Photo: psa.kz
Kazakhstan has officially declined to build a gas processing plant at the Karachaganak field under the terms proposed by a consortium of Western investors led by Italy’s Eni and the UK’s Shell. The decision was confirmed by the press service of the Ministry of Energy, as reported by KazInform.
“Kazakhstan found the financial terms proposed by the shareholders unacceptable. Among them was a condition requiring an additional $1 billion payment on top of 100% of the construction costs for the Karachaganak Gas Processing Plant,” the statement said.
The consortium reportedly justified the demand by noting that construction costs could not be recouped within 3–4 years, especially since the production sharing agreement (PSA) with Kazakhstan expires in 2033.
Another condition set by the shareholders was the complete termination of an ongoing arbitration dispute with Kazakhstan over an alleged unjustified deduction of revenues.
“In light of this, negotiations on the Karachaganak Gas Processing Plant project — launched under the final PSA for the Karachaganak project — have now been concluded. Nevertheless, the issue of the field’s gas potential is still under consideration,” the ministry stated.
Bloomberg had previously reported that Kazakh authorities were considering transferring the project to KazMunayGas, a subsidiary of the state wealth fund Samruk-Kazyna.
The Karachaganak oil and gas condensate field in western Kazakhstan spans over 280 square kilometers and is considered one of the largest of its kind in the world. It is being developed by an international consortium operating under a PSA signed with Kazakhstan on November 18, 1997.
Royal Dutch Shell and Eni each hold a 29.25% stake in the project, Chevron owns 18%, LUKOIL has 13.5%, and Kazakhstan’s state-owned KazMunayGas holds a 10% share.
Currently, most of the gas extracted at Karachaganak is reinjected into the reservoir, while the rest is sent to Russia’s Orenburg Gas Processing Plant due to the lack of on-site processing capacity. Discussions about building a gas plant at Karachaganak have been ongoing since the early 2000s.
