Kazakhstan is intensifying its efforts to revise longstanding production-sharing agreements (PSAs) with major international energy firms, as a new generation of political elites seeks to assert economic sovereignty and reconfigure the country’s relationship with global oil giants. That’s the observation of Rassul Kospanov, a political scientist with a focus on Kazakhstan, as presented in an analysis published by Carnegie Politika.

The shifting political leadership of Central Asia’s largest economy in recent years triggered a wave of legal disputes and political manoeuvring. The less stable environment is a departure from the three-decade-long era of Nursultan Nazarbayev, the former president who stepped down from the political stage in 2022.

Since 2023, Kazakhstan has launched a series of high-stakes claims against foreign energy consortia. The most significant concerns the North Caspian Operating Company (NCOC), operator of the giant Kashagan oilfield in the Caspian Sea. The government initially filed a $13bn lawsuit over “unauthorised expenses” incurred between 2010 and 2018. By 2024, the claim had surged to $160bn, including compensation for lost profits — the figure represents more than half the country’s total GDP, which stood at $288bn last year.

Simultaneously, environmental claims have gained momentum. Kashagan’s operators have been fined $5.1bn for various violations, with arbitration proceedings ongoing. Kazakhstan has also filed a $3.5bn environmental claim against the Karachaganak Petroleum Operating (KPO) consortium, which oversees another of the country’s largest oilfields.

Until recently, Tengizchevroil (TCO) — a consortium comprising Chevron, ExxonMobil, KazMunayGas and Lukoil — had escaped similar scrutiny. However, on February 13, TCO chief executive Kevin Lyon was summoned to parliament to answer questions posed by Kazakh lawmakers. It was an unprecedented move, notes Kospanov.

Around the same time, Energy Minister Almassadam Satkaliyev held meetings with top executives from Chevron and ExxonMobil, while Chevron CEO Mike Wirth visited Astana in April for discussions with President Kassym-Jomart Tokayev and Prime Minister Olzhas Bektenov.

In a key government meeting on January 28, Tokayev stated that while the PSAs had been essential to Kazakhstan’s early oil development, the time had come to renegotiate their terms to better reflect national interests. Satkaliyev later confirmed that the government was preparing to revise the agreements, starting with the Tengiz project PSA. He emphasised the importance of increasing Kazakhstan’s revenue share, reviewing operator arrangements and securing more favourable terms.

All of this has taken place thanks to an emerging younger political class — unbound by the compromises of the 1990s. It has been pushing for resource governance reforms. Public pressure is also mounting: in 2022, a petition called for the declassification of PSA terms and greater transparency on revenue allocation.

At the same time, global dynamics such as sanctions applied to Russia and secondary penalties that hit those found to have breached those sanctions, supply chain disruptions and mounting Western interest in Central Asia have added urgency to Kazakhstan’s recalibration.

Officials warn that without contract revisions, the country may face budgetary risks as key fields reach depletion by 2040. 

Resource nationalism?

Western companies have contended that Kazakhstan’s renegotiation efforts amount to a simple case of “resource nationalism” as all the claims allegedly amount to an attempt to increase the state’s stakes in the oil projects. The Kazakh government has rejected the claim.

Central Asia, though, is not new to populist cases of resource nationalism, such as examples seen in neighbouring Kyrgyzstan – there, the nationalisation of the Kumtor flagship gold mine comes to mind as a particularly egregious example. But could Kazakhstan’s grievances be compared to a case like Kumtor?

If Kospanov’s argument is correct, the oil contract revision efforts cannot be simply dismissed as populist.

The International Consortium of Investigative Journalists (ICIJ) revealed in April that the international oil companies have been taking a “staggering 98% of oil revenue, after modest royalty payments” from the Kashagan field, citing a confidential interim ruling in the $160bn arbitration claim seen by ICIJ reporters.

“The 98% revenue claim may hint at the crux of the arbitration dispute: the terms of the original 1997 production-sharing agreement for Kashagan, signed during the administration of former President Nazarbayev, have long been reported to favor the oil companies, even after revisions made in 2008. The agreement has never been published,” ICIJ wrote. 

Paolo Sorbello, editor at independent Kazakh website Vlast.kz and an expert on Kazakhstan’s oil sector told the media outlet that “Kazakh society is definitely not happy that the agreement for Kashagan, as well as the Tengiz and Karachaganak contracts, are not public.”

Added Sorbello: “People have been seriously advocating for transparency in that department. And so the Kazakh government’s 98% revenue claim talks to the ‘gut’ of the people.”

Sorbello also noted, however, that despite the size of the revenue paid to Kashagan operator NCOC, it is worth noting that state-owned KazMunayGaz is a “significant shareholder in NCOC and is therefore also earning revenues.”

“By lodging such a massive claim, despite clear contract terms, the Kazakh government could turn a generational oil find into an endless courtroom battle,” Sorbello cautioned, concluding. “On the other hand, NCOC shareholders should [come to] the negotiating table if they want to keep the relationship alive, not offer one-off payments hundreds of times smaller than what the government asks.”