Kazakhstan is testing the patience of Western majors operating in the country, including Shell, Eni, Exxon Mobil and TotalEnergies, by demanding they pay tens of billions of dollars in compensation between them for failing to adhere to contractual terms at two giant projects: Kashagan and Karachaganak. The battle is being played out in the arbitration courts, where each year the Kazakhs are upping the amount of damages they feel are due, leaving the oil companies guessing about their true intentions. The consortium overseeing the Karachaganak project, one of the world’s largest onshore developments, with production of around 20 billion cubic meters per year of gas and 250,000 barrels per day of liquids, is fighting a claim of over $5 billion. With Shell and Eni as joint operators holding separate 29.25% stakes — alongside Chevron (18%), Russia’s Lukoil (13.5%) and Kazakh state Kazmunaigas (10%) — Karachaganak Petroleum Operating (KPO) has a 40-year production-sharing contract (PSC) that runs until 2038. The government says KPO owes it money for capital costs that the operator had recovered over a period of more than a decade — an amount that it says keeps going up each year. According to Shell filings at the UK’s Companies House seen by Energy Intelligence, the claims against the consortium have risen from $3.5 billion in 2023 to as much as $5.7 billion this year and are set to increase again in 2026, assuming the case remains unresolved. This means Shell and Eni, as things stand, would be on the hook for around $1.7 billion each. In the filings, Shell said it has not taken out any financial provisions so far because it does not know what Kazakhstan’s game plan is. A European industry veteran who used to work on the project says the Kazakhs may be using the claim as leverage to force the KPO partners into giving a larger stake to Kazmunaigas. But he said the Kazakhs themselves may not know what they want in the long term: “It’s possible they’re just making this up as they go along,” he told Energy Intelligence.
