Karachaganak Petroleum Operating ‘Has Nine Months’ To Satisfy Government

NECE Starts New Year With £500,000 Kazakhstan Success

Within nine months, the shareholders of Karachaganak Petroleum Operating (KPO) will have to come up with a proposal to Kazakhstan’s government on how to resolve the dispute about allocation of oil sales proceeds at the Karachaganak gas-condensate field, energy minister Kanat Bozumbayev has said.

The government thinks the present system is unfair. The energy ministry will also pursue a parallel claim through international arbitration.

In March 2016, Kazakhstan said it wanted the KPO consortium to pay about $1.6bn because of an unjust interpretation of the production sharing agreement (PSA), which had resulted in Kazakhstan not receiving part of the profits from the sale of oil from the Karachaganak field.

“We have signed a memorandum with them at the end of December that will continue our negotiations during the next nine months of 2017. They will formulate concrete proposals to us,” the energy minister said.

The total sum of the claims was listed in Russian firm Lukoil’s financial report. It is one of the PSA participants. In June 2016 the Financial Times, citing a source, reported that KPO had offered to pay about $300mn to settle the dispute. Kazakhstan rejected that offer.

Karachaganak Petroleum Operating 'Has Nine Months' To Satisfy Government

Overview of karachaganak facilities (Photo credit: KPO)

KPO equity partners are Shell and Eni (29.25% each), Chevron 18%, Lukoil 13.5% and Kazakh state-owned KazMunayGaz 10%.

Discovered in 1979, the field is one of the world’s largest gas-condensate fields, with 9bn bbls condensate and 48 trillion ft3 of gas initially in place, and estimated gross reserves of over 2.4bn bbls condensate and 16 trillion ft3 of gas. Shell acquired its stake when it bought BG in February 2016. The partners’ PSA extends until 2038.

Azerbaijan desk