KazMunayGaz (KMG) has signed an initial agreement with China's Citic Construction for the Karachaganak associated gas processing plant project, simultaneously terminating the previously awarded Engineering, Procurement, and Construction (EPC) contract with a South Korean-led consortium.

Project Agreement and Contract Termination

The agreement with Citic Construction establishes the foundational principles for cooperation, defining the project framework, cost estimates, equipment layout, and the form of collaboration. This decision effectively restarts the long-delayed project from the beginning. Consequently, KMG has terminated the EPC contract previously awarded to a consortium led by Hyundai Engineering of South Korea and partnered by Italy's Sicim. This termination occurred despite expectations that Hyundai would retain the contract after project responsibility was transferred from the field's operating consortium to KMG earlier in the year.

Project Rationale and Revised Plans

The processing plant is designed to handle approximately 4 billion cubic meters of associated gas annually from the Karachaganak field. Its objectives are twofold: to help meet rising domestic gas demand in Kazakhstan, where supply is constrained, and to maintain stable liquid hydrocarbon production at the mature field by managing increasing volumes of associated gas. With the project now under KMG's full control, its scope, capacity, and even its planned location near existing field facilities are subject to revision. Authorities remain hopeful for a start-up soon after the original 2030 target.

Project History and Current Status

The project has experienced significant delays and ownership changes. Initially, field operator Karachaganak Petroleum Operating (KPO), led by Eni and Shell, awarded the EPC contract in early 2025 and was responsible for steering the project under a 2022 agreement. However, in May of this year, the Kazakh government ordered KPO to halt all work and transfer the project to KMG after a failure to agree on adjusted commercial terms, which prevented a final investment decision. The project has now returned to a preliminary design stage, with the parties agreeing on next steps for front-end engineering and design (FEED) development.

Future Procurement Strategy

To accelerate the project, KMG aims to award a new EPC contract in the second quarter of 2026. This contract is expected to integrate the FEED phase, allowing a direct transition into the EPC phase. This integrated approach is intended to shorten the project timeline by several months compared to awarding separate FEED and EPC contracts.