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Eni & Shell to Cease Gas Plant Development in Kazakhstan Amid Disputes

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Key Takeaways

  • Kazakhstan ordered Eni and partners to stop work on the Karachaganak gas plant project.
  • Costs have risen to $6 billion, and the project's completion delayed from 2028 to 2030.
  • E and Shell sought $1B in state support; the state may now develop the plant independently.

Eni SpA (E - Free Report) and Shell plc (SHEL - Free Report) have received orders from Kazakhstan government to terminate their plans for the construction of a gas processing plant at the Karachaganak gas and condensate development. Authorities in Kazakhstan have resorted to this move due to ongoing disputes over the project’s cost and its timeline, both of which remain uncertain.

Rising Costs and Delays Fuel Dispute

On May 17, a government agency in Kazakhstan, responsible for overseeing the protection of state interests, sent a letter to the shareholders of the Karachaganak gas project. In this letter, the agency asked the shareholders to cease all activities related to the gas processing plant immediately. The letter mentioned that the reason for this decision was the rising costs associated with the project and the delay in its estimated time of completion.

Per a Bloomberg report, the cost associated with the development of the gas processing plant has increased to $6 billion. The report further stated that the group of international companies involved in this project, led by Shell and Eni, has pushed back the planned completion of the facility to 2030 from the previously stated date in 2028.

Kazakh Government Eyes Alternate Plan

The companies have also asked the government of Kazakhstan to support them by contributing approximately $1 billion toward the project’s expenses. The financial help from the government would help the companies make the project commercially feasible. In light of these developments, the Kazakh government is considering an alternative to develop the refinery independently. 

Zacks Rank & Key Picks

Both E and SHEL currently carry a Zacks Rank #4 (Sell).

Some better-ranked stocks from the energy sector are Flotek Industries Inc. (FTK - Free Report) and Energy Transfer (ET - Free Report) . While Flotek Industries sports a Zacks Rank #1 (Strong Buy) at present, Energy Transfer carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Flotek Industries specializes in green chemistry, which provides innovative solutions aimed at reducing the environmental impact of the energy industry. Flotek develops specialty chemicals tailored for both domestic and international energy producers, as well as oilfield service companies. These chemicals not only help reduce the environmental impact of hydrocarbon production but also lower operational costs.

Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. Boasting a pipeline network extending more than 130,000 miles, its network spans over 44 states. With a presence in all the major U.S. production basins, ET’s outlook seems positive.

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