Shell has announced a pause on all new investments in Kazakhstan due to ongoing international arbitration cases that could result in multibillion-dollar claims against Western oil companies operating in the country.

Arbitration Disputes Impacting Investment

Shell is a shareholder in two major Kazakh oilfields, Kashagan and Karachaganak, both subject to arbitration. CEO Wael Sawan expressed disappointment at the lack of alignment between joint venture partners and the government on these issues, stating it directly impacts Shell's appetite for further investment. The company will withhold new commitments until there is clarity on the outcomes.

Details of the Karachaganak Case

The arbitration involves Karachaganak Petroleum Operating (KPO), operated by Shell and Eni with Chevron and Lukoil as other foreign shareholders. In January, a London tribunal issued an interim ruling supporting Kazakh government claims that KPO miscalculated reimbursable expenses from 2010-2021, reducing state revenues. This paves the way for a final ruling expected to involve a multi-billion dollar settlement.

Kashagan Claims and Broader Context

Shell is also a shareholder in the Kashagan field, where Kazakhstan reportedly seeks up to $160 billion in claims for production delays. Other Kashagan shareholders include Eni, TotalEnergies, ExxonMobil, CNPC, and Inpex. An analyst noted that while Shell's investment pause may not change the near-term macro picture for Kazakhstan, it signals significant displeasure over repeated legal disputes faced by Western majors in the country.

Recent Investment History and Project Setbacks

Shell's last investment in Kazakhstan was in the Caspian Sea offshore fields Kalamkas and Khazar. The company quit operatorship of Khazar in 2019 and has not entered any new exploration or development projects since. The Kalamkas-Khazar project was later taken up by Lukoil in 2023, but plans for first production in 2029 are now in doubt after U.S. sanctions on Lukoil in October 2025 prompted the Russian company to announce the sale of its international assets. Kazakhstan's Ministry of Energy stated it plans to issue a statement addressing Shell's concerns.