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Kashagan

Kazakhstan’s $5 Billion Kashagan Fine Moves Into New Legal Phase

Kazakhstan has escalated its dispute with the foreign investors behind the Kashagan oil field, warning the consortium’s managing director that he could face administrative and criminal liability over its failure to pay an environmental fine of nearly $5 billion. The warning to Giancarlo Ruiu, managing director of North Caspian Operating Company, was reported by Reuters, which cited two sources and a document it had reviewed. NCOC’s shareholders include Eni, ExxonMobil, Shell, and TotalEnergies, each with a 16.81% stake; Kazakhstan’s state-owned KazMunayGas, with 16.88%; CNPC, with 8.33%; and Inpex, with 7.56%. The dispute began after the Department of Ecology for the Atyrau Region inspected the consortium’s production facilities in 2022 and identified about ten alleged violations. Inspectors said that by November 1, 2022, more than 1.7 million metric tons of sulfur had accumulated at a storage site within the Bolashak oil and gas processing complex. NCOC’s permit allowed it to store no more than 730,000 tons. According to the environmental authorities, the operator had exceeded the permitted limit by more than twofold. In early 2023, the regional environmental department issued a notification seeking 2.356 trillion tenge in penalties, equivalent to about $5.4 billion at the exchange rate at the time. NCOC rejected the allegations and maintained that its sulfur-handling operations complied with Kazakh law and the permits issued for the project. The proceedings continued for more than three years. In August 2025, a court set aside the original notification because of procedural deficiencies in the way it had been issued. The ruling did not dismiss the environmental allegations themselves. The authorities subsequently issued a new notification, allowing the case to proceed. After further domestic proceedings, the Atyrau Regional Court upheld the penalty on June 19, allowing the ruling to enter into force. It later emerged that members of the consortium had been aware of the risk posed by the growing sulfur stockpiles for years. In 2017, Eni warned that the project was heading towards exceeding the permitted storage capacity. By late 2020, NCOC had also cautioned that Kazakhstan’s new Environmental Code, adopted the following year, would increase the risk of substantial penalties. According to internal documents reported by Bloomberg, Eni executives proposed processing more of the sulfur for sale on international markets. ExxonMobil, TotalEnergies, CNPC, and Inpex were not planning comparable measures at the time, while KazMunayGas had yet to settle on a position. On July 14, Kazakhstan’s Ministry of Justice said the domestic court ruling had entered into force and gave NCOC until July 20 to pay voluntarily. The ministry said compulsory enforcement proceedings could begin if the consortium failed to meet the deadline. NCOC did not pay by July 20. The Justice Ministry subsequently warned Ruiu of possible liability for non-compliance, marking a further escalation in a dispute that had already moved beyond the original question of sulfur storage. The consortium continued to deny wrongdoing and maintained that the penalty could not be enforced while international arbitration proceedings were under way. Its foreign shareholders are separately challenging the fine...

Kashagan

Kashagan Operator Faces July 20 Deadline to Pay $4.9 Billion Environmental Fine

Kazakhstan says it will begin compulsory collection proceedings against the North Caspian Operating Company (NCOC), operator of the giant Kashagan oil field, if it does not pay a 2.3 trillion tenge ($4.9 billion) environmental fine by July 20. The deadline follows a domestic court ruling that has entered into legal force, even as the project’s foreign shareholders pursue international arbitration over the penalty. Deputy Minister of Justice Daniyel Vaisov announced the deadline on July 14. “Foreign companies currently have an obligation to pay 2.3 trillion tenge. If they fail to pay the fine by July 20, the Republic of Kazakhstan will proceed in accordance with the law, including enforcement proceedings and compulsory collection measures,” Vaisov said. However, in a statement to The Times of Central Asia, NCOC said a tribunal in parallel UNCITRAL arbitration proceedings had issued a restraining order prohibiting Kazakhstan from taking any measures to enforce the fine while the arbitration is pending. The company said the UNCITRAL proceedings had been initiated by Kazakhstan itself. NCOC and the contracting companies said they reject both the fine and the allegations underlying it and are contesting them through the UNCITRAL proceedings as well as the ICSID arbitration. They called on Kazakhstan to comply with the restraining order. The dispute stems from a 2022 inspection of Kashagan’s onshore processing facilities in the Atyrau Region. Environmental authorities said the operator had exceeded its permitted sulfur-storage limits, and the Ministry of Ecology and Natural Resources imposed the 2.3 trillion-tenge penalty in 2023. NCOC said it had obtained and maintained all required permits and had always conducted its sulfur management in full compliance with the law. The case has passed through several rounds of domestic litigation. On August 1, 2025, the Administrative Chamber of Astana City Court annulled the original penalty order because of procedural violations, without ruling on the substance of the environmental allegations. The ministry subsequently corrected the procedural defects and reissued the penalty later that month. An Astana court left the reissued fine in force on April 8, 2026. Vaisov said on July 14 that the ruling had entered into legal force. NCOC brings together Kazakhstan’s state-owned KazMunayGas and six foreign partners: Shell, TotalEnergies, Eni, ExxonMobil, CNPC, and Inpex. NCOC and the project’s six foreign shareholders have initiated treaty arbitration through the Washington-based International Centre for Settlement of Investment Disputes (ICSID), arguing that Kazakhstan’s conduct breaches protections owed to investors. Vaisov said the parties were finalizing the composition of the ICSID tribunal, which is expected to be completed by the end of July. “We believe the Republic’s actions regarding the alleged sulfur-storage permit violations are inconsistent with its obligations under international investment treaties, including its obligation to provide fair and equitable treatment to investors,” NCOC said. The Kazakh authorities maintain that the sulfur was stored in breach of environmental rules. The mechanics of compulsory collection may prove difficult. Nurlan Zhumagulov, executive director of the Energy Monitor Foundation, said that NCOC acts as the project’s operator while each shareholder markets its own...

Oil and Gas

Major Hydrocarbon Field Discovered in Kazakhstan

A major hydrocarbon field has been discovered in Kazakhstan’s Atyrau Region, with reserves potentially comparable to those of the Kashagan oil field, the country’s largest oil source, according to Kurmangazy Iskaziyev, First Deputy Chairman of the Management Board of KazMunayGas. The site is located on the Zhylyoi Platform near the Caspian Sea coast. Its onshore location could significantly reduce development costs, although the deposits are believed to lie at considerable depths. Kashagan has long stood as the symbol of both Kazakhstan’s oil wealth and the technical difficulty of extracting it. The offshore field cemented the country’s position as a major crude producer, but also became known for cost overruns, delays, and the engineering challenges of operating in the northern Caspian. Any onshore discovery mentioned in the same breath immediately raises expectations that it could avoid some of those constraints while delivering comparable scale. Kashagan, discovered in the northern Caspian Sea, remains one of the largest oil fields found globally in recent decades. Its recoverable reserves are estimated at 9–13 billion barrels of oil, with gas reserves exceeding 1 trillion cubic meters. Development is carried out by the North Caspian Operating Company consortium, which includes Shell, TotalEnergies, ExxonMobil, Eni, China National Petroleum Corporation, Inpex, and KazMunayGas. Speaking at the Geoscience & Exploration Central Asia forum, Iskaziyev said the resource potential of the Zhylyoi Block, including Karaton, Kazhygali, and Zhylyoi, is estimated at 4.7 billion tons, with total geological potential reaching up to 20 billion tons of oil equivalent. At this stage, such figures reflect geological potential rather than proven, recoverable reserves. In Kazakhstan, as elsewhere, moving from estimate to production depends on depth, pressure, sulfur content, and the cost of drilling and processing. Large discoveries can take years to confirm commercially, particularly in high-pressure or technically complex formations. KazMunayGas has already begun exploration work. A well 5,750 meters deep has been drilled at the Karaton site, and five promising targets have been identified as part of a joint project with Tatneft. During testing at one of these sites, a gas flow containing hydrogen sulfide was recorded. The main challenge remains the depth of the deposits, which may reach up to 9 km. According to Iskaziyev, these conditions are comparable to projects undertaken by KazMunayGas’s Chinese partners, including Sinopec and China National Petroleum Corporation, where drilling depths can reach up to 11 km. The company plans to expand geological exploration into neighboring areas, including Kazhygali, and is negotiating subsoil use contracts. The timing is significant. Kazakhstan is under growing pressure to demonstrate that its oil sector can still deliver major new projects as existing fields mature. A large onshore discovery in Atyrau would reinforce the region’s role as the core of the country’s energy system and support efforts to sustain export volumes and investor interest. At the forum, a memorandum of understanding was also signed between KazMunayGas and BP on cooperation in geological exploration and the development of the Ustyurt Block in the Mangistau Region. The Times of Central Asia previously reported...

Kashagan

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...

Kashagan

Kazakhstan–Kashagan Dispute Heads to International Arbitration

Kazakhstan’s Vice Minister of Justice, Daniel Vaisov, announced that the country’s claims over the removal of sulfur storage limits at the Kashagan field, operated by North Caspian Operating Company N.V. (NCOC), will be heard under the International Centre for Settlement of Investment Disputes framework, which is headquartered in Washington. NCOC includes Shell, TotalEnergies, Eni, ExxonMobil, CNPC, Inpex, and KazMunayGas. In March 2023, an inspection of the Kashagan consortium by Kazakhstan’s environmental authorities identified violations of environmental legislation, including the excessive storage of sulfur volumes exceeding permitted limits. The resulting claim was valued at around $5 billion, according to the authorities. A court of first instance in Kazakhstan ruled in favor of the environmental authorities, according to Vaisov. Six of the seven NCOC participants, excluding KazMunayGas, challenged the ruling in a Kazakh court in March this year. At the same time, the foreign investors initiated international arbitration proceedings. “This claim was filed under bilateral international agreements: the agreement between the Republic of Kazakhstan and the Republic of France, and the agreement between the Republic of Kazakhstan and the Kingdom of the Netherlands,” Vaisov said during a briefing. The Ministry of Justice, Ministry of Ecology, and Ministry of Energy are jointly handling the case. Kazakhstan has been steadily tightening its position in major energy projects, seeking a larger share of revenues from fields developed under production-sharing agreements signed in the 1990s. Disputes over Kashagan and Karachaganak reflect broader efforts to rebalance terms with foreign investors as production stabilizes and fiscal pressures grow. The outcome of these cases could reshape how Central Asia’s largest economy manages foreign participation in its energy sector. A separate dispute concerning project costs, reportedly exceeding $100 billion, is being handled under the framework of the Production Sharing Agreement (PSA), in line with government policy, Vaisov said. Kazakhstan maintains that under the current terms, participating oil companies receive up to 98% of revenue from oil production at Kashagan, leaving the state with comparatively limited income in the form of royalties. Astana’s claim related to this issue has been reported at approximately $160 billion. “As far as I know, an interim decision has been made regarding Karachaganak. Further work is currently underway,” Vaisov said. In January 2026, an international arbitration tribunal ruled in favor of Kazakhstan in its dispute with shareholders in the Karachaganak Oil and Gas Projects, Eni, Shell, Chevron, and Lukoil. Compensation for the shareholders’ unjustified reimbursement of expenses has yet to be determined, but experts estimate it at between $2 billion and $4 billion. Vaisov also noted that Kazakhstan has been reducing the cost of arbitration proceedings involving foreign investors. “The Ministry of Justice has managed to reduce spending on these matters each year. Since 2021, costs have been reduced by nearly threefold. At the same time, the Republic of Kazakhstan engages leading law firms for these proceedings, as contracting companies do the same,” he said.

Shell

Shell Signs New Exploration Deal in Kazakhstan Amid Legal Disputes

British energy company Shell has launched a new exploration project in Kazakhstan despite previously announcing that it would pause new investments in the country. On March 5, it was announced that Shell had signed a contract for geological exploration in the Aktobe region. The company has been involved in several legal disputes with Kazakhstan over subsoil use and had stated that it did not plan to invest further in the country’s energy sector. Geological Exploration Contract The Zhanaturmys site, which has attracted Shell’s interest, covers an area of 1,377 square kilometers and is located in one of Kazakhstan’s most actively developed oil and gas basins. The document was signed by Kazakhstan’s Deputy Energy Minister, Yerlan Akbarov, and Shell’s Senior Vice President and Chair in Kazakhstan, Suzanne Coogan. The contract provides for seismic exploration, data collection, and technical assessments. “The signing of today’s contract for geological exploration is further confirmation of Shell’s commitment to long-term cooperation with the Republic of Kazakhstan. Drawing on our global experience and advanced technologies, we intend to continue contributing to geological exploration and the expansion of the country’s resource base,” Coogan said. The agreement will remain in force until 2032. The project will be implemented under the terms of an improved model contract. According to Kazakhstan’s Energy Ministry, the company will allocate at least 100 million tenge (about $200,000) to finance socio-economic development in the region where the site is located. Shell is currently involved in three projects in Kazakhstan: the North Caspian Production Sharing Agreement (NCOC, 16.81% stake); the Karachaganak Production Sharing Agreement (29.25% stake); and the Caspian Pipeline Consortium (7.4% stake). Kazakhstan produces around 1.8–1.9 million barrels per day and hosts some of the world’s largest offshore reserves in the Caspian Sea. Western energy majors, including Shell, Chevron, ExxonMobil, and Eni, have operated in the country for decades through complex production-sharing agreements. Legal Disputes In February, Shell CEO Wael Sawan said the company would suspend new investments in Kazakhstan while legal proceedings with the government were ongoing. Numerous lawsuits filed by Kazakhstan, with claims amounting to billions of dollars, have reduced the company’s willingness to invest in the country, he said. “This affects our desire to continue investing in Kazakhstan. Although we see many opportunities for investment in the future, we will wait until we have a clearer picture of how things will turn out,” Sawan stated. Karachaganak and Kashagan Kazakhstan is currently involved in several legal disputes with Western oil companies, both in national courts and international arbitration. The cases concern two major oil and gas projects. One of them is Karachaganak. In 2023, the Kazakh government filed a lawsuit against the field's developers over cost deductions. The initial claim amounted to $3.5 billion but later increased to $6 billion after additional claims were filed. The project is operated by a consortium led by Eni and Shell, each holding a 29.25% stake. Other partners include Chevron (18%), Lukoil (13.5%, which has agreed to sell its stake), and KazMunayGas (10%). In January, it was...