Kazakh Claims Against Kashagan Oil Majors Rise to $160 Billion

(Bloomberg) -- Kazakhstan’s arbitration claims against a group of international oil majors that developed the Kashagan field escalated above $160 billion after the country alleged some deals were tainted by corruption, according to people familiar with the matter.

The government demand adds more than $10 billion in damages to the case, and that number may go even higher, the people said, asking not to be identified because the information isn’t public. The total has ballooned from the amount reported last year.

In another development, arbitrators rejected the companies’ requests that the case be split and ruled that everything will be handled together, the people said.

The firms involved in the case include Eni SpA, Shell Plc, Exxon Mobil Corp. and TotalEnergies SE. Representatives for the Kazakhstan energy ministry, Shell and TotalEnergies declined to comment. Eni didn’t immediately return a request for comment.

Exxon deferred to the North Caspian Operating Co., the joint venture that runs the project, which said the contracting companies have acted in accordance with the development agreement. It declined to elaborate.

The giant field has been beset by delays, technical difficulties and cost overruns since development began more than 20 years ago. The government raised its claims to about $150 billion in April, seeking as much as $138 billion in lost revenue from production that was promised to the government but not delivered. 

The dispute underscores the difficulty of operating in Central Asia’s largest oil-producing nation, where major international companies face challenging environmental and geological conditions.

Companies invested about $55 billion to develop Kashagan, which produced an average of about 400,000 barrels a day last year.

While the field was one of the biggest discoveries in decades, it also brought numerous technical challenges — from a sea that was frozen for almost half the year to a reservoir that contained high concentrations of poisonous gas. 

Kashagan pumped its first oil in September 2013 — eight years later than targeted and $45 billion over the initial budget — only to shut down a month later after leaks were detected in a pipeline. Production resumed in 2016, and the field gradually reached output of as much as 270,000 barrels a day the next year.

Eni, lead developer in the project’s early stages, once estimated that Kashagan’s output would top 1.5 million barrels a day.

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