Kazakh Energy Ministry thinks dispute with Kashagan, Karachaganak could be settled out of court

ASTANA. May 16 (Interfax) - Kazakh Energy Minister Almasadam Satkaliyev said a dispute with the Karachaganak Petroleum Operating and North Caspian Operating Company, operators of the Karachaganak and Kashagan oil fields, respectively, could be settled out of court.

"I think, in any case, consultations will be held, and if there is a mutual desire, we can consider the possibility of resolving this dispute through negotiations," Satkaliyev told reporters on the sidelines of the government meeting.

Satkaliyev said that currently "standard procedures are underway in accordance with the current regulations."

"The parties appoint arbitrators. It's a standard procedure. Consultations are underway as part of the dispute settlement. In general, we must understand that improving the investment climate and attracting investment is our main priority, and all issues must be resolved in accordance with the legal guidelines," the minister said.

The government filed lawsuits with claims of $16.5 billion against the operators of the country's largest oil fields, Kashagan and Karachaganak, on behalf of the public.

Bloomberg, citing sources, reported earlier that the operators of Kazakhstan's two largest oil fields, Kashagan and Karachaganak, had been served with lawsuits from the government in an arbitration court in connection with accusations of unauthorized spending.

The sources said the government believes that the partners in the projects should not deduct expenses totaling $13 billion for Kashagan and $3.5 billion for Karachaganak. The government appointed arbiters to consider the Kashagan and Karachaganak cases in Geneva and Stockholm, respectively, the sources said.

Kashagan is considered one of the largest oil fields discovered in the world in recent decades, with recoverable reserves of 9 billion to 13 barrels of crude. Commercial production at the field began in the fall of 2016.

NCOC, the operator of the Kashagan project, is owned by KMG Kashagan B.V. with 16.877%; Shell (SPB: RDS.A) Kazakhstan Development B.V., Total EP Kazakhstan, Agip Caspian Sea B.V., and ExxonMobil Kazakhstan Inc. with 16.807% each; CNPC Kazakhstan B.V. with 8.333% and Inpex North Caspian Sea Ltd. with 7.563%.

The Karachaganak oil and gas condensate field is one of the largest in the world. Its reserves are estimated at 1.2 billion tonnes of oil and 1.35 trillion cubic meters of gas. It is operated by Karachaganak Petroleum Operating B.V. (KPO) under a 40-year production-sharing agreement signed in 1997. This international consortium is comprised of Shell with a 29.25% stake through its 100% affiliate company BG Karachaganak Ltd, Eni with 29.25%, Chevron with 18%, Lukoil with 13.5%, and KazMunayGas with 10%.