Kazakhstan to receive $1.1 billion to settle Karachaganak row

Read on the website Vestnik Kavkaza

Energy majors developing the Karachaganak gas condensate field will pay $1.1 billion to Kazakhstan to settle a profit-sharing dispute, Kazakhstan's Energy Ministry said.

Kazakhstan and the consortium led by Shell and Eni will also amend the terms of their production-sharing agreement so that the republic will receive a higher share of future revenues from one of the Central Asian nation's biggest hydrocarbon fields.

The ministry estimated the extra income to amount to $415 million by 2037 based on the Brent crude price of $80 per barrel. The group has also agreed to provide a $1 billion long-term loan to Kazakhstan for infrastructure development.

Kazakhstan filed a $1.6 billion claim against foreign firms developing Karachaganak in 2015, Russia's Lukoil said.

The claim said that Kazakhstan had not received its fair share of income from the giant project. The two sides have since discussed various ways of settling the row.

The Energy Ministry said in May that Astana expected to settle the dispute within a month and that it expected a large one-off payment from energy majors as well as a higher share of future revenue, Reuters recalls.

The consortium, which includes Chevron and Kazakh state-owned company KazMunayGaz, produced 8.4 million tonnes of condensate at Karachaganak in January-August this year.

The Energy Ministry said the companies have pledged to invest $5 billion more in the field so that it would generate billions in additional revenue and agreed to supply feedstock for local refineries and chemicals plants on commercial terms.

The consortium said this month it would spend $1.1 billion on a project that would sustain Karachaganak's output at its peak for a longer time.