ExxonMobil has blocked a proposed settlement over Kazakhstan’s $5.2 billion environmental fine against the operator of the Kashagan oil field, according to an October 9 Bloomberg report citing unnamed sources. The dispute also affects reported discussions about a potential $80 billion expansion, although Kazakhstan’s state oil company has challenged accounts of that proposal.
Citing people familiar with the negotiations, Bloomberg said Exxon opposed the latest settlement proposal and persuaded TotalEnergies, previously neutral, to join its position. Together, their opposition was sufficient to halt the proposal. The terms under discussion were not disclosed.
Kashagan is operated by a consortium of international companies and Kazakhstan’s state-owned KazMunayGas. ExxonMobil, TotalEnergies, Shell, and Eni each hold 16.81%, while KazMunayGas owns 16.88%. CNPC and Inpex hold the remaining stakes, according to KazMunayGas.
According to Bloomberg, KazMunayGas has decided to pay its share of the fine, although the agency did not establish whether payment had been made. ExxonMobil, TotalEnergies, KazMunayGas, Shell, and Inpex declined to comment. Eni, CNPC, and North Caspian Operating Company (NCOC), the field operator, did not respond to its requests.
The dispute has also entered discussions over future development. In August, Bloomberg reported that Exxon had proposed an $80 billion joint venture with KazMunayGas to develop western Kashagan. The proposed 50-50 venture could produce up to 600,000 barrels a day, but would depend on resolving the sulfur fine and Kazakhstan’s separate claims of around $150 billion.
However, KazMunayGas chairman Askhat Khassenov rejected that account, saying it was inaccurate and that the company did not confirm plans for the joint venture. The project has not been approved, and neither the investment figure nor the proposed production capacity has been independently confirmed.
KazMunayGas has published separate expansion plans for existing Kashagan operations. Its Phase 2A and 2B projects could raise total oil and condensate production to roughly 710,000 barrels a day, subject to further technical work, gas-processing capacity, and investment decisions. It remains unclear how the reported western development would fit alongside those plans.
Kashagan produced approximately 18.2 million metric tons of oil in 2025, according to KazMunayGas. Further expansion would be technically demanding. The field lies in the shallow northern Caspian Sea, where high levels of hydrogen sulfide complicate extraction and processing.
The penalty dates to a 2022 inspection of NCOC’s Bolashak processing complex in the Atyrau Region. Inspectors said more than 1.7 million tons of sulfur had accumulated in storage, against a permitted limit of 730,000 tons. NCOC denies the alleged violations and maintains that its sulfur management complied with Kazakh law and project permits. The penalty totals 2.356 trillion tenge, with its dollar value varying by exchange rate.
NCOC’s 2024 sustainability figures show that sulfur in block storage fell from 1.775 million tons at the end of 2022 to 613,000 tons at the end of 2024. Annual sulfur production in 2024 was 1.42 million tons, a different measure from the accumulated stockpile involved in the fine. The reduced stockpile does not determine whether the earlier storage breached the permit.
Concerns about storage predated the inspection. In 2017, Eni warned that sulfur stockpiles risked exceeding the permitted limit.
The courts have kept the penalty alive despite procedural setbacks. A Kazakh court overturned the original order in 2025 because of defects in how it was issued, but the authorities reissued it. The Atyrau Regional Court upheld the fine on June 19, 2026. NCOC missed the July payment deadline, prompting compulsory collection measures and the freezing of company property and vehicles.
Collection was paused on September 7 after NCOC challenged an enforcement officer’s actions. A court later dismissed the challenge, and the authorities resumed collection on September 29.
Foreign shareholders are also contesting Kazakhstan’s actions abroad. The International Centre for Settlement of Investment Disputes (ICSID) registered their case on February 27, 2026. Its tribunal was constituted on August 12, and the proceedings remain pending. The claimants are invoking international investment treaties.
In separate commercial arbitration under the rules of the United Nations Commission on International Trade Law, NCOC says a tribunal issued interim measures preventing Kazakhstan from enforcing the fine while proceedings continue. The Justice Ministry rejected that interpretation, saying the order could not prevent enforcement of a domestic court judgment.
The dispute adds to wider tensions over Kazakhstan’s oil contracts. In February, Shell chief executive Wael Sawan said the company would pause new investments pending clarity over legal cases involving Kashagan and Karachaganak. Shell nevertheless signed an exploration agreement in Kazakhstan’s Aktobe Region in March. The wider cases include disagreements over costs claimed under production-sharing agreements, distinct from the sulfur fine.
Kazakhstan wants further investment at Kashagan, while the consortium faces a multibillion-dollar penalty and competing legal proceedings. Exxon’s reported rejection of the settlement highlights divisions among the partners. The terms of the failed proposal remain undisclosed, and the separate expansion plan is contested.