Exxon Has Tied an $80 Billion Project to a Settlement of Claims by Kazakhstan — Bloomberg

The American company ExxonMobil has warned Kazakhstan that the fate of potential investments in the expansion of the massive Kashagan oil field depends on the resolution of long-standing disputes between the government and international oil companies, Bloomberg reported, citing sources.

According to sources interviewed by the agency, ExxonMobil is proposing to establish a 50-50 joint venture with the state-owned company KazMunayGas to develop the undeveloped western part of Kashagan. The total potential joint investment in the project is estimated at $80 billion, according to Bloomberg. It is expected that development of the western part of Kashagan could yield up to 600,000 barrels of oil per day.

During negotiations with Kazakh officials, ExxonMobil linked the new project to the settlement of claims that Kazakhstan has filed against its international partners in the Kashagan project, according to Bloomberg sources. The total amount of these claims is approximately $150 billion; they are primarily related to lost revenue due to delays in developing the field. This dispute is currently being heard in international arbitration. In addition, Kazakhstan has fined the consortium of investors developing Kashagan $5 billion for environmental violations. The consortium denies the violations and has been challenging the fine for several years.

According to ExxonMobil’s plan, the other majors—current partners in the Kashagan project—will be offered minority stakes in the new joint venture, sources told Bloomberg. Companies that join the project will be released from their obligations regarding the environmental fine upon the establishment of the joint venture and from any remaining claims upon the final investment decision. Those who decline will also be released from claims, provided they do not challenge the new joint venture’s right to develop the western part of the field; however, they will not be able to renew their license for eastern Kashagan after it expires in 2041, sources said.

KazMunayGas supported ExxonMobil’s proposal, but the plan still requires political approval, which is not guaranteed, sources told Bloomberg. ExxonMobil, KazMunayGas, and Kazakhstan’s Ministry of Energy declined to comment.

According to sources, developing a concept for the development of the western Kashagan field could cost $250 million, while preliminary engineering and design work will require approximately $2 billion starting in 2028. A final investment decision is scheduled for 2030.

Kashagan is one of the largest oil and gas fields in the world, 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 $45 billion over the initial budget, according to Bloomberg. A month after production began, operations at the field were suspended due to pipeline leaks and did not resume until 2016.

Production in the developed eastern section of Kashagan currently stands at approximately 450,000 barrels per day. The project is being implemented by the North Caspian Operating Company (NCOC) consortium, which includes KazMunayGas with a 16.88% stake and six global oil and gas majors—Europe’s TotalEnergies, Eni, and Shell; the U.S.-based ExxonMobil (each with a 16.81% stake); the Chinese CNPC (8.33%); and the Japanese Inpex (7.56%).

According to Bloomberg sources, Eni has also independently sent “signals” to the Kazakh government expressing interest in developing the western part of Kashagan in partnership with unnamed partners. Eni did not respond to Bloomberg’s inquiry, nor did CNPC, while Shell, TotalEnergies, Inpex, and NCOC declined to comment.

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