Kazakhstan is arguing in international arbitration that around a dozen contracts for the development of the Kashagan field, totalling $10.7 billion, may have involved conflicts of interest, unjustified cost overruns or bribery. The arbitration tribunal has not yet ruled on these claims.
WHAT THE DISPUTE IS ABOUT
According to findings by the International Consortium of Investigative Journalists (ICIJ), Kazakhstan's claims relate to contracts that the North Caspian Operating Consortium (NCOC) signed in the 2000s with a number of international engineering and construction companies.
NCOC brings together Shell, ExxonMobil, Eni, TotalEnergies, China National Petroleum Company and Inpex. The consortium said its members acted in accordance with the contracts, Kazakhstan's laws and applicable standards. Due to the confidentiality of the proceedings, NCOC declined to disclose further details.
WHY KAZAKHSTAN LINKS THE CONTRACTS TO THE KASHAGAN DELAY
According to the Kazakh side, alleged irregularities in the awarding of the contracts and subsequent project management partly contributed to delays in developing Kashagan. The field, which was originally expected to come on stream in the mid-2000s, only reached full production in 2016.
Kazakhstan claims the delay postponed the project's transition to the profit-sharing stage – the most advantageous phase of the production-sharing agreement for the state. Meanwhile, the oil companies continued to recover their claimed development costs. Available estimates of these costs are around $60 billion, although the materials note that this figure is considered conservative.
THE SCALE OF THE ARBITRATION PROCEEDINGS
The Kashagan dispute is part of an international arbitration claim of approximately $160 billion, which also includes claims related to lost profits and environmental damage. The proceedings are registered with the Permanent Court of Arbitration in The Hague.
NCOC disputes Kazakhstan's claims. According to the ICIJ, the consortium points to deficiencies in the evidence and the expiry of the limitation period. Representatives of the oil companies also argue that some of the materials linked to Italian bribery investigations may point to possible involvement by Kazakh state officials rather than the oil companies.
WHAT IS KNOWN ABOUT THE FURTHER DEVELOPMENT OF THE DISPUTE
On 21 July, the Kazakh authorities seized NCOC's assets in the country, including property and vehicles, in connection with a disputed environmental fine of $5 billion. This matter has become the subject of separate international arbitration proceedings.
There is as yet no final ruling on the corruption claims in the Kashagan case. According to the ICIJ, in the absence of an agreement between the parties, proceedings on the merits of these claims and liability for any violations could continue until at least 2028, when the arbitration's final ruling is expected.