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Energy Project

Italy’s Eni Expands Energy Projects in Kazakhstan with Hybrid Power Plant

The Italian energy company Eni is accelerating the expansion of its projects in Kazakhstan. By the end of the year, the company plans to complete construction of a hybrid power plant in Zhanaozen, one of the country’s key oil and gas centers. The 247-MW project combines three energy sources: solar, wind, and gas generation. The approach is expected to reduce the carbon footprint while providing a more stable energy supply in a region where strategically important production assets are concentrated Construction is proceeding in stages. The first component is already operational. In September 2025, a solar power plant with 80,000 panels was commissioned. Full completion of the complex is scheduled for the end of 2026, following the launch of gas and wind generation facilities. According to the Ministry of Energy, the project is intended to strengthen energy security for major enterprises in the Mangistau region, including Ozenmunaygaz and the Kazakh Gas Processing Plant. In a region that regularly experiences power shortages, this is a significant development. The project was discussed during a meeting between Kazakhstan’s Minister of Energy Yerlan Akkenzhenov and Italy’s Ambassador to Kazakhstan Antonello De Riu. Italian companies are gradually expanding their presence in Kazakhstan’s energy sector, from upstream production to processing and power generation. Cooperation extends beyond electricity generation. In January 2026, QazaqGaz and Eni moved to the practical phase of exploration at the Kamenkovsky block in the Caspian Basin. Work is also continuing at the Yuzhny Shu-Sarysu and Bereke blocks. Another major initiative is the gas-chemical complex under construction in the Atyrau region. The polyethylene project, with a planned capacity of 1.25 million tons per year and an estimated cost of $7.5 billion, has already entered the construction phase. The project is being implemented by KMG PetroChem, with Italy’s MAIRE group (through its subsidiary Tecnimont) serving as a key contractor. At the same time, conventional power generation projects are advancing. Cooperation with Italian power engineering company Ansaldo Energia has enabled the installation of new gas turbines at Almaty CHPP-3, with equipment deliveries completed in January 2026. However, this expanding cooperation is taking place amid legal uncertainty. Earlier, Eni and Shell, partners in the development of the Karachaganak field, lost a key stage of arbitration proceedings in London and may be required to pay Kazakhstan between $2 billion and $4 billion. While this could affect future investment decisions, it has not so far slowed the growth of Italian companies’ activities in the country.

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...

Oil and Gas

Kashagan and Karachaganak: Will Kazakhstan’s Claims Lead to Changes in the Shareholder Structure?

The beginning of 2026 has been marked by a new round of confrontation between Kazakhstan and the international consortia developing the country’s largest oil and gas fields, North Caspian Operating Company N.V. (Kashagan) and Karachaganak Petroleum Operating B.V. (Karachaganak). Below is an overview of the current situation and the possible scenarios. Arbitration proceedings initiated in early 2023 have expanded from $16.5 billion to more than $170 billion. Over three years, Kazakhstan has secured preliminary victories on several claims, enough, in my view, to suggest that the era of foreign oil consortia dominating Kazakhstan’s strategic projects may be coming to an end. Ecology and NCOC Violations This week, Bloomberg reported in its article “Oil Majors Seek Arbitration Over $5 Billion Kazakh Sulfur Fine” that the NCOC consortium is filing in international arbitration to challenge a Kazakh court decision to collect 2.3 trillion tenge (KZT). The Bloomberg headline, however, presents the issue inaccurately. Environmental violations, including the excessive storage of approximately 1 million tons of sulfur, were identified during an inspection in March 2023, when the exchange rate stood at 451.71 KZT per $1. The rate later rose to 520-540 and currently stands at around 500 KZT per $1. According to investment forecasts, it may reach 600 KZT per $1 by the end of 2026. As a result, the dollar equivalent of the fine has decreased significantly. At the March 2023 rate, 2.3 trillion KZT amounted to approximately $5.1 billion. At 500 KZT per $1, it equals about $4.6 billion. At 600 KZT per $1, it would fall to roughly $3.8 billion, a difference of about $1.3 billion. After my earlier publications arguing that foreign consortia should be fined in foreign-currency equivalent at the exchange rate prevailing at the time of filing, the proposal was also raised in Parliament. Such an approach would be logical: the consortia export their oil and receive revenue in foreign currency, yet fines are imposed in tenge. After several rounds of appeals, the consortium lost what became the largest environmental dispute in Kazakhstan’s history, initially involving more than 20 systematic violations of environmental legislation. Correspondence between consortium members published in Western media indicated they were aware of the violations but considered remediation and compliance financially costly. NCOC’s annual revenue is approximately $10 billion. Media reports also stated that the consortium offered around $110 million, roughly 50 times less than the fine, for regional social programs in exchange for waiving environmental claims. Neither NCOC nor the Kazakh government confirmed such negotiations. In 2010-2011, similar environmental and tax claims against the Karachaganak consortium resulted in Kazakhstan receiving a 10% stake in the project. The current ownership structure of NCOC is: ENI (Italy) - 16.81% ExxonMobil (U.S.) - 16.81% CNPC (China) - 8.33% INPEX (Japan) - 7.56% TotalEnergies (France) - 16.81% Shell (UK) - 16.81% KazMunayGas (Kazakhstan) - 16.88% Total investment in Phase One of Kashagan is estimated at $60 billion. By analogy with Karachaganak, the environmental fine could hypothetically lead to an increase in Kazakhstan’s share by 5-7 percentage...

Oil and Gas

Kazakhstan Intends to Accelerate Oil Refining Expansion to 40 Million Tons per Year

Kazakhstan plans to accelerate the expansion of its oil refining capacity to reach 40 million tons per year by 2033, seven years earlier than the previously announced 2040 target. The revised timeline was announced by Deputy Energy Minister Kaiyrkhan Tutkyshbaev at a government meeting on February 17. A full cycle of work is scheduled for 2026-2033, covering feasibility studies, design, construction, and the commissioning of a fourth large refinery with a projected capacity of 10 million tons per year. Once completed, the new facility would increase Kazakhstan’s total refining capacity to 40 million tons annually. Previously, in its updated Concept for the Development of the Oil Refining Industry, the Ministry of Energy had set a target of increasing refining capacity from 18 million to 38 million tons by 2040. The decision to accelerate the timetable follows criticism from President Kassym-Jomart Tokayev at an expanded government meeting on February 10. Addressing Kazakhstan’s dependence on imports, Tokayev noted that the country produces approximately 100 million tons of oil annually but refines only about 18 million tons domestically. This imbalance, he said, has contributed to chronic diesel fuel shortages and reliance on imported aviation kerosene. According to him, modernization of the three existing refineries in Pavlodar, Atyrau, and Shymkent is expected to increase processing capacity from 18.4 million to 27.4 million tons per year. An additional 10 million tons of capacity is to be provided by a new refinery planned for the Mangistau region, near the Caspian Sea coast. Tokayev emphasized that the project should be implemented with the participation of private investors, arguing that financing the construction of a refinery solely from the state budget would be economically unjustified. Tutkyshbaev stated that the ministry has begun preparing initial data on raw material sources and the product mix for the future plant, taking into account demand forecasts and potential export markets. These calculations will determine the refinery’s configuration, the choice of technology licensor, and the precise construction site. The results are expected to be presented in the coming months. The Ministry of Energy expects that expanding existing refineries and constructing a new plant will gradually resolve domestic fuel shortages. Between 2028 and 2030, the deficit of aviation kerosene is projected to decline from 500,000 to 300,000 tons per year, with full elimination anticipated by 2033. Following the launch of the fourth refinery, Kazakhstan is expected to begin exporting diesel fuel and gasoline to neighboring countries. Plans also call for increasing the depth of oil refining from 89% to 94% at existing plants, and to 95% at the new facility. The quality of motor fuels is expected to improve from environmental class K4 to K5. As previously reported by The Times of Central Asia, the Kazakh government began seeking private investors to build the fourth refinery even before Tokayev’s most recent comments on the need for increased refining capacity.

Oil and Gas

More Than 20 Promising Oil and Gas Fields Identified in Kazakhstan’s Aral Basin

A large-scale state geological exploration program in Kazakhstan has identified more than 20 promising hydrocarbon sites in the Aral Basin. The announcement was made by Kanat Yerubaev, Acting Chairman of the Geology Committee of the Ministry of Industry and Construction. According to Yerubaev, by the end of last year 29 promising exploration areas had been identified as part of the state geological study program, covering a range of minerals from gold and copper to lead, zinc, and tungsten. Particular attention was given to oil and gas. Work in the Aral Basin enabled specialists to specify the geological structure of the region, identify new structural elements, and assess forecast hydrocarbon resources. More than 20 sites have been classified as promising, and the Ministry of Energy intends to auction subsoil use rights for these areas later this year. The Geology Committee estimates forecast hydrocarbon resources at one Aral Basin site at approximately 800 million tons. An even larger potential, exceeding 1 billion tons of oil and gas, has been identified in the Syr Darya Basin in the southwest of the country. Exploration activities there began in 2024 and are scheduled for completion in 2026. If these forecasts are confirmed, Kazakhstan’s proven oil reserves could increase by more than 25%. The current state balance sheet records more than 4 billion tons of proven oil reserves, sufficient for over 50 years at current production levels. In 2026, new seismic exploration projects are scheduled to begin in other relatively underexplored sedimentary basins, including North Turgai, Shu-Sarysu, and Priirtysh. Yerubaev noted that Kazakhstan is moving away from geological surveys conducted at a 1:200,000 scale, which provide only a general overview, and transitioning to more detailed 1:50,000 scale surveys. He compared the shift to “getting a navigator instead of a world map, where you can see every step,” emphasizing that such precision aligns with international standards and supports informed investment decisions. At the same time, the sector’s digital infrastructure continues to develop. Kazakhstan operates a unified subsoil use platform that provides 22 government services and access to more than 66,000 geological reports. By the end of 2025, 97.5% of primary geological data, approximately 4.7 million records, is expected to be digitized, with full digitization scheduled for completion this year. Approximately $485.5 million has been allocated for state-funded geological research projects over the next three years. Under current legislation, 50% of subscription bonuses collected from auctions for subsoil use rights are to be reinvested in the sector to support geological development and infrastructure modernization. This framework is designed to create a sustainable model in which revenues from subsoil licensing are directed back into further exploration. The Times of Central Asia previously reported that Kazakhstan had become one of the global leaders in proven rare earth metal reserves.

Banking

Kazakhstan’s Banking System and the Logic of Early Enforcement

Kazakhstan’s growth model depends on uninterrupted access to international finance. Because its largest energy and mining projects rely on foreign capital, hard-currency financing, and offshore banking channels, confidence in the integrity of its banking system is not just a regulatory issue; it is a macroeconomic constraint. This reliance is structural. Export revenues are concentrated in globally-priced commodities—especially oil (up to 60% of total exports in recent years), and uranium (40%+ of global output)—linking fiscal stability directly to hard-currency liquidity and correspondent banking access. In that context, correspondent banking is a systemic requirement underpinning international payments and trade. Because international banks incorporate sanctions exposure and AML/CFT risk into their assessments, adverse risk perceptions can trigger de-risking behavior that raises costs and slows flows. Astana is now courting U.S. and European investment in multibillion-dollar initiatives, including the Trans-Caspian/Middle Corridor and projects related to rare earth and critical minerals supply chains. This further increases Kazakhstan’s exposure to Western compliance standards and regulatory scrutiny. With a growth model heavily driven by foreign capital, Kazakhstan understands that perceived weaknesses in banking system compliance would not halt investment outright, but would translate into higher funding costs and reduced appetite in international capital markets. Sanctions Exposure After 2022: Structural, Not Tactical Russia’s full-scale invasion of Ukraine in February 2022 sharply increased Kazakhstan’s exposure to global sanctions enforcement. Geography, membership in the Eurasian Economic Union, and dense trade and infrastructure ties with Russia made Kazakhstan a focal point for concerns over re-exports and sanctions leakage. At the same time, its border with China—an important source of dual-use goods—has added another layer of scrutiny, even as reporting later showed that China-origin cargo bound for Russia was, in documented cases, routed without physically entering Kazakhstan, despite being linked to it in trade flows. Western sanctions reshaped logistics faster than enforcement capacity could adapt. Restrictions on shipping, insurance, and financial services increased reliance on overland transit routes through Central Asia, drawing attention to Kazakhstan, even where violations were difficult to substantiate. Western investigations later showed that EU-origin dual-use goods continued to reach Russia through intermediary channels, underscoring enforcement gaps beyond Kazakhstan itself. For Kazakhstan, however, heightened scrutiny translated directly into financial risk, regardless of intent. In the logic of global compliance, perception can be as consequential as proof. Early Intervention as Risk Management Since 2022, Kazakhstan’s response has evolved from declaratory neutrality to early, containment-oriented enforcement. This shift has been driven less by foreign-policy alignment than by a calculation that even isolated violations can carry disproportionate financial consequences. President Kassym-Jomart Tokayev has repeatedly emphasized that sanctions violations carry direct economic consequences for Kazakhstan, warning in public remarks that non-compliance could expose the country to secondary sanctions affecting trade, finance, and investment flows. By framing compliance as a matter of macroeconomic risk management rather than geopolitical positioning, the government signaled that enforcement would prioritize financial stability over short-term commercial convenience. That logic has translated into practice. When Western sanctions were imposed on Sberbank in 2022, Kazakhstan approved the sale and restructuring of...