The Caspian Pipeline Consortium (CPC) has let contract to Overseas Bechtel Inc. for a 500 mile crude oil export pipeline in Russia.
Bechtel will provide engineering, procurement, financing, and construction services and serve as project manager for the 42 in. line that will extend west from Grozny, near the Caspian Sea, to Novorossiisk, on the Black Sea. Estimated cost is more than $850 million.
At Grozny, the new line will tie into 800 miles of existing pipeline that runs along the north shore of the Caspian Sea from supergiant Tengiz field in Kazakhstan.
Together, the two segments will form a 1,300 mile system capable of shipping crude oil from the Tengiz region and from Baku, Azerbaijan, to a new terminal and port facilities at Novorossiisk for shipment to world markets, ultimately reaching open oceans via the Mediterranean Sea.
Bechtel said the pipeline system between Russia and Kazakhstan will be the first such project in the Commonwealth of Independent States planned, financed, managed, and built mainly by western firms and technology.
Participants in addition to Bechtel include Willbros Overseas Ltd. of the U.K. In addition, Oman Oil Co. Ltd. of Bermuda will act as project coordinator and report to CPC's executive board.
CPC members are Oman, Kazakhstan, Russia, and Azerbaijan.
Chevron Corp., scheduled to further develop Tengiz and Korolev fields along the Caspian coast in Kazakhstan, last summer signed a memorandum of understanding to join the CPC (OGJ, June 29, Newsletter). There has been no word on later developments in that agreement.
CAPACITY, TIMETABLE
Initial capacity of the new pipeline system will be 360,000 b/d, with capacity added in increments as needed. Ultimately, the system will be able to ship 1.5 million b/d of Tengiz and Azeri crude.
Michael L. Thiele, senior vice-president and manager of Bechtel's pipeline and industrial business line, said the system's volume is based on current projections of Kazakh crude available for export. Potential Russian and Azeri crude oil export volumes, which are still being determined, have not been included in design of the facility.
CPC officials said they want the first phase of the project carried out on a fast track that would see it completed in 3 years, The fast track plan would include use of an idle pipeline and pump stations from Tengiz to Grozny. The pump stations are either operational or require only limited work to be placed in service.
The project's estimated price tag is based on expected costs of building new facilities and upgrading existing ones, including construction of new and expanded export facilities at Novorossiisk.
The pipeline route was chosen after an evaluation of eight options. It was found to be the most attractive politically and economically and in terms of a short construction schedule.
One positive factor is that the land to be crossed includes relatively easy terrain, Bechtel said. The route of the combined Tengiz-Baku-Novorossiisk system also lies entirely within C.I.S. partners' boundaries.
Jackson Stromberg, president of Bechtel Financing Services Inc. said potential funding sources for the Caspian line may include export credit agencies, multilateral institutions such as the European Bank for Reconstruction and Development, and international commercial banks.
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