Consortium faces ecological penalty amounting to 134 billion tenge

By Saule Tasboulatova

Emergency discharge of fuel gas at Kashagan's D island. 26 Aug 2013.The Ecology Department of Atyrau Oblast sent instructions to Agip KCO and NCOC about  compensation over damage to the environment for the amount of 134.2bn tenge, caused as a result of flaring nearly 2.8 million cubic metersof sour gas.

To recall, on September 24, 2013 near the Bolashak (Karabatan) processing unit due to rapture  of gas pipeline a hydrogen sulfide (associated gas) leaked into the environment. As a result of accident the residual sour gas was flared to on-shore and off-shore flare stacks of Kashagan field.

As per the requirements of RoK Code “On Administrative Offences” administrative proceedings have been initiated based on the results of audits. The companies have the right to appeal against the instruction within a month.

The information that ecological penalties will be imposed on Kashagan operators became known in January. Most likely, that the sum of penalty was known much earlier, than it was voiced. It is also unusual that all information about penalties is coming not from local department of ecology (which always was prepared for a dialogue with the press), but from the press service of the ministry of environmental protection and water resources. It is hard to escape a conclusion that there is a ‘bargaining’ going on among higher authorities, and, it is possible that in order to win some of the positions, the ministry decided to use penal "bludgeons". So far they used only one. But if to speak about the sequence, then soon the sum of penalty for production delay at Kashagan has to be voiced. In due time the Oil Minister Uzakbai Karabalin, answering the questions of journalists, said: “There will be sanctions and penalties that are stated in the PSA. First of all, penalties will be imposed for violations of ecology and occurred leaks. There was also flaring of sour gas”.

To recall, according to Additional Agreement of 2008, Kazakhstan tightened control over budget and schedule implementation of Kashagan project, by increasing penalilties for the delay of commercial production of crude from $50 billion per year to $120 mln per year.

Exxon, Royal Dutch Shell, Total, Eni and Kazakh state oil company KazMunaiGas each hold a 16.81 percent stake in Kashagan.

Japan's Inpex has 7.56 percent, and China National Petroleum Corp (CNPC) bought a 8.33 percent in 2013 from ConocoPhillips.