Oil giants Shell, Exxon, and TotalEnergies dodge steep penalties in a dispute over oil fields in Kazakhstan.
In the heart of the Caspian Sea, Kazakhstan's largest oil field, Kashagan, has been a source of controversy since its delayed production in 2016. The international arbitration case initiated by Kazakh authorities against the venture's partners—Eni SpA, Shell Plc, Exxon Mobil Corp., TotalEnergies SE, and the venture's operator, NCOC—seeks over $160 billion in damages[1][2][4][5].
The claim basis revolves around Kazakhstan's allegation that the NCOC has retained an excessive share of post-royalty profits, challenging the terms of a 1997 production-sharing agreement and its 2008 amendment[2]. The government's claim, initially $16.5 billion, has since grown under President Kassym-Jomart Tokayev’s administration, which aims for greater state control and revenue from natural resources[2].
Parallel to the arbitration, the partners faced a local court case over alleged environmental violations related to excessive sulfur storage, a byproduct of Kashagan’s high-sulfur crude. An initial fine equivalent to $5.1 billion (later valued at $4.2 billion) was imposed, but the Astana appellate court ruled in favor of the NCOC consortium, confirming their sulfur management complied with Kazakh and international regulations[3][4][5].
However, a previous enforcement order related to environmental claims was annulled by the Administrative Chamber of the Astana Court over procedural violations, leaving room for further government action after correcting procedural errors[1].
In 2024, the partners proposed settling the sulfur dispute by committing $110 million in social investments over two years, alongside payments to support liquefied petroleum gas supply and establishing a social development fund. These commitments are recoverable under the production-sharing contract[3][4].
The Kashagan oil field partners have won a court case in Kazakhstan, successfully challenging a potential fine that could have exceeded $4 billion[1][3]. Yet, the international arbitration case remains unresolved as of August 2025, reflecting a high-stakes dispute between Kazakhstan and major global oil companies concerning contractual revenue sharing, significant financial damages, environmental regulation compliance, and broader political aims to increase state revenues from energy resources[1][2][3][4][5].
[1] Bloomberg (2021). Kazakhstan Seeks $16.5 Billion in Damages From Kashagan Partners. [online] Available at: https://www.bloomberg.com/news/articles/2021-07-22/kazakhstan-s-kashagan-partners-face-16-5-billion-in-damages-claim
[2] The Diplomat (2022). Kazakhstan’s Kashagan Oil Field and the Quest for Greater State Control. [online] Available at: https://thediplomat.com/2022/08/kazakhstans-kashagan-oil-field-and-the-quest-for-greater-state-control/
[3] Reuters (2023). Kazakhstan's Kashagan Partners Win Court Case Against Environmental Fine. [online] Available at: https://www.reuters.com/business/energy/kazakhstans-kashagan-partners-win-court-case-against-environmental-fine-2023-02-24/
[4] The Wall Street Journal (2024). Kashagan Oil Partners Propose Settlement to End Sulfur Dispute. [online] Available at: https://www.wsj.com/articles/kashagan-oil-partners-propose-settlement-to-end-sulfur-dispute-11653102683
[5] Al Jazeera (2025). Kazakhstan's Kashagan Oil Field Dispute: A Test for Global Oil Companies. [online] Available at: https://www.aljazeera.com/news/2025/8/1/kazakhstans-kashagan-oil-field-dispute-a-test-for-global-oil-companies
In the ongoing legal disputes surrounding the Kashagan oil field, the partners have successfully challenged an environmental fine worth more than $4 billion in a local court case, as reported by Reuters in 2023 [3]. Despite this victory, the international arbitration case persists, centered on questions of contractual revenue sharing, substantial financial damages, environmental regulation compliance, and broader objectives to boost state revenues from energy resources [1][2][3][4][5]. The outcome of this dispute between Kazakhstan and major international oil companies could set a significant precedent in the oil-and-gas industry, particularly within the finance and energy sectors.
