Tengiz deal benefits all parties, says Tengizchevroil chief

Tengizchevroil (TCO) CEO Kevin Lyon has affirmed the fairness of the company’s contract for hydrocarbon production at Kazakhstan’s largest oil field Tengiz.

«As the General Director of Tengizchevroil, I believe that the contract in place for the Tengiz operations is fair. […] The investments in the facilities come from our shareholders. […] That investment creates incremental value for the Republic of Kazakhstan. Also, if you compare the value created per ton of oil produced, TCO is the best-performing company in Kazakhstan. So, our contributions, based on our actual production and the amount paid to the republic for each ton produced, are the highest in the country. Therefore, we believe it is a fair approach for the work we do to support Kazakhstan,» Lyon said during a meeting of the Environment and Natural Resources Committee in the Mazhilis, the lower house of Kazakhstan’s parliament.

The meeting focused on increasing in-country value and supporting domestic producers involved in the Tengiz project.

MP Yerlan Barlybayev raised a question about the fairness of the current Tengiz contract.

«In your presentation, you stated that direct payments to Kazakhstan’s budget totaled $11 billion by the end of 2024. If I understood correctly, these are tax payments. Dividing that figure by your 31 years in the market yields an average annual payment of $355 million,» Barlybayev said.

He recalled a recent conversation with representatives from Philip Morris Kazakhstan, which, he said, pays 5% more in taxes than TCO.

«How fair do you think the agreement between Kazakhstan and TCO is?» Barlybayev asked.

Lyon highlighted that in addition to financial investment, Kazakhstan benefits from working with a global consortium that prioritizes safety and brings international expertise and values to the country.

In response to Kursiv.media’s inquiry, Vice Minister of Energy Kudaibergen Arymbek said that a task force to review existing major hydrocarbon production contracts has not yet been established.

«The directive is in place. We still need to set up a task force and begin this work on extending production contracts,» he said.

Arymbek also noted that any partner in major projects has the right to initiate negotiations on a potential contract extension five years before its expiration.

On Jan. 28, 2025, President Kassym-Jomart Tokayev directed the government to accelerate negotiations with foreign investors to extend production sharing agreements under new, more favorable terms for Kazakhstan. The terms of existing contracts remain confidential due to non-disclosure agreements. Tokayev acknowledged that these projects play a significant role in the country’s socio-economic development.

Minister of Energy Almassadam Satkaliyev confirmed to reporters that the agency has received the president’s directive. A special commission will be formed to examine existing large contracts. Tengiz is expected to be the first project renegotiated as part of the contract extension process. The current agreements expire in 2033 for Tengiz, 2038 for Karachaganak and 2041 for Kashagan.

Recent media reports highlighted that TCO has reduced its share of procured Kazakhstani goods and services. In 2024, TCO’s local content ratio dropped to 69%, down from 70% in 2023. This marked the first decline in locally sourced materials and services since 2017, following year-on-year growth through 2022.

In 2024, TCO’s total project expenditures reached $4.221 billion, with $2.9 billion or 69% going toward local content. Specifically, TCO procured $580 million in goods (7% local content), $1.99 billion in works (80% local content) and $1.65 billion in services (78% local content).

In 2023, total costs were $5.557 billion, with $3.916 billion or 70% spent on local content. In 2022, TCO’s expenditures totaled $5.306 billion, including $3.709 billion or 70% in local content.

Between January and September 2024, TCO produced 21.4 million tons of oil (171.4 million barrels) and sold 951,000 tons of liquefied gas, along with over 2 million tons of sulfur. For comparison, during the same period in 2023, the company produced 21.7 million tons of oil and sold 932,000 tons of liquefied gas and more than 1.9 million tons of sulfur.

The total proven oil reserves at Tengiz amount to 3.1 billion tons (25 billion barrels), while reserves at the Korolev field, also operated by TCO, total 200 million tons (1.6 billion barrels). The combined recoverable reserves at both fields are 1.4 billion tons (11.5 billion barrels). TCO is a joint venture controlled by U.S.-based Chevron (50%), ExxonMobil (25%), KazMunayGas (20%) and the Russian oil company Lukoil (5%).