International oil companies participating in the Kashagan project have initiated arbitration proceedings against Kazakhstan in connection with a $5 billion environmental fine.

The dispute concerns requirements related to sulfur storage at the Kashagan field, The Caspian Post reports, citing Bloomberg.

The move follows a decision by a court in Astana last December to reject the consortium’s appeal against the fine. After the court ruling, the foreign shareholders opted to pursue a review of the case through international arbitration mechanisms.

In a statement, the shareholders said they contest the allegations and had attempted to resolve the matter through dialogue. However, those efforts did not produce results. “Despite the fact that we dispute the charges and attempted to resolve the situation through dialogue, these efforts have been unsuccessful. Therefore, the international shareholders have concluded that it is necessary to initiate arbitration within the framework of international agreements,” the statement said.

The North Caspian Operating Company (NCOC), which operates Kashagan, is currently engaged in extensive legal proceedings involving multibillion-dollar claims by the Kazakh government.

Bloomberg previously reported that the shareholders of the Kashagan project had underestimated the potential scale of sanctions from Kazakhstan. According to the publication, the companies had been aware for several years of environmental violations related to sulfur storage but did not take corrective measures. In 2022, the government filed a lawsuit seeking 2.3 trillion tenge in damages.

Subsequently, additional claims amounting to approximately $155 billion were introduced. These claims are linked to the terms of the production-sharing agreement, which the government says allows investors to receive up to 98% of the project’s profits.

In a separate but related case, authorities are also seeking an additional $6 billion from shareholders of the Karachaganak project on similar grounds.