Kazakhstan has alleged in a confidential arbitration case that some of the biggest international oil firms that have developed the giant Kashagan oilfield awarded $10.7 billion worth of contracts with unjustified cost increases or through bribes, the International Consortium of Investigative Journalists (ICIJ) team reported on Friday, citing multiple sources.
The Kashagan oilfield was developed by the North Caspian Project consortium of international majors and Kazakhstan’s state oil firm KazMunayGas. The shareholders in the consortium include KazMunayGas, Eni, Shell, ExxonMobil, TotalEnergies, China’s CNPC, and Japan’s INPEX Ltd.
The Kazakh government alleges in the confidential arbitration that the Kashagan consortium awarded in the 2000s about a dozen of contracts that contained unjustifiably high costs, or were compromised by bribery and self-dealing, ICIJ reports.
The claim has been registered with the Permanent Court of Arbitration in The Hague, and the tribunal has yet to make any decision on the corruption claims, people with knowledge of the matter told ICIJ.
This claim is the gravest accusation at Big Oil yet in the years-long court dispute between Kazakhstan and the consortium over cost overruns, project delays, and environmental damage at Kashagan.
The allegation of compromised contracts is part of a larger, $160-billion claim, from Kazakhstan against Big Oil over lost production and profits and environmental damages.
Kazakhstan has several arbitration cases with as much as $166 billion in claims against the oil majors for damages, mostly because of lost revenues from delays at the Kashagan oilfield.
The years of disputes have prompted Shell to pause investment in Kazakhstan.
“We are disappointed that we can’t see alignment between the joint venture partners and the government on some of these topics. It does impact our appetite to invest further in Kazakhstan. So we watch the situation with care,” Shell’s chief executive officer Wael Sawan told analysts during an earnings call early this year.
“We think that there’s still a lot of potential investment opportunities in Kazakhstan, but we will hold until we have better line of sight to where things end up,” the executive added.
By Charles Kennedy for Oilprice.com
