The Dunga dispute is closed; the Kashagan fine settlement falls through
Published · 14 min read · 11 stories
The Energy Ministry and KazMunayGas closed a long-running dispute under the Dunga production sharing agreement: Kazakhstan will receive compensation and the field a new development plan to 2039. According to Bloomberg, a settlement of the 2.356 trillion tenge Kashagan fine fell through over objections from ExxonMobil and TotalEnergies. The Kurultai ratified the protocol with Russia on duty-free oil product supplies, an inspection of the Atyrau refinery ended with cases in court, and Brent rose 3.6% on the week to $104.41.
The week in a minute
- 1The Dunga PSA dispute is settled: compensation for Kazakhstan (amount undisclosed) and a plan for 67.4 million barrels in 2026–2039.
- 2Bloomberg: ExxonMobil and TotalEnergies blocked a settlement of the 2.356 trillion ₸ Kashagan fine (about $5.2 billion).
- 3The Kurultai ratified the protocol with Russia: duty-free oil product supplies to 2028, saving about 30 billion ₸ in 2026.
- 4Atyrau refinery inspection: over 100 t of gas flared, emissions above limits, cases sent to court.
- 5Brent +3.6% on the week to $104.41; the tenge weakened 1.4% to 453.93 per dollar.
The week on the map
The fields in this issue's stories; the number is the story.
- 1DungaThe Dunga dispute is settled: compensation for Kazakhstan and a plan for 67.4 million barrels to 2039
- 2KashaganBloomberg: ExxonMobil blocked a settlement of the 2.3 trillion tenge Kashagan fine
- 8Karachaganak, Tengiz, Kalamkas Sea, KhazarLUKOIL's deal with Carlyle lapsed back in July; the US licence expires on 22 October
- 10Zhetybai, Asar, Zhetybai East, Airantakyr, Burmasha, KarazhanbasKMG in Mangystau: Mangistaumunaigas produced 4.55 Mt of oil in nine months, Karazhanbasmunai 1.55 Mt
The week in numbers
ICE Brent December futures, Friday quote at 20:00 Astana time (not the settlement price).
TTF front-month (November) futures on ICE, late evening of 9 October (22:03 Moscow time). Kazakhstan has no single price: wholesale caps run from 7,563 to 55,716 ₸ per 1,000 m³ excl. VAT by region (Energy Ministry Order No. 210); no change was reported this week.
The National Bank's official rate for 10–12 October.
Deals
The Dunga dispute is settled: compensation for Kazakhstan and a plan for 67.4 million barrels to 2039
On 5 October in Astana the Energy Ministry and KazMunayGas, with the authorised body PSA and the operator Dunga Operating GmbH taking part, signed an agreement settling the disputed issues under the production sharing agreement (PSA) for the Dunga field in Mangystau region. The dispute was over whether certain past contractor costs could be recovered from production; the investors will pay Kazakhstan an agreed compensation, the amount of which was not disclosed. The agreement clears the way for a new 2026–2039 development plan producing 67.4 million barrels of oil. The foreign partners, Oman Oil Company and PTTEP (20% each), still have to sign; KazMunayGas holds 60% through Dunga Operating. Dunga produced 677,300 tonnes of oil in 2025 against 630,000 in 2024.
Why it matters. Under a PSA the investor first recovers its costs from the production, and only then does the profit split with the state begin. A dispute over which costs are recoverable is therefore a dispute over the state's share. Closing it removes the uncertainty and opens a new investment cycle at the field.
- Dunga Operating (KazMunayGas) — 60
- Oman Oil Company — 20
- PTTEP — 20
The operator can move to the 2026–2039 plan: tie in 61 previously drilled wells and convert 45 wells to water injection.
The uncertainty is gone, but the compensation is undisclosed and the foreign partners have yet to sign.
The third development phase means work on tying in wells and on pressure maintenance.
LUKOIL's deal with Carlyle lapsed back in July; the US licence expires on 22 October
On 8 October Interfax, citing the 2025 report of LUKOIL International GmbH, said the agreement to sell the company's foreign assets to Carlyle lapsed at the end of July because the US Treasury's Office of Foreign Assets Control (OFAC) did not approve it; 'intensive negotiations' are under way with other buyers. The latest extension of the US licence that lets these assets operate expires on 22 October. In Kazakhstan LUKOIL holds 13.5% of Karachaganak, 5% of Tengizchevroil and 12.5% of CPC; these projects are exempt from US sanctions until 14 October 2027. The Kalamkas-more and Khazar project with KMG is suspended; according to Forbes.kz, the auditor KPMG flagged a material uncertainty about its operator's ability to continue as a going concern, as banks closed all of its accounts in 2025.
Why it matters. In the issue for 21–27 September we reported that the deal awaited US approval; according to LIG's report it had lapsed back in July, and a buyer is being sought anew. Who buys the assets will shape the shareholder line-up of Tengiz, Karachaganak and CPC; the sanctions exemption to October 2027 lets them operate as usual.
KPO, TCO and CPC operate as usual.
The buyer of the stakes is unknown; the next date is 22 October, when the US licence expires.
No change at Tengiz and Karachaganak; the Kalamkas-more and Khazar project remains suspended.
Companies
Bloomberg: ExxonMobil blocked a settlement of the 2.3 trillion tenge Kashagan fine
On 9 October Bloomberg, citing sources, reported that ExxonMobil did not back the latest proposal by the Kashagan partners to settle the dispute over the 2.356 trillion tenge fine (about $5.2 billion) and persuaded TotalEnergies, until then neutral, to take the same position; the objections of the two companies were enough to stop the settlement. The fine relates to more than 1.2 million tonnes of sulphur stored at Kashagan above the norms, a violation found in 2022. According to the agency, ExxonMobil links possible investment of up to $80 billion in expanding the field to a settlement. Enforcement resumed on 29 September, and the partners are contesting the fine in two international arbitrations; the NCOC partner companies did not comment on the report.
Why it matters. Kashagan is one of the country's three largest fields. Until the dispute is closed, every consortium partner, KazMunayGas included, faces the risk of a large payment, and according to Bloomberg the decision to expand the field depends on a settlement. The report has not been officially confirmed.
- KazMunayGas — 16.88
- Shell — 16.81
- TotalEnergies — 16.81
- Eni — 16.81
- ExxonMobil — 16.81
- CNPC — 8.33
- Inpex — 7.56
Enforcement continues, but no effect on Kashagan output has been reported.
The risk of a payment of about $5.2 billion stays open and a possible expansion waits for a settlement; the information comes from a single source.
Orders for a Kashagan expansion still depend on the outcome of the dispute; current contracts are unaffected.
Regulation
The Kurultai ratifies the protocol with Russia: duty-free oil product supplies to 2028
On 7 October the Kurultai ratified, in two readings, the protocol renewing the agreement with Russia on supplies of oil and oil products to Kazakhstan. The agreement expired on 1 January 2024; the protocol, signed on 27 November 2024, covers the period since then and extends the agreement to 1 January 2028, after which it renews automatically for five-year periods. Annual agreement on supply volumes and the duty-free regime are kept: Energy Minister Yerlan Akkenzhenov put the saving in 2026 at about 30 billion tenge (diesel 15.75 billion, jet fuel 8.61 billion, gasoline 5.59 billion). According to the minister, the three large refineries processed 18.4 Mt of crude last year and covered more than 90% of domestic demand; about 300,000 tonnes of jet fuel a year come from Russia, and he expects full self-sufficiency and exports of oil products to Central Asia by 2030.
Why it matters. Domestic refineries do not yet cover all demand, jet fuel above all, so duty-free imports from Russia insure the home market. According to Reuters, imports of Russian diesel rose to 77,000 tonnes in September from 28,000 in August.
Energy Ministry estimate; about 30 billion tenge in total.
Inbusiness.kz, 7 OctoberDuty-free imports lower the risk of shortages of diesel and jet fuel.
About 30 billion tenge saved in 2026; until the refineries expand, the fuel market depends on imports.
Expanding the Shymkent refinery from 6 to 12 Mt (feasibility study by year-end) and Pavlodar by 2 Mt means future orders.
The EAEU extends its anti-dumping duty on Chinese oil and gas well pipes to 2031
The Board of the Eurasian Economic Commission extended to 5 October 2031 inclusive the anti-dumping duty on seamless steel pipes from China used to drill and operate oil and gas wells. The rate is 12.23% to 31% of the customs value, depending on the producer. Six Russian pipe plants sought the extension, backed by the Vyksa steel works and Kazakhstan's QazExpoCentre-Pipe and KSP Steel. The measure has been in force since 2015.
Why it matters. Well pipes are a sizeable cost item in drilling and completion. The duty keeps protecting EAEU pipe makers, Kazakh ones included, but Chinese pipes stay more expensive for subsoil users.
Chinese well pipes stay dearer, with a duty of 12–31% of customs value.
A small addition to drilling costs for subsoil users, market protection for pipe makers.
Kazakh pipe makers keep protection from cheap imports until 2031.
Refining
Atyrau refinery inspection: emissions above limits and over 100 tonnes of gas flared; cases go to court
On 6 October the Ministry of Ecology reported the results of an unscheduled inspection of the Atyrau refinery, launched after numerous residents' complaints about air quality. Emissions had not been calculated and limits not set for certain furnaces and tanks; during emergencies on 25 August and 2–7 September more than 100 tonnes of gas were flared; and emissions of carbon monoxide and nitrogen oxides above the limits were recorded at three of the plant's facilities. On 1 October the administrative cases were agreed with the prosecutor and sent to court, and the materials were also passed to law enforcement. The refinery disputes some of the findings: it says the emission calculations are part of its emission-limits project and that flaring during emergencies is provided for in the design.
Why it matters. A week earlier the refinery presented a 174 billion tenge environmental programme to obtain a comprehensive environmental permit. The court's decision will show how strictly the Environmental Code is applied to the largest industrial sites; hearings on the refinery's environmental permit for 2026–2029 take place on 6 November.
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Emergency gas flaring
- 2
Emergency flaring on 2–7 September; over 100 tonnes of gas in total
- 3
Cases agreed with the prosecutor and sent to court
- 4
Hearing on the 2026–2029 environmental permit
A signal to large sites: inspections triggered by residents' complaints end in court cases.
The size of the fines is not stated; extra environmental spending within the KMG group is possible.
Demand for gas-cleaning equipment and emission monitoring systems.
Prices and markets
Brent this week: from $98.2 to $105.6, $104.4 on Friday
On Monday evening December Brent stood at $102.51. On Tuesday it fell 2.1% to $98.17 as concern about a supply shortage eased. On Wednesday the price returned to $101.98; the same day the US Department of Energy reported that commercial crude stocks fell by 3.2 million barrels in a week, while analysts had expected a 1.7 million rise. On Thursday Brent rose 5.4% to $105.58 on fears of disrupted fuel supply from the Middle East and because of Hurricane Isaias: by Friday US Gulf of Mexico output was down by about 1.3 million barrels a day. On Friday evening it stood at $104.41 (+0.1%); according to Reuters, China approved exports of about 3.7 million tonnes of diesel, gasoline and jet fuel for October.
Why it matters. Over the week Brent rose 3.6% (both values are the December contract on Friday evening), and oil above $100 supports export earnings. But a range of almost $7.5 within one week shows how sharply the market reacts to news on supply, stocks and weather.
Evening quotes of ICE Brent December futures, Astana time (19:48–20:15).
Kapital.kz, 10 OctoberA price above $100 keeps revenue per barrel high.
Volatility is high; worth testing projects at different prices in the economic model.
The price does not change this week's orders.
The tenge weakened 1.4% on the week to 453.93 per dollar
Over the week the official rate swung by almost 8 tenge: 447.73 for 5 October, 454.98 for 6 October, 453.65 for the 7th, 447.14 for the 8th and 448.94 for the 9th. After Friday's trading the rate for 10–12 October was set at 453.93, 6.20 tenge higher than a week earlier.
Why it matters. A weaker tenge means more tenge for every export dollar and more tax income in tenge, but dearer imported equipment. Sharp swings within the week complicate settlements under tenge contracts.
National Bank rate for the date; one rate for 10–12 October.
Kapital.kz, 10 OctoberExport revenue in tenge went up.
The rate swung by almost 8 tenge in a week, so the currency risk on tenge settlements is higher.
Imported equipment and materials got dearer in tenge.
World
EIA raises its fourth-quarter Brent forecast to $105; IEA countries speed up stock releases
On 6 October the US Energy Information Administration (EIA) raised its forecast for the average Brent spot price in the fourth quarter of 2026 to $105 a barrel, $14 above its forecast a month earlier. It expects $96 on average for 2026 and $84 for 2027; Brent averaged $114 in September. EIA estimates that global oil stocks fell by 1.9 million barrels a day on average in the third quarter and will fall by another 0.7 million in the fourth. On 7 October the member countries of the International Energy Agency (IEA) backed speeding up releases from emergency stocks, diesel first: about 325 million barrels have been released and about 100 million more are pledged.
Why it matters. EIA forecasts are one of the benchmarks for budgets and investment decisions. The agency expects a high price to the end of the year and a decline in 2027, a handy pair of scenarios for testing projects in the economic model. EIA's forecast is for the spot price, not the futures contract in our market summary.
A guide to a high price to the end of the year; plans for 2027 call for more caution.
EIA's 2027 forecast is $12 below 2026: project valuations should allow for a lower price.
No direct effect on orders.
Projects
Digital twins at the 12 main fields by the end of 2028
At the government meeting on 6 October Prime Minister Olzhas Bektenov instructed the Energy Ministry, together with Samruk-Kazyna and KazMunayGas, to extend artificial intelligence (AI) and digital-twin solutions to all production assets and to launch digital twins fully at the 12 main fields by the end of 2028. According to the government, a pilot at an Embamunaigas field could add up to 2.9 million tonnes of oil if scaled up. The sector's portfolio holds 45 AI projects, 34 of them being rolled out; Energy Minister Yerlan Akkenzhenov put the combined effect of three solutions at about 23 billion tenge a year. By the end of the year the ministry plans to approve a register of priority AI solutions.
Why it matters. A digital twin is a computer model of the reservoir, the wells and the surface facilities on which decisions are tested before operating modes change on the real field. For mature fields it is one way to slow the decline in output without new drilling.
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Government instruction
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Register of priority AI solutions (Energy Ministry)
- 3
Digital twins at the 12 main fields
KMG group companies have until the end of 2028; the solutions register is due by the end of 2026.
The 2.9 million tonnes is an estimate for a scaled-up rollout, not a result.
Demand for IT solutions, data work and reservoir simulation.
Production
KMG in Mangystau: Mangistaumunaigas produced 4.55 Mt of oil in nine months, Karazhanbasmunai 1.55 Mt
According to KazMunayGas, in January–September Mangistaumunaigas (MMG) produced about 4.552 Mt of oil and Karazhanbasmunai 1.549 Mt; the releases give no comparison with last year. MMG's main fields are at a late stage: hydraulic fracturing is done on about 300 wells a year and yields around 400,000 tonnes of oil annually, failures on 43 wells with new pumps fell almost threefold, a 2,107 m horizontal well was spudded at Asar in September, and exploration under the roadmap to 2032 is meant to add 38 Mt of reserves. Karazhanbasmunai has drilled 30 wells in the Coastal zone, uses steam injection, polymer flooding and sidetracking, and plans four wells with horizontal sections. At the site of the new 900 million m³-a-year gas processing plant in Zhanaozen, 133 of 240 long-lead equipment items are ready (60.8%), and the modules are being shipped by sea from China.
Why it matters. The Mangystau fields have been produced for decades, and without new technology their output would fall faster. Fracturing, horizontal wells and thermal methods are the main ways of holding it up.
The fracturing and new-pump experience is a benchmark for other mature fields.
Volumes only, with no comparison with last year and no financial data.
Demand for fracturing, horizontal drilling, sidetracks, pumps and thermal methods.
What's next
- The International Energy Agency's (IEA) monthly Oil Market Report.IEA
- IEA Governing Board: members are asked to speed up their remaining stock releases, diesel first, and to assess whether more are needed.IEA
- The latest extension of the US licence that lets LUKOIL's foreign assets operate until they are sold expires.Интерфакс
- The National Bank announces its base rate decision (now 16.25%).Национальный банк РК
- Meeting of the seven OPEC+ countries, Kazakhstan included: December output levels.OPEC
- Public hearing in Atyrau on the Atyrau refinery's environmental permit for 2026–2029 (emission and discharge limits, environmental monitoring), 15:00, also on Zoom.Минэкологии РК, реестр общественных слушаний
- EIA Short-Term Energy Outlook, November edition.EIA
- The Energy Ministry's electronic auction of hydrocarbon subsoil rights on e-qazyna.kz (bids were accepted until 5 October).Минэнерго РК
- Last day for bids in the 56-block oil and gas auction (held on 25 December). Every block, fee and date — subsoil auction; the rules — hydrocarbon auction.Kapital.kz
production sharing agreement
Production sharing agreement (PSA): the investor first recovers its costs from the oil produced, and the remaining production is split between the state and the investor. A dispute over which costs can be recovered therefore directly changes the state's share — exactly the kind of dispute closed this week at Dunga. The largest offshore projects, Kashagan included, are also developed under a PSA.
To the glossaryThe digest reviews the week's reports; the facts and figures belong to the sources cited. It is not investment or legal advice.