Oil and Gas - The Times Of Central Asia

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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...

Fuel prices

Central Asia Avoids Fuel Shock as Global Pressures Build

Central Asia has so far avoided the immediate fuel shocks spreading across much of the world following the U.S. and Israel’s war with Iran. There are no lines at gas stations, no visible shortages, and no signs of panic buying. But that stability sits within a rapidly tightening global market, where disruptions in Asia and policy responses in Europe are reshaping fuel flows in ways the region will struggle to avoid. Across Southeast Asia, governments are already taking precautionary steps. Some state agencies and private firms are shifting parts of their workforce to remote work to reduce fuel consumption and prepare for potential price spikes and logistics disruptions, while Thailand is preparing contingency measures, including possible fuel rationing. China, one of Asia’s largest suppliers of refined fuels, has moved to restrict exports of gasoline, diesel, and jet fuel in an effort to prevent domestic shortages linked to the war. The move is expected to tighten supplies across Asia, especially for countries that rely on Chinese fuel imports. China supplied about one-third of Australia’s jet fuel last year, highlighting the wider regional impact, and roughly half of the Philippines’ and Bangladesh’s in 2024. Vietnam has already warned airlines to prepare for flight reductions in April due to the risk of shortages caused by these export restrictions. Indonesia is also imposing limits on fuel sales. Fuel-related pressures have begun to emerge in Europe as well. Poland has introduced tax measures aimed at reducing fuel prices, with the government saying this will lower prices for consumers. Slovenia, meanwhile, has introduced significant restrictions on fuel consumption. Under new rules, private motorists are limited to purchasing a maximum of 50 liters per day, while businesses and farmers may purchase up to 200 liters daily. The combined effect of war-driven energy shocks and renewed tariff barriers is raising global costs and adding pressure across trade, transport, and inflation. Against this backdrop, Central Asia’s apparent stability is misleading. It is highly unlikely that import-dependent states such as Kyrgyzstan and Uzbekistan will be as well protected as Kazakhstan, which may benefit in the short term from higher crude prices. Starting April 1, Russia is banning gasoline exports in an effort to stabilize its own domestic market. Russia is a key fuel supplier to Central Asia. However, according to assurances from the Ministry of Energy of the Russian Federation, the temporary export ban will not affect supplies to Uzbekistan. Deliveries under intergovernmental agreements are expected to continue, ensuring that at least part of the region’s supply remains uninterrupted. In Kyrgyzstan, despite recent developments, fuel prices and supplies remain relatively stable. The government is considering lowering taxes or temporarily waiving excise duties for fuel importers should the crisis continue. Information from Turkmenistan is difficult to verify independently. Despite reports of fuel shortages at gas stations last year, official media are now indicating a significant increase in domestic gasoline production. The production plan for January-February 2026 was reportedly fulfilled at 122.7%, according to Deputy Chairman of the Cabinet of Ministers Guvancha...

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...