Exxon Links New $80 Billion Kazakh Oil Venture to Ending Dispute

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Or sign-in if you have an account.(Bloomberg) — ExxonMobil Holdings Corp. has told Kazakhstan that a potential $80 billion joint investment to expand the Kashagan oil field is contingent on resolving a long-running $150 billion dispute between the government and international companies, according to people familiar with the matter.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe proposed investment, in an equal joint venture with state-owned KazMunayGas National Co., would tap the undeveloped western part of the massive Kashagan oil reservoir, potentially producing as much as 600,000 barrels a day, the people said, asking not to be named because the information is private.In talks with Kazakh officials, the US oil major has linked this potential investment to the resolution of disputes between the Kashagan partners and the government, the people said. This relates to the state’s claims for about $150 billion mostly for lost revenue during development delays, which is subject to international arbitration, and a $5 billion environmental fine.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againWhile KazMunayGas has agreed with Exxon’s proposal, the plan would still need to get political approval, which is not certain, the people said.Exxon and KazMunayGas declined to comment. Kazakhstan’s Energy Ministry declined to comment.When the Kashagan deposit was found in 2000 it was the largest oil discovery in decades. Italy’s Eni SpA, the field’s operator at the time, expected it to eventually pump as much as 1.5 million barrels a day, but there were numerous delays and cost overruns during the complicated development process.Output from the developed eastern portion of Kashagan is currently about 450,000 barrels a day. The North Caspian Operating Co., the joint venture that operates the project, expects to boost production to about 500,000 barrels a day this year and as much as 710,000 barrels a day by 2031.About 1 billion barrels out of an estimated 16 billion barrels of total recoverable reserves have been extracted from Kashagan in its first decade in operation, according to the government. Exxon is seeking to unlock about 10 billion of these barrels from the western Kashagan development, according to people familiar with the matter. Bloomberg first reported the company’s initial proposal last year. In Exxon’s plan, other oil majors that are currently partners in Kashagan would be offered minority stakes in the new joint venture, the people said. Companies that joined the new development would be released from the claims related to the sulfur fine when the venture was formed, and from remaining claims at the final investment decision, the people said.Any company that declined the offer would be released by Kazakhstan from the claims, provided they do not dispute the new joint venture’s right to develop the western portion of the field, the people said. These firms also wouldn’t be able to extend their part of the existing license for eastern Kashagan after it expires in 2041, the people said. This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.The development concept for an Exxon-led project to commercialize western Kashagan may cost $250 million, the people said. The front-end engineering and design would require further spending of about $2 billion from 2028, they said, adding that the plan implies start of development after the final investment decision in 2030.Exxon is one of the major partners in NCOC alongside Eni, Shell Plc, TotalEnergies SE, KazMunayGas, China National Petroleum Corp. and Inpex Corp.Eni has separately approached Kazakhstan’s government sending signals it wishes with some other unnamed partners to develop western Kashagan’s oil resources, the people said.Shell, TotalEnergies, Inpex and NCOC declined to comment. CNPC didn’t respond to a request for comment. Eni didn’t immediately respond to a request for comment. —With assistance from Mitchell Ferman, Alberto Brambilla, Sarah Chen, Dan Murtaugh and Kevin Crowley.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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