Kazakhstan Suspends Karachaganak Gas Plant Project With Foreign Partners

Kazakhstan has officially suspended its cooperation with foreign shareholders on the gas processing plant project at the Karachaganak field, Orda.kz reports.

The Ministry of Energy announced this:

The implementation of the project under the current Production Sharing Agreement (PSA) has been suspended,  the ministry said in a statement on July 2.

Authorities now plan to develop new mechanisms for the project outside the PSA framework, with a priority on involving national companies. The project is likely to come under the control of KazMunayGas.

Previously, Kazakhstan had demanded that Eni and Shell transfer management of the project to KazMunayGas (KMG). 

According to Upstream sources, the foreign partners had attempted to shift part of the costs to the state budget and sought to halt an arbitration case over gas pricing proposals the government deemed unacceptable.

An official letter was sent instructing them to stop construction. Nonetheless, the Hyundai Engineering and Sicim consortium is still expected to remain the main contractor, with part of the financing likely to come from the National Fund.

Tensions between Astana and the Karachaganak Petroleum Operating consortium had been building for some time. Originally, Eni and Shell committed to completing the plant by 2028, but later pushed the deadline to 2030 and raised the estimated cost to nearly $6 billion.

The investors also sought billions in compensation from Kazakhstan for lowering domestic gas prices, arguing the project would be unprofitable under the existing PSA, which is valid through 2033.

Kazakh officials had previously hinted they could proceed with the project independently. 

Original Author: Ruslan Loginov