Karachaganak shareholders hesitate on gas plant investment, Kazakhstan may go solo
Foreign shareholders of Karachaganak Petroleum Operating B.V. (KPO) are reportedly unwilling to invest in the construction of a gas processing plant (GPP) with an annual capacity of 4 billion cubic meters at the Karachaganak field in the West Kazakhstan region.
The news was reported via the Energy Monitor Telegram channel, run by oil and gas expert Nurlan Zhumagulov. He cited sources familiar with the matter, whom he met on the sidelines of the Astana International Forum, currently underway in the capital.
«Unfortunately, several shareholders are not prepared to meet Kazakhstan’s request to increase commercial gas output,» Zhumagulov wrote. «Investors want Kazakhstan to cover a $1 billion shortfall in the gas plant’s estimated cost. The engineering, procurement and construction (EPC) contract is priced at $3.7 billion, but shareholders are only willing to commit $2.7 billion. They’re also proposing to settle ongoing arbitration.»
Zhumagulov backed the Kazakh government’s decision to reject those terms and proceed with the project independently.
«The investors will eventually leave, but the GPP will remain and serve future generations. There’s plenty of gas at Karachaganak,» he said. «To accelerate the project, Hyundai Engineering will stay on as general EPC contractor. However, to cut construction costs, the government plans to replace the current construction contractor.»
The expert added that negotiations to extend the Karachaganak production sharing agreement (PSA) are unlikely to occur.
Earlier media reports indicated that KPO consortium partners, Italy’s Eni and the UK’s Shell, faced an ultimatum from the Kazakh government. Authorities demanded the GPP project be approved by June 2025 so that construction can begin, with operations slated to start in 2029. The plant is intended to process growing volumes of associated petroleum gas from the Karachaganak field.
Karachaganak holds an estimated 1.2 billion tons of oil and 1.35 trillion cubic meters of natural gas. The field is being developed under a 40-year PSA signed in 1997 by an international consortium that includes Shell (29.25%), Eni (29.25%), U.S.-based Chevron (18%), Russia’s Lukoil (13.5%) and Kazakhstan’s state-owned KazMunayGas (10%).
