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Kazakhstan Seeks $16.5 Billion From Big Oil Over Project Costs

Kazakhstan will continue to seek a court ruling on its claim that it is owed as much as $16.5 billion by international oil majors for project costs in two of the biggest oilfield developments in the country in the past decade, according to Kazakhstan’s Energy Minister Almasadam Satkaliyev.

Kazakhstan, part of the OPEC+ group of oil producers, has had several litigations over project costs and delays with major international oil firms.

In April, Kazakhstan said it was taking 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 the Kashagan oilfield and another $3.5 billion for the Karachaganak field development.

Under the profit-sharing agreements for the Kashagan and Karachaganak oilfields, the companies can deduct some costs from the income before sharing it with the government of Kazakhstan.

Two months after Kazakhstan started the arbitration proceedings, it doesn’t plan to reach an out-of-court settlement and will press ahead with the $16.5 billion claim, minister Satkaliyev told Reuters.

“There are working procedures. Arbitrators are being appointed, consultations are underway,” he added.  

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 Eni, ExxonMobil, Shell, TotalEnergies, China National Petroleum Corporation (CNPC), and Inpex.

So far, the consortium has invested $50 billion in the project.

Karachaganak Petroleum Operating is the consortium operating the oilfield of the same name, also a huge field capable of producing 400,000 bpd. The consortium includes Eni and Shell as joint operators, U.S. supermajor Chevron with 18%, Russia’s Lukoil, and KazMunayGas. This group of companies has invested $27 billion in Karachaganak so far.

In previous disputes over project delays for both fields, Kazakhstan, via KazMunayGas, doubled its stake in Kashagan to 16.8% and got 10% in Karachaganak via settlements in 2008 and 2012, respectively.   

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By Tsvetana Paraskova for Oilprice.com

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