Kazakhstan seeks $160 billion from foreign oil companies

Kazakhstan’s legal battle against international oil majors involved in the Kashagan oil field has escalated, with the country’s claims now surpassing $160 billion. The dispute revolves around accusations of corrupt deals and financial mismanagement, adding an additional $10 billion to the already substantial demands.

The Kashagan project, an enormous offshore field in the Caspian Sea, has been beset by delays and cost overruns since its inception over two decades ago.

Major industry players, including Eni SpA, Shell Plc, ExxonMobil Corp., and TotalEnergies SE, are now entangled in the conflict as Kazakhstan seeks compensation for what it claims are lost revenues and unfulfilled promises.

Recently, an arbitration tribunal decided to consolidate the various claims into a single case, rejecting the companies’ requests to address them separately. This ruling has intensified the pressure on the involved firms as they now face a unified legal challenge from Kazakhstan.

Discovered in the late 1990s, the Kashagan field was once celebrated as one of the largest oil finds in recent history.

However, its development has been anything but straightforward. Technical difficulties, such as harsh environmental conditions and high concentrations of hydrogen sulfide in the reservoir, have plagued the project from the outset. The hydrogen sulfide concentration is estimated at 17% straight out of the well—a level so high that even a few breaths can be lethal.

The project’s initial budget of $10 billion eventually ballooned to $55 billion, with production beginning only in 2013—eight years behind schedule.

Even after production commenced, the project faced significant setbacks. Just a month after the first oil was pumped, a pipeline leak forced a shutdown, with operations resuming only in 2016. Despite these challenges, Kashagan produced an average of 400,000 barrels per day last year, far below the once-anticipated peak of 1.5 million barrels per day.