Kashagan Shareholders to Challenge Kazakhstan’s $5 Billion Fine in Arbitration

Kashagan’s foreign shareholders have launched international arbitration against Kazakhstan over a nearly $5 billion environmental fine, Orda.kz reports.

According to Bloomberg, citing Shell, the claims relate to sulfur storage requirements at the field.

Following the Astana court's refusal to hear the consortium's appeal against the fine in December, the foreign shareholders decided to take the dispute to international arbitration.

«Despite challenging the charges and attempting to resolve the situation through dialogue, these efforts have been unsuccessful. The international shareholders have concluded that it is necessary to initiate arbitration under the relevant international agreements,» the statement said. 

NCOC is already involved in a large-scale legal dispute over government fines amounting to billions of dollars.

Bloomberg previously reported that Kashagan’s shareholders had long underestimated the potential sanctions from Kazakhstan. The company, the outlet said, had been aware for several years of violations related to sulfur storage but took no action. As a result, in 2022 the government filed a lawsuit seeking 2.3 trillion tenge.

Additional claims later brought the total to $155 billion. These relate to the terms of the production-sharing agreement, which the government argues allow investors to receive up to 98% of profits. On similar grounds, Kazakhstan is also seeking another $6 billion from shareholders in the Karachaganak project.

As we reported previously, the Western shareholders of Kashagan may be able to challenge the return of the Kairan and Aktota fields to state property in court.

Original author: Raushan Korzhumbekova