Chevron, Shell Cut Kazakh Oil Output After Drone Strike Hits Russian Plant
A Ukrainian drone attack on a key Russian gas facility forces a 25-30% production cut at the Karachaganak field, highlighting supply chain risks.
Energy giants Chevron and Shell, along with their partners, have curtailed oil and gas production by 25-30% at the major Karachaganak field in Kazakhstan after a Ukrainian drone strike damaged a critical gas processing plant deep inside Russia.
The disruption highlights the intricate and vulnerable logistics of Central Asian energy exports, where production in one country remains dependent on infrastructure in a neighboring nation at war. The target of the strike was the Orenburg gas processing plant, located approximately 90 miles from the Kazakh border, which is essential for processing sour gas from the Karachaganak field.
Production at Karachaganak, one of Kazakhstan's largest oil and gas condensate fields, was significantly reduced following the October 19th attack. According to a , daily output was expected to fall by 8,500 to 9,000 metric tons. The field is operated by Karachaganak Petroleum Operating (KPO), a consortium that includes Shell (29.25% stake), Eni (29.25%), Chevron (18%), Lukoil (13.5%), and Kazakhstan's state-owned KazMunayGas (10%).
Despite the significant operational impact at the field, the market reaction for Chevron was muted. Shares of the energy major traded slightly higher at $154.72 in Tuesday morning trading. The limited impact on its stock price reflects that Karachaganak is a non-operated minority stake for Chevron. Crucially, the company's primary asset in the country, the massive Tengiz field where it holds a 50% stake, is not affected by the Orenburg plant disruption. Production at Tengiz has seen a separate, unrelated reduction this month due to scheduled maintenance.
The incident exposes a key geopolitical risk for Western energy firms operating in the region. The KPO consortium has a long-term agreement to send its sour gas to the Russian facility for processing, a legacy of Soviet-era infrastructure. With the plant now damaged and halting intake, the consortium was forced to scale back oil and condensate production, as it is intrinsically linked to gas output.
This event has intensified discussions within Kazakhstan about accelerating plans to build a domestic gas processing plant at Karachaganak to reduce its reliance on Russian infrastructure. , Kazakh officials have long considered such a project to enhance energy security and capture more value from their domestic resources.
Kazakh authorities have stated they are monitoring the situation closely and hope to lift the production restrictions within days, pending the resumption of operations at the Orenburg facility. In the interim, Russia's Gazprom has reportedly agreed to supply Kazakhstan with gas from its pipelines to cover any domestic shortfalls, though the halt to processing directly impacts the consortium's export volumes and revenue.
For Chevron, which has a market capitalization of over $311 billion, the financial hit is manageable. However, the event serves as a stark reminder of the operational uncertainties tied to the ongoing war in Ukraine, where military actions can have cascading effects on energy supply chains far from the front lines.