CPC moves to construction

The Caspian Pipeline Consortium, which will build the first large pipeline taking Caspian oil to world markets marked the end of its design phase at a signing ceremony in Moscow, allowing construction to begin.

Kazakh Prime Minister Nurlan Balgimbayev and Russian First Deputy Prime Minister Yuri Maslyukov were delighted the negotiations were completed.
"It is hard to overestimate the project's importance to Russia's strategic interests, the development of the export potential of our country and invigoration of the regional economies along the pipeline route," Russian Prime Minister Yevgeny Primakov said in a letter. "CPC will become an important factor in ensuring stability in the Caspian region," he added.
"The CPC pipeline is yet another step in Kazakh-Russian co-operation in the development of the Caspian region's energy resources," Balgimbayev said.
"It will become a major export route for Kazakh oil to international markets and will give a powerful impetus to the development of theKazakh economy," he added.

Richard Matzke, president of Chevron Overseas, and operator of CPC, said much work remained to be done. "We haven't built the pipeline yet. We have a long way to go and we don't have much time," he said.
"Many said the Caspian Pipeline Consortium couldn't hold together and the project couldn't be done," he said, "but this ceremony is evidence that this unique partnership among three governments and 11 companies is indeed a healthy reality.
"I'm very pleased with how this significant step that symbolises the economic growth and co-operation that is taking place in the region," he added.
"The support of the Russian and Kazakhstan governments in achieving this milestone has been an absolutely essential part of this project," said Matzke. "I commend the CPC's general director, Victor Fedotov, for his great skill in moving this project forward."

The approvals will enable the CPC to move from the design phase to the construction phase. CPC expects to award contracts for purchase of line pipe very soon and for construction of the pipeline and the marine terminal at the Russian port of Novorossiysk on the Black Sea in early 1999.
The main construction effort is scheduled to start early in the first quarter of 1999. The first shipment of oil is scheduled for June 30, 2001 with the first phase due to be fully completed by October 2001.
The pipeline, which will connect the huge Tengiz oilfield with Novorossiysk on Russia's Black Sea coast, a distance of around 1,500 km, will have an initial capacity of 560,000 bpd, rising to 1.34 mm bpd after 2010.
The pipeline's principal source of oil will be Tengiz, which is currently producing an average of about 210,000 bpd.
The first phase of the line will cost $ 2.3 bn, with a further $ 4.5 bn required over the lifetime of the project.
Balgimbayev said taxes and transit tariffs would raise $ 23 bn for Russia and $ 8.6 bn for Kazakhstan.

CPC said that it would announce the results of a tender for the line pipe purchase soon.
It will announce the winner of the tender for the marine terminal at Novorossiysk in February 1999.
CPC said earlier that its shareholders had approved a budget for 1999 of $ 854 mm.

Chevron holds a 15 % stake in CPC, LUKArco 12.5 %, Mobil 7.5 %, Rosneft and Shell 7.5 %, BG and Agip have 2 % each, Oryx and Munaigaz have 1.75 % each.
The remaining 50 % is divided between Russia (24 %), Kazakhstan (19 %) and Oman (7 %).