Investors demand prolongation of a 20-year Kashagan contract, Government terminates contracts with unfair subsoil users

Among the events that attracted attention last week were the announcement of the Minister of Oil and Gas, U. Karabalin, that the oil production at the Kashagan deposit can’t be started until the end of 2015, intention of the leading shareholders of the North-Caspian project – ExxonMobil and Shell – to prolong the contract for another 20 years as well as the information of the deputy Prime Minister-Minister of Industry and new technologies, A. Isekeshev, about the termination of contracts with the subsoil users not executing their obligations.

On June 1st 2014 the participants of the North-Caspian consortium signed a memorandum of understanding with the Government of Kazakhstan on further development of the Kashagan project. However, on confidential conditions the shareholders of the international consortium, in particular, Shell and ExxonMobil, keep negotiating upon the prolongation of the contract on Kashagan for another 20 years – from 2041 (PSA expires in 2041) to 2061 due to the economic efficiency.