The Kashagan field, developed with a cost of $55bn, is located in the Caspian Sea. Credit: booms /Shutterstock.

Partners in the Kashagan oil project are on the brink of resolving the dispute with the Kazakh Government over a multi-billion-dollar environmental fine, reported Bloomberg, citing sources.  

In 2023, Kazakh authorities ordered the North Caspian Operating Company (NCOC), operator of the Kashagan field, to pay $5bn in fines.   

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NCOC’s partners include Eni, Shell, ExxonMobil, TotalEnergies, Inpex and CNPC.  

The proposed settlement aims to halt the government’s pursuit of the environmental penalty, with the companies instead committing to a $110m investment in social projects over the next two years, the sources said. 

This comes after a legal victory for the oil majors last year, where they successfully challenged allegations of improper sulphur storage at the project site. 

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Despite the operator’s denial of any wrongdoing and their successful legal challenge, the Kazakh Government continued to seek the penalty through the country’s court of appeals.  

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According to sources, the current draft of the agreement includes a pledge by the oil companies to reduce sulphur storage at the field.  

The Kashagan venture is also involved in a separate arbitration over $13bn in contested costs. The partners have denied fault in the other case as well. 

Kazakhstan’s energy ministry directed inquiries to the Environment Protection Ministry, which did not return the requests for a comment.  

Shell and TotalEnergies opted not to comment on the situation. Eni was not able to provide a comment. CNPC and Inpex have also not responded to requests for comment. 

The Kashagan field, developed at a cost of $55bn, is located in the Caspian Sea. 

It has a history of operational challenges, including a shutdown due to pipeline corrosion caused by sulphurous gas in 2013, and a recent output curtailment for repairs to a gas separation unit.  

Settlement discussions among the joint venture partners began in November 2023.