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Oil: Caspian Pipeline to Double Capacity from Tengiz to Europe

The Caspian Pipeline Consortium has approved a plan to almost double the throughput of the Caspian pipeline which links the gargantuan Tengiz oil field to the Black Sea. At a meeting in Moscow, the governments of Kazakhstan and Russia approved the deal which will see companies such as Chevron undertake significant work in the Caucasus.

The expansion work will cost $5.4 billion but will be more than offset by the estimated 6-9 billion barrels of oil residing in the Tengiz oilfield in Kazakhstan and additional fields which will use the pipeline.

Relevant documents authorizing the implementation of the expansion project have been signed by the Minister of Energy of the Russian Federation Sergey Shmatko and the Deputy Minister of Oil and Gas of Kazakhstan Lyazzat Kiinov, Vice-President of OAO Transneft, MV  Н.В. Barkov and president of JSC “NC KMG” K. Kabyldin and CEO of CTC, NV Platonov.

Mr Shmatko said:

“The Caspian Pipeline Consortium fully meets Russia’s national interests. Russia retains status as the largest energy partner, while Kazakhstan has an opportunity to export additional quantities of oil, increasing its own production.

“Tengiz-Novorossiysk pipeline is of great importance for the development of large deposits in the Caspian region, including those developed by Russian companies. Mining companies in Kazakhstan and Russia will get the full value for their oil and reduce the cost of its transportation compared to alternative export routes.  Therefore, I want to note the importance of this project for the two economies. Its implementation will actively contribute to the development of future cooperation of Russia and Kazakhstan in the energy sphere. “

The President of KazMunaiGaz, Kairgeldy Kabyldin, remarked:

“Today’s decision is particularly relevant in light of decisions taken by the Republic of Kazakhstan to further increase production in such fields as Tengiz and several others, and also reaffirms the importance of the CTC, as one of the vectors of export routes from Kazakhstan. We are pleased that together with our Russian partners and international oil and gas companies, we were able to solve this difficult task.”

General Director of Caspian Pipeline Consortium Nikolai Platonov, commented:

“Today, the company adopted a long-awaited decision. CTC team is ready to proceed with the project and to conduct all work in full compliance with the specified parameters of the shareholders and the observance of all norms of law in Russia and Kazakhstan.

“Application for the construction of better technology and equipment will help minimize the impact on the natural and social environments and, as a result, to be commissioned pipeline system that ensures safe and efficient transportation of Kazakh and Russian oil to world markets.

“Expansion of the CPC will bring practical benefits not only shareholders of the project, but also to the regions along which the pipeline route and who will get new jobs, new order volumes of contract work and supply materials.”

The expansion project involves:

  • The construction of ten additional pumping stations (2 in the Republic of Kazakhstan, 8 in the Russian Federation),
  • Six new oil storage tanks near the city of Novorossiysk,
  • A third offshore mooring point 10 km north of the Port of Novorossiysk,
  • Replacement of an 88km section of pipeline in Kazakhstan,
  • Five existing pump stations will be refurbished.

About 70% of deliveries of materials and equipment on the project will use Russian enterprises. The three largest CPC shareholders, Transneft, KazMunaiGaz (KMG) and Chevron, will provide project management services to the project. The project is in the final stages of construction contract negotiations with awards expected in the first quarter 2011.

Equity interest in the Caspian Pipeline Consortium

  • Russian Federation 24% ₁
  • Republic of Kazakhstan 19% ₂
  • Chevron Caspian Pipeline Consortium Company 15%
  • LUKARCO B.V. 12.5%
  • Rosneft-Shell Caspian Ventures Limited 7.5%
  • Mobil Caspian Pipeline Company 7.5%
  • Caspian Pipeline Company 7% ₁
  • ENI International N.A.) N.V. S.ar.l.  2%
  • BG Overseas Holdings Limited 2%
  • Kazakhstan Pipeline Ventures L.L.C. 1.75% ²
  • Oryx Caspian Pipeline L.L.C. 1.75%

₁ Transneft represents the shares of the Russian Federation and the Caspian Pipeline Company
² Kazmunaigas represents the shares of the Republic of Kazakhstan and Kazakhstan Pipeline Ventures

About Business Desk

Business Desk
Editors and staff from the Business Desk at The Global Herald.

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