ALMATY/APRIL 17 2024 (The Bulletin) — Kazakhstan has increased an arbitration claim initially lodged last year against international energy companies to more than $150b, sources told Reuters. 

The claims, focused on the Kashagan and Karachaganak oil and gas fields, are based on alleged lost income by Kazakhstan. The increase from $16.5b makes the arbitration claim one of the world’s biggest.

Reuters quoted a “source with knowledge” of the case as saying that the new litigation claim “reflected the calculation of the value of oil production that was promised to the government but not delivered by the field developers”.

Kazakh officials and Western oil companies have not commented on the new figure, although they confirmed that they are involved with unspecified attribution proceedings.

Kashagan and Karachaganak are two of Kazakhstan’s biggest oil and gas fields. Both have been the focus of legal disputes with the Kazakh government previously. Kazakh officials have said they were unfairly dealt with in the 1990s when oil companies were making deals to exploit fields in newly independent former Soviet states.

In 2020, the Karachaganak partners paid out $1.9b to settle an arbitration dispute with Kazakhstan. Kazmunaigas, the Kazakh state oil and gas company, is now a shareholder in both projects.

Analysts have said that arbitration claims are part of the risk of doing business in Kazakhstan and that international companies factor this risk into their costs.

The specifics of the current dispute have not been disclosed, although Kazakh officials have said that it is a purely commercial dispute that will be settled through the courts.

“The sides are going to resolve it within the arbitration framework,” the Kazakh energy ministry said.

Italy’s Eni is the main developer at Kashagan and also at Karachaganak, alongside Shell.

ENDS

— This story was published in issue 565 of the Central Asia & South Caucasus Bulletin, on April 23 2024

— Copyright the Central Asia & South Caucasus Bulletin 2024