Kazakhstan is now seeking $160 billion from international oil companies

Kazakhstan’s legal battle against international oil companies involved in the Kashagan oil field has intensified, with the nation’s claims now exceeding $160 billion. The dispute centers around allegations of corrupt dealings 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 more than two decades ago. Major industry players 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 arbitral tribunal recently decided to consolidate the claims into a single case, rejecting the companies’ requests to treat 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 biggest oil discoveries 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, plagued the project from the start. The concentration of hydrogen sulfide directly from the well is estimated at 17% – a level at which even just a few breaths can be lethal.

The project’s initial budget of $10 billion soon grew to $55 billion, with field production only starting in 2013 – eight years late.

Even after production began, the project faced setbacks. A pipeline leak just a month after the first oil was pumped brought it to a halt, with operations only resuming in 2016. Despite these challenges, Kashagan produced an average of 400,000 barrels per day last year, well below the once-anticipated peak of 1.5 million. barrels per day.

By Julianne Geiger for Oilprice.com

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