Shell (SHEL) and Eni (E) have been ordered by Kazakh authorities to immediately halt construction of a major gas processing plant at the Karachaganak oil and gas field, following escalating disagreements over project costs, delays, and financial responsibilities.
The decision, formalized in late May, comes after repeated concerns from the Kazakh government regarding missed deadlines and a ballooning project budget that has now reached an estimated $6 billion.
The Karachaganak project, which was originally scheduled for completion in 2028, was recently delayed to 2030 as costs surged and foreign partners requested additional financial support from the Kazakh state. Specifically, Shell and Eni sought around $1 billion in government backing to offset losses attributed to regulated gas prices, arguing that such support was necessary to maintain the project’s commercial viability.
This request, coupled with the rising price tag and shifting timelines, led Kazakh officials to question the feasibility and partnership structure of the venture.
In a formal notice sent to the project’s shareholders, Kazakh authorities instructed all foreign investors to cease work on the gas processing facility and dissolved the working group established to oversee its implementation.
The government is now considering transferring full control of the project to KazMunayGas, Kazakhstan’s national oil and gas company, signaling a possible shift toward domestic management and financing of the strategic infrastructure.
The halt underscores the growing tension between Kazakhstan and its international partners over large-scale energy projects, particularly as cost overruns and regulatory challenges become more frequent. For Shell and Eni, the suspension represents a setback in their Central Asian operations and raises questions about the future of foreign investment in Kazakhstan’s energy sector.
Despite the project halt, analysts remain cautiously optimistic about Shell’s long-term prospects, noting that the company’s stock still has upside potential according to consensus price targets. However, the situation at Karachaganak highlights the complex risks global energy companies face when navigating evolving regulatory and economic landscapes in resource-rich nations.
