PLANS ADVANCE FOR CASPIAN CRUDE OIL PIPELINE

First phase construction of a big crude oil export pipeline from Kazakhstan to the Black Sea is poised to proceed.

Caspian Pipeline Consortium Ltd. (CPC) plans Phase I construction of 155 miles of 40 in. line in Russia from Kropotkin to a deepwater terminal to be built on the Black Sea coast near Krasnodar, northwest of Novorossiysk. Cost will be about $300 million for the line and terminal.

The aim of the ultimate 930 mile system, reported to carry a price tag of $1.2 billion, is to ease bottlenecks that limit oil exports from Russia and Kazakhstan via the Caspian Sea. An outlet on the Black Sea would provide access to oil shipments through Turkey's Bosporus strait into the Aegean and Mediterranean seas.

Ultimate export capacity of the CPC project could approach 2 million b/d.

PHASE I

Proposed Route for the Caspian Pipeline Consortium System (13399 bytes)

A prequalification process identified 10 contractors that will submit bids on Phase I. Overseas Bechtel Inc. and Willbros (Overseas) Ltd. conducted preengineering. J.P. Kenny Inc. will tender the engineering, procurement, and construction package.

A turnkey contract for engineering, procurement, and construction is to be let in the third quarter.

CPC said it will use engineers, manufacturers, constructors, and suppliers from sources that include Russia, France, Italy, Germany, Britain, and the U.S. At present, three Russian contractors - Transneft, Giprotruboprovod, and Stryoneft - are assisting in things such as administration, data gathering, transportation, communications, and acquisition of right-of-way.

Construction, planned to get under way by January 1996, will mark the beginning of a project that ultimately will involve a pipeline system starting at Tengiz, Kazakhstan.

The route skirts the north end of the Caspian Sea, then runs through Astrakhanskaya, Komsomolskaya, and Kropotkin to the Novorossiysk area. Part of the system, from Tengiz to Komsomolskaya, has been in operation for some time.

The marine terminal will include an onshore tank farm and a single point mooring (SPM) system for offshore tanker loading.

Start-up of Phase I is scheduled by January 1997.

Until the second - and final - phase of the overall project is complete, the Kropotkin-Black Sea segment will obtain crude from an existing 28 in. line that runs from Tikhoretsk to Kropotkin. Oil arrives at Tikhoretsk via pipelines from Samara, Russia, and Lisichansk, Ukraine, that carry production from fields in western Siberia, the Volga-Ural region, and western Kazakhstan.

Completion of Phase I will enable exports of as much as 15 million metric tons/year (300,000 b/d) of crude from Russia and Kazakhstan.

PHASE II

The big boost in export capacity will come from CPC's Phase II. It will carry oil from fields in western Kazakhstan, including giant Tengiz, as well as oil fields in Azerbaijan.

Completion of Phase II from Komsomolskaya to Kropotkin will enable exports of an additional 62-75 million metric tons/year (1.24-1.5 million b/d) of oil from Kazakhstan, Russia, and Azerbaijan.

That will jump total export capacity to 77-90 million metric tons/year (1.54-1.8 million b/d).

Russia and Kazakhstan, each with a one third initial interest in Phase I, have guaranteed to ship minimum volumes of crude through the line's first phase, assuring its financial viability. Oman, which owns the remaining one third, will provide all equity and guarantee financing for Phase I.

Kazakhstan and Oman formed CPC in June 1992. The next month the partners invited Russia to join the project. In June 1993, Russia's participation in CPC gained approval from the Supreme Soviet.

Although Russia, Kazakhstan, and Oman are equal partners in CPC Class A voting shares, Oman agreed as part of Phase I implementation to acquire Class B shares representing an undivided 25% interest in the combine.

With that move, the new shareholding will be Russia and Kazakhstan 25% each and Oman 50%. However, CPC voting rights will still be shared equally among the three partners.

Chevron Corp., a partner 'with Kazakhstan in the Tengizchevroil joint megaventure for development of Tengiz field, is a potential large shipper on the CPC system. Press reports said Chevron declined an invitation to join the combine for lack of agreement on partnership terms.