The operator of the Kashagan offshore oilfield has lost a key legal appeal against a massive environmental fine in Kazakhstan, setting the stage for further litigation.

Court Upholds Multibillion-Dollar Fine

A special administrative court in Astana has rejected an appeal by the North Caspian Operating Company (NCOC) against a fine of 2.3 trillion tenge ($4.4 billion). The fine was originally imposed in 2023 by the Atyrau regional ecology department, which alleged NCOC exceeded permitted sulphur storage volumes at its onshore processing facility in Bolashak.

Basis of the Environmental Penalty

The fine stems from an inspection in 2022, where authorities found excessive amounts of elementary sulphur stored in open-air pads at the Bolashak facility. This facility processes crude oil from the Kashagan field, removing poisonous hydrogen sulphide, which results in the production of elementary sulphur. NCOC has consistently contested the fine, arguing it had secured all necessary permissions for the open-air storage.

Ongoing Legal Battle and Operational Response

This ruling is the latest in a series of court battles between NCOC and the Atyrau authorities. The Astana court has allowed NCOC to contest the decision in a higher court, indicating further legal challenges are expected. In response to the original fine, NCOC has significantly reduced the sulphur stockpile at Bolashak by breaking up and selling the majority of it. As of 1 April, stored volume had fallen to 383,000 tonnes, a 75% reduction from the time the fine was imposed.

Project Stakeholders

The Kashagan field is operated by an international consortium, NCOC, whose shareholders include Eni, Shell, TotalEnergies, ExxonMobil, China National Petroleum Corporation, Inpex of Japan, and Kazakhstan's state-owned KazMunayGaz.