An international arbitration court has upheld Kazakhstan’s claims that the operator of the Karachaganak oil and gas field inflated costs, resulting in budget shortfalls. The field is being developed by a consortium of five companies from various countries, including LUKOIL. The arbitrators ruled that the project participants must compensate the Kazakh authorities between $2 billion and $4 billion, with the exact amount to be determined later. Meanwhile, Kazakhstan intends to acquire LUKOIL’s stake in projects on its territory and has already submitted a proposal to OFAC.
“Victory in the Karachaganak case strengthens Kazakhstan’s negotiating position, although the outcome of the Kashagan dispute will still depend on specific contractual and factual circumstances,” notes Andrei Gusev, Senior Partner at Nordic Star, in his commentary for Kommersant.
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