The oil majors behind the giant Kashagan oil field have told Kazakhstan’s government that they may seek international arbitration in a dispute over a $5 billion environmental fine, according to people familiar with the matter.
(Bloomberg) — The oil majors behind the giant Kashagan oil field have told Kazakhstan’s government that they may seek international arbitration in a dispute over a $5 billion environmental fine, according to people familiar with the matter.
The Kazakh authorities ordered the North Caspian Operating Company, which runs Kashagan, to pay a 2.3 trillion tenge ($4.8 billion) fine earlier this year for allegedly storing too much sulfur at the project. The operator has denied any wrongdoing and mounted a successful legal challenge to the decision, but the government is still pursuing the penalty at the country’s court of appeals.
International partners in NCOC including Eni SpA, Shell Plc, Exxon Mobil Corp. and TotalEnergies SE have asked to start settlement talks with the government over the fine, and said they could seek international arbitration if that doesn’t happen, the people said, asking not to be named because the information is private.
NCOC didn’t respond to emailed requests for comment. The Energy Ministry didn’t reply to a request for comment. Exxon, Shell, TotalEnergies and Eni declined to comment.
The Kashagan partners are already involved in a separate arbitration over $13 billion in disputed costs. The oil companies have denied being at fault in both cases.
The joint venture partners, which also include Chinese National Petroleum Corp. and Japan’s Inpex Corp., made the approach to the government following a legal ruling in June that nullified the results of the sulfur-storage inspection at Kashagan conducted by the regional environmental protection department.
Kazakhstan’s government has appealed the court decision, the Ministry of Ecology and Natural Resources said by email. Preliminary hearings for the appeal were made on Sept. 14, it said.
CNPC didn’t respond to a request for comment. Inpex declined to comment.
–With assistance from Francois de Beaupuy, Laura Hurst, Kevin Crowley, Alberto Brambilla, Kathy Chen and Shoko Oda.
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