Kazakhstan Seeks to Transfer Karachaganak Plant Management to KazMunayGas Over Delays, Costs
Photo: KMG press service
The Kazakh authorities are dissatisfied with delays and budget overruns in the Karachaganak gas processing plant (GPP) project and are now pushing to transfer its management to the national company KazMunayGas, Orda.kz reports.
According to Upstream, citing sources close to the negotiations, the government sent a formal letter to foreign shareholders Eni and Shell on May 17, demanding that construction be halted due to extended timelines and rising costs. The shareholders had earlier proposed shifting part of the costs to Kazakhstan’s budget and requested an end to arbitration in an ongoing gas pricing dispute — a proposal the authorities rejected.
In response, the government proposed that KazMunayGas take over contractual and management rights. Eni and Shell have already invested approximately $60 million in the project’s preparation.
Negotiations over compensation and transfer terms are ongoing.
Despite the proposed change in operator, the EPC contract is still expected to be executed by Hyundai Engineering Co Ltd and Sicim.
The consortium has confirmed its readiness to proceed with construction for $3.5 billion, with partial financing expected from Kazakhstan’s National Fund.
The plant is designed to process up to 4 billion cubic meters of gas annually and is considered key to meeting Kazakhstan’s domestic gas needs. The current commissioning date is set for 2029.
Orda.kz has requested comment from KazMunayGas, but no response was received at the time of publication.
The dispute between Astana and the Karachaganak Petroleum Operating consortium has been simmering for some time. Initially, Eni and Shell planned to complete the plant by 2028, but the timeline was pushed to 2030, and estimated costs ballooned to nearly $6 billion.
The investors also sought multi-billion-dollar compensation for domestic gas price caps, claiming the project would otherwise be unprofitable under the current production-sharing agreement, valid until 2033.
In May, KMG CEO Askhat Khasenov publicly criticized the project’s pace and confirmed that the government is considering implementing the plant without foreign partners.
Original Author: Ruslan Loginov
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