The Ministry of Ecology of Kazakhstan Has Denied Information About An Agreement With The Operator of The Kashagan Field on An Environmental Dispute

The Minister of Ecology and Natural Resources of Kazakhstan E. Nysanbaev denied information about an agreement with the operator of the Kashagan oil and gas field (OGF) North Caspian Operating Company (NCOC) on an environmental dispute. On January 16, 2024, Bloomberg, citing sources, reported that NCOC shareholders were close to reaching an agreement with Kazakh authorities that would resolve a dispute over a potential $5 billion environmental fine.

In particular, it was reported that Eni, Shell, ExxonMobil and TotalEnergies have prepared a draft settlement that will stop the application of environmental sanctions by the Kazakh government and will include the companies’ obligation to make additional investments in social projects. These costs will amount to $110 million over the next 2 years.

However, at a briefing in the government, E. Nysanbaev denied information about the agreement between the parties:

• I cannot confirm for my part;
• because we worked within our competence and today we are in litigation with this company;
• the amount of violation is 2 trillion 300 billion tenge;
• all issues will be resolved within the legal framework;
• we have done our part, the courts are deciding this issue, we will wait for the court’s decision.

Problems with sulfur

In 2022, the Department of Ecology for the Atyrau Region of the Ministry of Ecology of Kazakhstan conducted an inspection at Kashagan, which showed:

• excess storage of sulfur is carried out at the storage sites of the Bolashak Unitary Plant and Gas Plant in the amount of more than 1 million tons;
• without approved design documents and environmental permits, a temporary sulfuric acid storage site is operated for the regeneration of spent alkali;
• the environmental protection action plan is not fully implemented;
• without appropriate treatment, wastewater is discharged into an evaporation pond;
• the requirements stipulated in the conclusion of the state environmental assessment are not met;
• the sludge trap was repurposed without approval from the authorized body in the field of environmental protection;
• untreated raw gas was flared without an environmental permit;
• without permits, unauthorized emissions were carried out at the evaporation tanks of the housing and communal services facility.

Environmentalists noted that these violations provide for the possibility of imposing a fine on the company in the amount of 2.3 trillion tenge.

At the same time, back in 2011, it seemed that all issues regarding sulfur had been resolved:

• as a result of purification of high-sulfur gas, 3.8 thousand tons/day or about 1.1 million tons/year of sulfur will be produced: the capacity of the temporary storage warehouse for sulfur at the Bolashak oil and gas processing plant on land is up to 4 million tons of sulfur; storage –  in closed conditions, isolated from the environment,
• liquid sulfur will be poured into sealed containers equipped with sensors.

It is likely that not all storage targets were met.

Chronology of the trial

NCOC went to court to challenge the results of the audit. In June 2023, the Astana court decided to partially satisfy the consortium’s claim; the main points of the environmentalists’ verification were disputed.

In particular, the court:

• supported NCOC’s position regarding the clause on sulfur placement,
• recognized the point from the environmentalists’ conclusion regarding the lack of additional purification filters as unfounded.

In turn, the Department of Ecology for the Atyrau region. in September he filed an appeal to challenge the decision of the first instance court.

In October, Bloomberg, citing sources, reported that NCOC shareholders threatened Kazakhstan with international arbitration over this dispute. Prime Minister of the country A. Smailov, commenting on this message, said that the republic is ready for a peaceful resolution of the issue, an agreement has been reached with the consortium on the removal of sulfur from the territory of the deposit and its sale for export.

At the end of November, the appeal board of the Astana city court decided to resume the judicial investigation and conduct a second forensic study in the dispute between ecologists and NCOC. The panel of judges issued a ruling to order a repeat forensic study, which will be entrusted to experts from the State Enterprise Center for Forensic Expertise of the Ministry of Justice. The court also asked the parties to provide the experts with the necessary documents for the study as quickly as possible.

NGM Kashagan

• located 80 km from Atyrau, in the northern part of the Caspian Sea;
• offshore field discovered June 30, 2000;
• is one of the largest fields in the world discovered in the last 40 years, as well as the largest offshore oil field;
• Recoverable reserves are estimated to range from 9 to 13 billion barrels. oil;
• commercial production began in the fall of 2016;
• operator: NCOC;
• The shareholders of the NCOC consortium are: KMG Kashagan B.V., share of participation: 16.88%; Shell Kazakhstan Development B.V., participation share: 16.81%; Total EP Kazakhstan, share of participation: 16.81%; AgipCaspian Sea B.V., share of participation: 16.81%; ExxonMobil Kazakhstan Inc., share of participation: 16.81%; CNPC Kazakhstan B.V., share of participation: 8.33%; Inpex NorthCaspian Sea Ltd., share of participation: 7.56%.

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