The operator of the Kashagan field, the company «North Caspian Operating Company» («NCOC»), has lost a court case regarding the results of an environmental inspection at the field. The court's appeal panel ruled in favour of the authorities, leaving the «NCOC» consortium with no chance of appeal.
Initially, the Ministry of Ecology of the Republic of Kazakhstan filed a lawsuit against the operator of the Kashagan field for violating environmental protection regulations. The Department of Ecology found that «NCOC» was storing an excessive amount of sulphur. The company's production facility held 1 million 750 thousand tonnes of sulphur against the permitted 730 thousand tonnes.
The inspection also revealed violations including failure to implement environmental protection measures, discharging wastewater without an environmental permit, and failing to comply with requirements set out in the state environmental expert review, among others. The total amount of environmental fines was 2.3 trillion tenge ($5.1 billion).
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For reference: «North Caspian Operating Company» («NCOC») is responsible for implementing the North Caspian Project for the development of the Kazakh offshore oil and gas fields Kashagan, Kairan and Aktoty. The Production Sharing Agreement for the North Caspian (PSA-NC) was signed by the Republic of Kazakhstan and an international consortium in November 1997.
The Kashagan field is an offshore oil and gas field located in the northern part of the Kazakh sector of the Caspian Sea. It is one of the largest and most complex offshore fields in the world. It covers an area of approximately 75 km by 45 km. The geological oil reserves of the field are estimated at 4.5 billion tonnes.
Disagreement with the inspection results led «NCOC» to appeal to the court in Astana. The court overturned 3 out of 10 of the identified environmental violations. However, neither side was satisfied with the partial ruling. «NCOC» stated that the company operates in accordance with the legislation of the Republic of Kazakhstan.
The Ministry of Ecology, for its part, filed an appeal against the ruling. The court's appeal panel upheld the legality of the fines, rejecting the arguments of the «NCOC» consortium. However, the media has not ruled out the possibility that «NCOC» will now turn to an international arbitration court.