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Uzbekgaz

SOCAR and BP Prepare for Exploration Drilling in Uzbekistan’s Ustyurt Region

Azerbaijan’s SOCAR, Britain’s BP, and state-owned Uzbekneftegaz are preparing for exploration drilling across six blocks in Uzbekistan’s Ustyurt region. Following completion of a 3D seismic survey, the next stage involves processing the data and selecting a site for the first exploration well. Drilling will help establish whether preliminary estimates of 100 million metric tons of oil and 35 billion cubic meters of gas could translate into commercially recoverable reserves. The work covered the Boyterak, Terengquduq, Birqori, Kharoy, Qoraqalpoq, and Qulboy blocks in the Republic of Karakalpakstan. The seismic survey covered more than 3,000 square kilometers, compared with a minimum commitment of 1,000 square kilometers. The partners reviewed the completed fieldwork and discussed preparations for exploration drilling at a managing committee meeting in Tashkent on September 7. The data still need to be processed and interpreted, and no drilling location or date has been announced. Total investment in the project has been estimated at approximately $2 billion, with development dependent on a commercial discovery. The partners remain at the exploration stage and have committed to drilling one well. Decisions on further investment will depend on its results. Uzbek officials expect the six blocks could contain around 100 million metric tons of oil and 35 billion cubic meters of gas. Potential annual oil production has been estimated at five million metric tons. All three figures remain projections: seismic data help identify promising structures, but drilling is needed to confirm the presence and characteristics of hydrocarbons. Uzbekistan’s Energy Ministry, SOCAR, and Uzbekneftegaz signed a production-sharing agreement covering the six blocks in July 2025. SOCAR was designated the operator. BP joined the project in May 2026, acquiring a 20% interest from each of the two original partners. The British company now holds 40%, while SOCAR and Uzbekneftegaz retain 30% each. The deal marks BP’s return to exploration in Uzbekistan, where it first signed exploration agreements with the same partners in 2018 before withdrawing in 2021. The acquisition coincided with BP’s renewed emphasis on oil and gas investment. The company had previously reduced its exploration portfolio as part of a shift toward low-carbon energy, but subsequently revised its strategy and refocused on its traditional business. When BP joined the project, its regional president for Azerbaijan, Georgia, and Turkey, Gio Cristofoli, said the company saw significant resource potential in Uzbekistan. He said participation in the agreement would expand BP’s exploration portfolio and support its long-term organic growth. For SOCAR, the Ustyurt survey is its largest seismic exploration project outside Azerbaijan. In June, the company reported that more than 80% of the seismic program had been completed and that initial results were providing insights into deeper geological structures. SOCAR announced the completion of fieldwork in July, with data processing expected to finish in the first quarter of 2027. The partners have developed a work plan through 2029. Uzbekneftegaz head Abdugani Sanginov previously proposed accelerating the project and beginning drilling by the end of 2027, but an approved drilling schedule has not been published. Uzbekistan needs to find...

Oil and Gas

Kazakhstan Pauses Collection of $5 Billion Fine from Kashagan Operator

Kazakhstan has suspended enforcement proceedings to collect about $5 billion from North Caspian Operating Company (NCOC), the operator of the Kashagan oil field. The fine itself remains in force. The pause followed a new challenge by the company in a Kazakh court, and the Justice Ministry has said it intends to resume collection efforts. Enforcement proceedings involving 2.3 trillion tenge ($5.06 billion) were suspended on September 7. NCOC challenged the actions of a state enforcement officer, after which the Specialized Interdistrict Administrative Court of Atyrau Region requested the case materials. While those materials are before the court, enforcement proceedings must be suspended. Before the suspension, authorities had stepped up collection efforts. The deadline for voluntary payment expired on July 20, after which the authorities began enforcement proceedings. On July 21, NCOC’s property and vehicles were frozen. The company’s managing director, Giancarlo Ruiu, was also warned of possible administrative and criminal liability for failure to comply with the court ruling. At issue is sulfur produced as a byproduct of processing oil and gas at Kashagan. Kazakhstan’s environmental authorities accused NCOC of storing volumes exceeding the limits set by its environmental permit. The consortium rejects both the allegations and the fine. Although the authorities’ original order was overturned over procedural violations, environmental regulators subsequently issued a new one. The reissued penalty was upheld by Kazakh courts, including the Atyrau Regional Court in June 2026, allowing the authorities to move toward enforcement. The dispute also has an international legal dimension. NCOC’s foreign shareholders have challenged the penalty through international treaty arbitration. Separately, NCOC said in July that a tribunal applying the rules of the United Nations Commission on International Trade Law (UNCITRAL) had issued an interim order barring Kazakhstan from enforcing the fine while those proceedings were pending. Kazakh authorities rejected NCOC’s interpretation of the order, arguing that the commercial arbitration tribunal could not prevent the state from enforcing its environmental laws and domestic court judgments. The Justice Ministry has made clear that the current suspension stems from NCOC’s challenge to the enforcement officer in a Kazakh administrative court, rather than from the UNCITRAL order. Kashagan is one of Kazakhstan’s largest oil fields and one of the world’s biggest oil discoveries of recent decades. Recoverable reserves are estimated at 9 billion to 13 billion barrels. The field produced 18.2 million tons of oil in 2025. The project is backed by some of the world’s largest oil companies. KazMunayGas holds 16.88%, while Eni, ExxonMobil, Shell, and TotalEnergies each hold about 16.81%. CNPC owns 8.33% and Japan’s Inpex 7.56%. For Kazakhstan, Kashagan is one of its main sources of oil production and export revenue. For the international companies, the dispute is also a test of the operating environment at the country’s largest oil fields. Kazakhstan accounts for around 2% of global daily oil supply, and the Kashagan case comes amid several multibillion-dollar legal disputes between Astana and international oil companies. The environmental fine is not the only dispute surrounding Kashagan. Kazakhstan has also brought claims against investors over costs...

Oil and Gas

U.S. Firm to Test Oilfield Water Recycling in Kazakhstan

U.S.-based IBL Elements will test technology in Kazakhstan for treating water produced during oil and gas extraction. The treated water could be reused, while the substances it contains will be studied to determine whether valuable and critical minerals can potentially be recovered. IBL Elements, the National Hydrogeological Service Kazhydrogeology, and oil producer Kazakhoil Aktobe have signed a memorandum of cooperation. The parties are preparing a pilot project to test technologies for treating industrial and produced water at oil and gas facilities. Produced water occurs naturally in underground formations and is brought to the surface along with oil and gas. Once separated from hydrocarbons, it can be treated for reuse or disposal, or reinjected underground. The new project is intended to determine whether some of this water can be returned to industrial use. Specialists will also study its composition and the possibility of recovering minerals. For now, the project is limited to research and testing. No commercial extraction of any elements has been announced. IBL Elements is based in Oklahoma and develops technologies for treating oilfield wastewater and recovering minerals from brines. The company says it is developing iodine extraction technology and also plans to recover lithium and other minerals. If the trials are successful, the technology could also be used at other oil and gas facilities in Kazakhstan, according to Bolat Bekniyaz, chairman of Kazhydrogeology. The project comes as American interest in Kazakhstan’s critical minerals is growing. In June, representatives of more than 20 U.S. companies and government agencies attended the AMM 2026 mining and metallurgy congress in Astana. Washington is looking at projects in Kazakhstan involving not only mining, but also processing and the development of new supply chains. For the IBL Elements project, critical minerals are only one part of the equation. The other is growing pressure on Kazakhstan’s water supplies. The country uses about 25 billion cubic meters of water annually, with industry accounting for roughly a quarter of that amount. Kazakhstan’s new Water Code requires industrial enterprises and heat producers to gradually transition to circulating and reused water supply systems. So far, 168 transition plans have been prepared. The authorities aim to increase the share of reused water in industry from 13% to 28% by 2030. The issue is particularly acute in Kazakhstan’s oil-producing west, where freshwater shortages coincide with large volumes of water brought to the surface during oil production. The outcome of the pilot will therefore depend on two factors: whether this water can be treated for reuse and whether it contains minerals at concentrations high enough to make their recovery economically viable.

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...

Oil refinery

Kyrgyzstan Signs $25 Million Deal for Kochkor-Ata Oil Refinery

Kyrgyzstan has signed a $25 million investment agreement for a new oil refinery in Kochkor-Ata, in the southern Jalal-Abad Region, as the country seeks to expand domestic production and reduce its heavy dependence on imported fuel. The agreement between the Cabinet of Ministers and Central Asian Energy LLC covers the construction and operation of the refinery. It was signed on July 20 by Minister of Economy and Commerce Bakyt Sydykov and the company’s general director, Shao Peipei. The plant is expected to have a planned annual output of 450,000 tons of petroleum products and create at least 300 jobs. The agreement stipulates that Kyrgyz citizens should account for at least 90% of its workforce. Sydykov said the project would support industrial development, create jobs, introduce modern technology, and strengthen Kyrgyzstan’s energy security. Shao said the company would invest $25 million under the agreement. The investor said the plant would produce gasoline and diesel in the K-5 and K-6 environmental classes, as well as bitumen and motor oils. The reference to K-6 is unclear because current Eurasian Economic Union fuel regulations classify motor fuels only through K-5. The Ministry of Economy and Commerce said construction was already underway and that the project’s first phase was expected to enter operation by the end of 2026. The ministry did not disclose the source of crude oil or explain whether the $25 million represents the refinery’s full cost, the investment covered by the agreement, or funding for its initial phase. The agreement comes as Kyrgyzstan faces renewed pressure from disruptions in the Russian fuel market. Deputy Energy Minister Nasipbek Kerimov said in early July that Kyrgyzstan consumes approximately two million tons of fuel and lubricants annually and receives almost 95% of that volume from Russia. He said Russian deliveries had declined slightly but that the country still had sufficient reserves. Russia has tightened fuel exports after Ukrainian drone attacks forced several major refineries to halt or reduce production. Gasoline output fell to about 65% of seasonal demand, according to Reuters calculations published on July 10. Kyrgyzstan receives Russian petroleum products duty-free under annual indicative balances within the Eurasian Economic Union. The disruption has highlighted the risks of relying overwhelmingly on one supplier. Kyrgyzstan is also modernizing its two largest existing refineries. The Kyrgyz Petroleum Company refinery in Manas, formerly Jalal-Abad, can process 500,000 tons of crude oil annually. It is undergoing a $410 million modernization project that is expected to be completed by the end of 2027. The upgraded plant is intended to produce AI-92 and AI-95 gasoline meeting K-4 and K-5 Eurasian Economic Union standards. The Junda refinery in Kara-Balta has an annual processing capacity of 800,000 tons. A $193.75 million modernization project is scheduled for completion by July 31, 2026. The work is intended to increase refining depth, improve efficiency, and expand domestic fuel production. Whether the new refinery reduces import dependence will depend largely on where it obtains crude oil. Kyrgyzstan’s limited domestic production means the plant could still rely on...

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...