Karachaganak shareholders demanded additional $1B for gas processing plant construction - Ministry of Energy explains
In response to an official inquiry from the Kazinform News Agency, Kazakhstan’s Ministry of Energy explained why the project for the construction of a gas processing plant (GPP) at the Karachaganak field has not been implemented.
“The development of the gas potential of the Karachaganak field and strengthening the country’s commercial gas reserves are of strategic importance. Over the course of two years, extensive negotiations were held on the Karachaganak gas processing plant project. Its planned capacity was 4 billion cubic meters of gas per year. Kazakhstan provided comprehensive support for the project. However, Kazakhstan deemed the terms proposed by the shareholders as economically unacceptable. Among these was the condition that Kazakhstan pays an additional $1 billion on top of covering 100% of the construction costs for the Karachaganak GPP,” stated the Ministry’s experts.
The shareholders explained this demand by stating that it would be impossible to recoup the construction costs within 3–4 years, as the production sharing agreement with Kazakhstan expires in 2033.
Apparently, according to the Ministry of Energy, the Karachaganak shareholders tried to use the project as leverage in a dispute that is currently being reviewed by an independent tribunal.
“Moreover, the shareholders demanded a complete halt to the ongoing arbitration case currently under review by an independent tribunal. In light of this, negotiations on the Karachaganak gas processing plant project - initiated within the framework of the Final Production Sharing Agreement for the Karachaganak project - have now concluded. Nonetheless, the issue of Karachaganak’s gas potential remains under consideration,” the Ministry's official response stated.
Given the strategic importance of gas processing at Karachaganak, Kazakhstan is currently considering the possibility of implementing the project with other partners.
“Possible options are being explored to carry out the project with alternative contractors, including the potential implementation of the GPP through the national company KazMunayGas,” the Ministry reported.
The fate of the project has not yet been finalized. Negotiations on the potential implementation of the GPP construction at Karachaganak are still ongoing. According to the Ministry, an appropriate decision on the future of the project will be made following the outcome of these talks.
Earlier, it was reported that President Kassym-Jomart Tokayev met with ExxonMobil Chairman and CEO Darren Woods. The two sides discussed the current state and future prospects of investment projects in the energy and oil and gas sectors.
