Exxon Has Blocked a Settlement Agreement on the Kashagan Environmental Fine – Media Reports
The status of the fine became a key part of the American company's negotiations with Kazakhstan regarding new investments in the project
Kashagan is considered one of the largest oil fields in the world discovered in recent decades / Photo: kmg.kz
ExxonMobil of the United States has blocked a proposed settlement between the partners in the Kashagan oil field in Kazakhstan and the country's government regarding a $5 billion environmental fine, Bloomberg reported, citing sources.
Details
According to sources interviewed by the agency, Exxon opposed the latest settlement proposal and persuaded TotalEnergies—which had previously taken a neutral stance—to side with it. The opposition from the two companies was enough to block the deal, sources told Bloomberg. In addition to Exxon and TotalEnergies, Shell, Eni, and KazMunayGas are participating in the Kashagan project, along with Japan’s Inpex and China’s CNPC, which hold minority stakes.
Exxon, TotalEnergies, KazMunayGas, Shell, and Inpex declined to comment to Bloomberg. Eni, CNPC, and the project operator, North Caspian Operating Co. (NCOC), did not respond to the agency’s inquiries.
Kashagan is one of the largest oil and gas fields in the world. It is located in the northern part of the Caspian Sea, approximately 80 km from the city of Atyrau. The field was discovered in 2000, but oil production did not begin until 2013—eight years later than planned and over the initial budget. Currently, production in the developed eastern part of Kashagan stands at about 450,000 barrels per day. The project is being implemented by the North Caspian Operating Company (NCOC) consortium, which includes six global oil and gas majors: Europe’s TotalEnergies, Eni, and Shell; the U.S.-based ExxonMobil; the Chinese company CNPC (8.33%); and the Japanese company Inpex (7.56%). KazMunayGas holds a 16.88% stake.
Context
The dispute over the environmental fine has been ongoing since 2022. Kazakhstan is demanding that the project operator pay approximately 2.3 trillion tenge ($5.2 billion), claiming that NCOC stored sulfur at the facility in quantities twice the permitted level.
During this time, the Kashagan partners discussed various options for resolving the matter. After several years of litigation, a court in Atyrau upheld the legality of the fine on June 19, and in July, the Ministry of Justice of Kazakhstan initiated proceedings to collect it. In July, Bloomberg sources reported that KazMunayGas was prepared to pay its share of the fine regardless of the position of its foreign partners, a stance that diverged from that of the other consortium members. The companies continue to challenge the fine in two international arbitration proceedings. According to an NCOC statement dated July 23, the consortium considers the fine unfounded and intends to challenge it “by all available means.”
The status of this fine ultimately became a key part of Exxon’s negotiations with Kazakhstan regarding new investments of up to $80 billion to expand production at Kashagan. During negotiations with the government, the American company stated that potential new investments of up to $80 billion would depend on the resolution of the dispute, Bloomberg reported in August, citing sources.
This article was AI-translated and verified by a human editor
