Kazakhstani court rules that Kashagan operator must pay more than $5 billion in fines for violation of environmental law
The board of appeals of the Astana court has ruled that the results of the Kashagan examination by the Ecology Department of the Atyrau Region were valid and correct. This means that the North Caspian Operating Company (NCOC), the Kashagan project operator, should pay $5.1 billion in fines.
The board of appeals has canceled a court decision from 2023 when NCOC challenged some results of the ecological examination. In 2022, authorities inspected Kashagan and found 1.7 million tons of sulfur at the site, a serious overrun of a limit by 773,000 tons. As a result, a legal proceeding has been initiated.
In December 2023, Minister of Ecology and Natural Resources Yerlan Nyssanbayev said that his agency wouldn’t seek an out-of-court settlement with members of the international consortium operating at Kashagan (NCOC) over the issue of a $5.1 billion fine.
«Neither the government nor state agencies can influence court decisions these days. We are going to wait for the final decision by courts – national and international (if members of the NCOC consortium appeal to international arbitrage) anyway. This is a dogma,» Nyssanbayev said.
He also noted that all legal proceedings are within the frame of national legislation and international law.
«As of today, we lost in the court on the first instance. However, we’ve filed an appeal and this issue is still under review by the court,» the minister added.
In turn, Zhomart Aliyev, head of the Committee for Ecological Regulation and Control under the Ministry of Ecology said that NCOC hasn’t notified the agency yet about its intention to appeal to the international arbitration court.
«As of now, the legal proceeding of the case ongoing in Kazakhstani courts. Neither the company nor we have appealed to the arbitration court,» he said, adding that NCOC has the right to appeal to the international arbitrage.
The official also said that the Ministry of Justice will participate in any arbitration proceedings as the agency authorized to represent the interests of the country.
On October 11, 2023, Bloomberg reported that NCOC was thinking about appealing to the international arbitration court to challenge a $5.1 billion claim by the government of Kazakhstan that accused the company of violating environment protection rules and wanted it to pay a fine. Investors were ready to do so if no out-of-court settlement with the government was reached. No one from NCOC, Exxon, Shell, TotalEnergies, Eni and the Ministry of Energy of Kazakhstan has commented on the news.
In early 2023, the government of Kazakhstan ruled that NCOC should pay $5.1 billion in fines for storing an excessive amount of sulfur at the site. Some experts said that Kazakhstan’s actions might have been driven by a desire to increase its share in the consortium by placing pressure on investors. NCOC denied any wrongdoing and challenged the accusation in court, which caused the Ministry of Ecology to appeal to the court once again.
On September 7, 2023, Prime Minister Alikhan Smailov said that Kashagan was capable of boosting its oil output by 5.9 times from 12.7 million tons in 2022 to 75 million tons per year. Among NCOC shareholders are KMG Kashagan B.V. (16.877%), Shell Kazakhstan Development B.V. (16.807%), Total EP Kazakhstan (16.807%), AgipCaspian Sea B.V. (16.807%), ExxonMobil Kazakhstan Inc. (16.807%), CNPC Kazakhstan B.V. (8.333%) and Inpex NorthCaspian Sea Ltd. (7.563%).
