The proposed 900-mile crude oil pipeline to move oil from Kazakhstan via Russia to the Black Sea for shipment to world markets is a step closer to reality.
Mobil Corp. signed an agreement in Moscow Dec. 6 to restructure the Caspian Pipeline Consortium (CPC). Action follows the signing of a protocol earlier this year to restructure CPC (OGJ, May 6, Newsletter).
The latest agreement permits Mobil to exercise its right to acquire a 7.5% equity interest in the planned pipeline project.
Also, the agreement enables Mobil and seven other producer companies to purchase a 50% equity interest in the CPC pipeline from its founding members in exchange for 100% funding of the initial pipeline construction cost.
"It is a major step toward the implementation of the transportation system, which will support full development of Kazakhstan's Tengiz oil field," said Lucio A. Noto, Mobil chairman and chief executive officer.
The system will also support other Kazakh and Russian oil.
After closing, equity interests will include the governments of Russia 24%, Kazakhstan 19%, Oman 7%, Chevron Corp. 15%, Lukoil 12.5%, Mobil and Russia's Rosneft 7.5% each, Agip SpA and British Gas plc 2% each, and state-owned Kazakh Munaigaz and Oryx Energy Co. 1.75% each.
Terms call for producer companies to fund the project at twice their equity for the initial construction of the pipeline project. Mobil's funding obligation will be 15%, the company said.
Construction plans
The overall project involves the rehabilitation and upgrading of the existing pipeline from Tengiz to Komsomolsk, construction and completion of a new pipeline from Komsomolsk to the Black Sea, and a new single-point mooring system and offshore loading complex at or near Novorossiisk.
Construction will allow Tengiz field production to exceed 200,000 b/d by the turn of the century and to reach about 800,000 b/d by 2010, Mobil said. The company has a 25% equity interest in Tengiz. Current production is about 150,000 b/d.
Initial pipeline construction, which is to be completed and commissioned by mid-late 1999, will provide an export capacity of 580,000 b/d of Russian and Kazakh oil exports.
Estimated capital expenditures for initial construction is $2.1 billion during the next 3 years. Mobil's share totals $310 million.
The total does not include pipeline assets valued at about $600 million contributed by the founding CPC members.
After completion of initial construction, the pipeline is expected to undergo a phased expansion, Mobil said, to accommodate a projected 1.4 million b/d level of Russian and Kazakh exports.
The expansion is projected to cost about $2 billion, with completion set around 2010.
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