Kazakh Authorities Request Suspension of Gas Plant Construction at Karachaganak - Upstream

Kazakh authorities have asked foreign investors to suspend work on the construction of a gas processing plant at the Karachaganak field, Orda.kz reports.

The decision reportedly stems from dissatisfaction with missed deadlines and rising costs.

According to Upstream Online, foreign companies Eni and Shell received formal notices instructing them to halt construction work on the gas processing facility. The move is linked to ongoing disagreements between the Kazakh government and investors over project timelines and cost estimates.

In a letter dated 17 May sent to Karachaganak shareholders, a copy of which has been seen by Upstream, the government agency responsible for protecting Kazakhstan's state interests in Karachaganak said that shareholders should immediately stop all work related to the gas processing plant,
Upstream reports. 

The letter also refers to the dispersing of the working group formed by investors to implement the project. Kazakh authorities expressed concern over the consortium’s proposal that the government cover part of the costs, around one billion dollars, which foreign companies associate with losses due to gas price regulation.

The investors initially postponed the plant’s construction from 2028 to 2030, later raised the cost estimate to $6 billion, and eventually sought financial support from the state.

Last year, serious disagreements emerged between Kazakhstan and Karachaganak Petroleum Operating. Eni and Shell argued that for the project to be financially viable, either more funding was needed or its capacity should be reduced. 

By the end of May,  Kazakh authorities were reportedly considering transferring full control of the project to KazMunayGas.

Original Author: Nikita Drobny