ChevronTexaco venture to increase oil exports via Caspian pipeline

Jan 13, 2005 01:00 AM

A pipeline venture led by ChevronTexaco plans to increase crude oil exports from Kazakhstan and Russia via a Black Sea port 42 % this year by expanding transport capacity, which it is seeking to double by 2008.
The Caspian Pipeline Consortium, or CPC, ships oil from fields in Kazakhstan to a Russian terminal near Novorossiisk on the Black Sea. It is seeking permission from the Russian and Kazakh governments to more than double shipments to 1.34 mm bpd by 2008, about six years earlier than planned.

"Our shareholders continue forecasting substantially increased volumes in the next two plus years, which requires CPC to move ahead with progressive system expansion," CPC General Director Ian MacDonald said. "CPC is already operating above its mechanical design capacity as far as Caspian original oil is concerned."
CPC boosted shipments by 110,000 bpd in December from November as new Russian shippers joined the route. Total exports in 2004 rose by 52 % to 22.5 mm tons (450,000 bpd) from 14.78 mm tons in 2003.

The pipeline, which connects Kazakhstan's giant Tengiz and Karachaganak fields to Russia's export outlet of Novorossiisk, recently started accepting crude from Russia, and transported 400,000 tons in December. Russia, which has a 24 % stake in CPC, wants the group to cut debt interest payments to channel more profits on dividends to all shareholders and not only to oil shippers.
Moscow wants the financing dispute resolved before it will agree to the pipeline expansion. Last year, Moscow criticized the pipeline venture, saying it is less profitable than pipes run by Russia's oil pipeline monopoly, Transneft. Russia is CPC's largest shareholder.

In a meeting with visiting President Vladimir Putin, Kazakh President Nursultan Nazarbayev called on Russia to quickly approve CPC's request to double capacity.
"This will be absolutely profitable for both Russia and Kazakhstan. This question can be solved as far as I know," he told Putin at talks in Almaty.
Putin declined to comment on the issue. But he did underscore Russia's keen interest in energy cooperation with its oil-rich neighbour, saying it was the "No. 1" issue in bilateral relations.

Putin also urged separate high-level talks on the issue of sharing the Caspian Sea among its five littoral states, which have disputing claims on the sea's vast energy resources.
"There are a lot of questions and problems there and [talks] are important for us, the Caspian states," Putin said.

The sea is also shared by Iran and the former Soviet republics of Azerbaijan and Turkmenistan. Russia is seeking to increase its share in oil projects in the Caspian, concerned by what it sees as the increasing influence of the United States in Kazakhstan and the Caspian region as a whole.
Nazarbayev said that the two countries' energy ministries were making progress in talks to jointly develop three major oil fields in Kazakhstan's western Caspian Sea territory. Almost all of Kazakhstan's oil exports continue to transit through Russia, and the CPC is currently the main export route for Kazakh oil. Kazakhstan's hydrocarbon reserves are estimated at 100 bn barrels, and analysts say it will become a major oil-producing country by 2007.

CPC's shareholders include Chevron, LUKoil, BP, Shell, ExxonMobil, Agip and BG.
Putin and Nazarbayev also intended to discuss cooperation in various regional security and economic cooperation organizations and the "quite complicated" situation in Iraq ahead of general elections there later this month, according to Putin.

Source: Bloomberg
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