Caspian Pipeline, Kazakhstan / Russia

On 22 November 2000, Chevron announced that the Caspian Pipeline Consortium (CPC) had completed the laying of new crude pipeline in Russia. The 1,580 kilometre pipeline connects the Tengiz oil field in western Kazakhstan with the Black Sea port of Novorrossiysk. Costing $2.65 billion, it is one of a number of projects designed to access the huge hydrocarbon potential of the Central Asian regions that have been opened up by the collapse of Communism. Almost half of the initial investment came from US corporations, including ChevronTexaco and ExxonMobil.

MARKET RATIONALE

The pipeline means jobs and revenues for Russia and Kazakhstan. CPC used local goods, local services and local contractors to construct the transportation system. This is an advantage in addition to the contribution that was made to the infrastructure of southern Russia and the North Caspian.

Over the life of the projects, the Tengiz Field and Caspian Pipeline directly and indirectly added more than $150 billion to the combined gross domestic product in Russia and Kazakhstan. In addition, the implementation of both the CPC and the Tengiz operations will sustain, on average, more than 200,000 jobs annually (directly and indirectly).

Furthermore the pipeline has encouraged the development of Russian and Kazakh oil fields and the industrial and commercial base in the region.

PROJECT TIMESCALE

The main construction effort started early in the first quarter of 1999. In November 2001 the first tanker loaded with oil from the CPC departed from Novorrossiysk.

The Caspian Pipeline will allow maximum development of the Tengiz Field, which has potential reserves of 6 to 9 billion barrels of recoverable oil. The current capacity is over 500,000 barrels per day, which is expected to increase to 700,000 barrels per day in 2010, and about 1.4 billion by 2015 when it reaches peak production. Tengizchevroil currently produces around 210,000 barrels/day, which is expected to rise to 260,000 barrels/day in mid-2001.

INTERESTS AND CONTRACTORS

The equity interest in the CPC is allocated as follows: Russian Federation (24%), Republic of Kazakhstan (19%), Sultanate of Oman (7%), Chevron Caspian Pipeline Consortium Company (15%), Lukarco B.V. (12.5%), Rosneft-Shell Caspian Ventures Limited (7.5%), Mobil Caspian Pipeline Company (7.5%), Agip International (N.A.) N.V. (2%), BG Overseas Holdings Limited (2%), Kazakhstan Pipeline Ventures L.L.C. (1.75%), and Oryx Caspian Pipeline L.L.C. (1.75%).

Stavropoltruboprovodstroi was the general subcontractor in the Starstroi Consortium in the Stavropol Krai and is responsible for construction of Spread 2, which is a 239-kilometre section of the CPC pipeline. Eighty percent of the work was further subcontracted to Svarochno-montazhnyi Trust (Field Welding Trust).

COMPANY

The original Caspian Pipeline Consortium (CPC) was established in 1992 and the restructured consortium (CPC) was established in 1996.

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