Kazakhstan demands over $150 billion in compensation from Kashagan oil firms

Kazakhstan has increased its arbitration claims against international oil companies that developed the Kashagan oil field to more than $150 billion, demanding compensation for lost revenue in addition to a dispute over costs, according to people familiar with the matter.

Kazakhstan’s government was already involved in a $15 billion arbitration over production costs at the giant field, which has been beset by delays, technical difficulties and cost overruns since development began more than 20 years ago. The additional claim is for as much as $138 billion in lost revenue, reflecting the calculation of the value of oil production that was promised to the government but not delivered by the field developers, the people said, asking not to be identified because the information isn’t public.

Kashagan produced its first oil in September 2013 - eight years later than planned and $45 billion over its original budget - but was shut down a month later after leaks were discovered in the pipeline.

Production resumed in 2016, and the field gradually reached 270,000 barrels per day in 2017. Eni, the lead developer in the early stages of the project, has estimated that Kashagan will reach production levels of at least 1.5 million barrels of oil per day.

North Caspian Operating Co., a joint venture leading the project, said there are a number of disputes over the application of certain provisions of the Kashagan production sharing agreement that are subject to arbitration.

The North Caspian Project represents the first major offshore oil and gas development project in Kazakhstan. It consists of three fields: Kashagan, Kairan and Aktoty.

The Kashagan field is one of the largest oil fields discovered in the last four decades; its recoverable reserves are approximately 9-13 billion barrels (1-2 million tons) of oil.