms involved, as they face a united front from Kazakhstan in the ongoing legal proceedings.
The Kashagan field, discovered in the late 1990s, was hailed as one of the largest oil finds in recent history. However, its development has been anything but smooth. Technical challenges, including harsh environmental conditions and high concentrations of hydrogen sulfide in the reservoir, have plagued the project from the start. The concentration of hydrogen sulfide straight out of the well is estimated at 17%—a level at which even just a few breaths can be lethal.
The initial budget for the project of $10 billion soon ballooned to $55 billion, with the field only beginning production in 2013—eight years behind schedule.
Even after production started, the project faced setbacks. A pipeline leak just a month after the first oil was pumped led to a shutdown, with operations resuming only in 2016. Despite these challenges, Kashagan produced an average of 400,000 barrels per day last year, far below the once-anticipated peak of 1.5 million barrels per day.
By Julianne Geiger for Oilprice.com
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