Projects
Kazakhstan Seeks Higher Profits from Its Major Oil and Gas Projects
Although between 8 and 17 years remain until the expiration of Kazakhstan’s three largest oil and gas production contracts—signed in the early years of the country’s independence—Astana has already announced its intention to renegotiate them to secure more favorable terms for the country.
Calling the Shots
Kazakhstan's President Kassym-Jomart Tokayev made his position clear for the first time in late January 2025. At an extended government meeting, he instructed the cabinet to "intensify negotiations on extending PSA contracts under updated terms that are more favorable for the country."
This concerns production-sharing agreements (PSAs) for the Kashagan and Karachaganak fields (signed in November 1997) and the Tengiz project (signed in April 1993), although the latter technically operates under a concession model rather than a PSA. These three fields account for over 65% of Kazakhstan's total oil output, and cumulative investments have reached $185 billion.
Previously, in an interview with Russia-24, Tokayev stated that Kazakhstan had no choice but to engage foreign investors after gaining independence in 1991, as the country lacked both financial and technological resources to develop the Soviet-era oil fields located on its territory.
"The government at that time had no alternative but to invite foreign investors. The first to enter our market were the Americans—Chevron. Together with the state, they privatized the largest oil field in western Kazakhstan," Tokayev said. "It must be acknowledged that the Americans have been quite successful in their work. However, the terms of that agreement were based on the investment practices of the time. Kazakhstan had no laws governing foreign investment, and production-sharing agreements seemed entirely reasonable at the time. Now, changing the game's rules would be unnatural, perhaps even absurd, from the perspective of our country's long-term interests. But adjustments are necessary, and we are now carefully working on them."
Tengiz: The First Domino
The review of Kazakhstan’s investor relations model will begin with Tengiz, where the development contract expires in early 2033 (see “The Tengiz Effect – 2023 and Beyond,” Petroleum, No. 5-2024). For years, the government regarded the Tengizchevroil (TCO) joint venture as a “sacred cow”—a benchmark for attracting investment into Kazakhstan’s oil and gas sector. And for good reason: the company is the country’s largest oil producer, top taxpayer, and so on. In the distant 1990s, the Americans introduced new business, safety, and labor standards to Kazakhstan and successfully integrated them into the local industry.
But as the contract’s expiration draws closer, criticism has intensified. Journalists and civil society activists accuse TCO of insufficient progress in increasing Kazakhstani content in goods, works, and services and excessive spending on the Future Growth Project—among other alleged shortcomings. However, these critics often overlook that TCO voluntarily takes on commitments not stipulated in the Tengiz concession agreement. For example, the company supplies feedstock to the polypropylene production facility in Atyrau and delivers commercial and liquefied gas to the domestic market.
In the spring of 2024, a Kazakhstani business alliance Parasat published an open appeal to the president of Kazakhstan, proposing to exchange foreign investors’ stakes in the Tengiz, Kashagan, and Karachaganak projects for part of Russia’s foreign exchange reserves frozen in Western banks following the outbreak of the war in Ukraine—while simultaneously renegotiating the terms of the contracts.
The initiative's authors argue that revenue generated from contract revisions could be redirected toward Kazakhstan’s planned social programs and economic reforms. “Russia still has those $300 billion frozen by the West. Judging by the tightening of sanctions, those funds won’t be released anytime soon—and there’s even talk of transferring them to Ukraine. The idea is simple: Russia could use these funds to buy out foreign companies’ shares in Tengiz, Karachaganak, and Kashagan,” the appeal states. As expected, Astana did not respond to this extravagant proposal.
What Kazakhstan Wants
It is highly likely that if the contracts are renegotiated, the composition of the operators developing Kazakhstan’s “Big Three” oil and gas fields will remain unchanged, although the share and influence of the national company KazMunayGas may increase. This was made clear by Kazakhstan’s Minister of Energy, Almasadam Satkaliyev, during a press briefing following the previously mentioned extended government meeting. “One possible option for extending the PSAs is to improve contract terms, increase Kazakhstan’s share, and change certain operators,” he stated. Later, specifically discussing Tengiz, he added, “One of the possible demands will be an increase in Kazakhstan’s stake, and it will be announced. We should officially begin the relevant negotiations within the next year or two.”
As of mid-February, a working group to determine the terms for extending the Tengiz contract had yet to be formed, according to Kazakhstan’s Vice Minister of Energy, Kudaibergen Arymbek. He noted that any partner in major projects—Tengiz, Karachaganak, and Kashagan—has the right to initiate negotiations on a possible contract extension five years before its expiration.
Currently, KazMunayGas holds a 20% stake in Tengizchevroil. However, it can be assumed that increasing Kazakhstan’s influence and share of project revenues is far from the only demand. The negotiation package may also include commitments such as the construction of a fourth refinery along with guaranteed crude oil supply or other large-scale infrastructure projects.
