Kazakhstan Expands Kashagan Legal Fight as Arbitration and Claims Mount
For several years, Kazakhstan has been engaged in arbitration proceedings worth billions of dollars, many of which have been conducted behind closed doors. Recently, new details have emerged about one of the largest disputes, involving the North Caspian Operating Company (NCOC).
The dispute stems from environmental violations identified during a 2022 inspection at the Kashagan field. Environmental authorities found that the operator, NCOC, had stored approximately 1.2 million tons of sulfur in excess of permitted limits. As a result, the company faced a fine of around $5 billion.
Kashagan is one of the largest and most technically complex offshore oil fields ever discovered, with proven hydrocarbon reserves estimated at 4.65 billion tons. The consortium includes seven major international energy companies: KazMunayGas (16.88%); Eni (16.81%); Shell (16.81%); ExxonMobil (16.81%); TotalEnergies (16.81%); CNPC (8.33%); and INPEX Ltd (7.56%). A lawsuit was filed by all consortium members except KazMunayGas, Kazakhstan’s national oil company. The field has long been central to Kazakhstan’s oil production and relations with international investors.
Kazakhstan’s interests in the Kashagan dispute are represented by the Ministry of Ecology and the Ministry of Justice. According to the Vice Minister of Justice, Daniel Vaisov, a trial court has already ruled in favor of the state.
“A first-instance court has ruled in Kazakhstan, recognizing the state’s position as lawful. Six contractors — excluding KazMunayGas — filed an appeal in March,” Vaisov said.
NCOC challenged the environmental inspection results. In June 2023, a court in Astana partially upheld the company’s claims. However, this was overturned in February 2024, when an appellate court ruled in favor of the government, confirming the inspection’s legality.
Subsequent developments have further complicated the case. In August 2025, an Astana court overturned the environmental agency’s order, citing procedural violations. The case is once again under appeal.
At the same time, the contractors have challenged the $5 billion fine through international arbitration. The proceedings are set to take place in Washington at the International Centre for Settlement of Investment Disputes (ICSID), where the arbitral tribunal is currently being formed, Vaisov said.
The case is being closely watched as a test of how far Kazakhstan is willing to push legal pressure on major Western energy investors.
Separately, Kazakhstan is pursuing much larger claims against Kashagan consortium members under the production-sharing agreement. In May 2024, Kazakhstan’s Ministry of Energy said claims against Kashagan project developers could reach up to $150 billion.
Initially, the government sought $15 billion from NCOC. It later increased its claims by a further $138 billion, citing lost profits linked to oil volumes that investors had committed to supply to the state.
The Ministry of Energy has described the dispute as purely commercial, relating to Kazakhstan’s rights under the production-sharing agreement. Officials maintain that the legal proceedings do not affect the investment standing of project participants.
Separately, in January last year, an economic court in Astana ordered NCOC to pay 3.5 billion KZT (about $8 million) for excessive flaring of raw gas.
In addition to Kashagan, Shell is involved in the Karachaganak oil and gas project. The consortium is led by Eni and Shell, with each holding 29.25%. Other partners include Chevron (18%), Lukoil (13.5%), and KazMunayGas (10%).
In January, Shell and its partners lost a separate dispute over cost deductions, with potential payments to Kazakhstan estimated at up to $4 billion. Shell said in February 2026 that it would suspend new investments in Kazakhstan pending the outcome of its legal disputes with the government.
At the time, Shell CEO Wael Sawan stated that the volume of claims, amounting to billions of dollars, had dampened the company’s willingness to invest. This position appeared to have been reversed a few weeks later when it signed a contract for geological exploration of the Zhanaturmys site in the Aktobe region.
That exploration agreement was signed by Kazakhstan’s Vice Minister of Energy, Yerlan Akbarov, and Shell’s Senior Vice President and Chair in Kazakhstan, Suzanne Coogan.
Experts say that despite ongoing legal disputes and broader geopolitical uncertainty, demand from Western investors for Central Asian oil and gas resources is likely to remain strong.



