Kazakhstan has begun laying the groundwork for a revision of the contracts it signed with big oil in the 1990s when the country was flat on its back.

“Almost two-thirds of all hydrocarbon production in Kazakhstan comes from just three oil and gas fields: Tengiz, Karachaganak, and Kashagan. They were discovered back in Soviet times, but their development only became possible thanks to production-sharing agreements entered into with Western oil companies in the 1990s,” according to political scientist Rassul Kospanov in a note for the Carnegie Endowment for International Peace. “Western oil giants receive up to 98 percent of the revenue from some Kazakh fields under contracts dating back to the 1990s.”

The deals with Western energy majors have long underpinned the country’s production boom but only delivered modest fiscal returns. Now the country's leadership sees 2025 as a critical window to assert greater control over its vast hydrocarbon resources and renegotiate these days.

At the start of the year, Kazakhstan’s oil output reached a record daily average of over 2.03mn barrels. Yet, rather than celebrate, authorities are increasingly focused on structural shortcomings in the sector.

“The Kazakh budget deficit has been growing steadily since 2020,” Kospanov noted, reaching 3% of GDP in 2024, while Western oil giants are walking away with most of the country’s oil riches from some of the best Kazakh fields.

Oil production is concentrated in the three major Soviet-era fields and their development was made possible by production-sharing agreements signed in the 1990s with companies such as Chevron, ExxonMobil, Eni, Shell, and TotalEnergies. Those deals brought in tens of billions of dollars in investment — $50bn in Kashagan alone — but came with long payback periods, tax breaks, and confidential provisions.

“The young and institutionally weak state had to provide investors with extremely favourable working conditions,” Kospanov wrote. As a result, the state received only a minor share of profits in the early years, and many of the terms remain undisclosed even today.

Recent legal and environmental claims signal a change in tone. In 2023, Kazakhstan filed a $13bn lawsuit against the consortium operating Kashagan, later expanded to $160bn, alongside a $5.1bn environmental fine. A further $3.5bn lawsuit was filed against the Karachaganak field’s operators. The Tengizchevroil consortium has not yet faced major litigation, but in February, its CEO was summoned to parliament for the first time to answer questions from Kazakh lawmakers.

President Kassym-Jomart Tokayev said in January that while production-sharing agreements were important historically, they now required revision on “more favourable terms” for Kazakhstan. Energy Minister Almassadam Satkaliyev later confirmed the government was preparing to renegotiate the Tengiz project, including changes to operators and revenue shares.

“There may be no better time than the present to tackle these changes,” Kospanov said, pointing to a new generation of Kazakh officials unconnected to the compromises of the 1990s. Their interest in reform reflects not only economic concerns but also a desire to demonstrate political independence.

Domestic pressure is also mounting. A 2022 petition called for transparency in oil contracts and revenue distribution, reflecting growing demands for resource equity. While public opinion is not the dominant force in Kazakhstan’s political system, Kospanov argued it is “becoming increasingly difficult to ignore.”

The unstable geopolitics at the moment is driving the change as the Central Asian countries have more leverage in the international community than ever before.

“If Kazakhstan does not start revising its oil agreements now,” Kospanov warned, “by 2040 it risks finding itself in a situation where the largest deposits have been depleted but no new ways of replenishing the budget have materialised.”