Caspian Pipeline Consortium begins exporting Kazakhstan oil
The Caspian Pipeline Consortium (CPC) Monday opened a valve sending the first Kazakhstan oil on its 1,500 km journey to Novorossiysk, a Russian port on the Black Sea. Two consultants say oil prices will have to remain strong if multiple pipelines are going to be built in the Caspian Region.
HOUSTON, Mar. 26�The Caspian Pipeline Consortium (CPC) Monday opened the valve sending the first Kazakhstan oil on its 1,500 km journey to Novorossiysk, a Russian port on the Black Sea.
Russian Deputy Minister of Energy Vladimir Stanev attended the ceremony in Atyrau, Kazakhstan, as did foreign diplomats. The 10 international companies financing the $2.6 billion initial phase of the CPC pipeline include companies from Kazakhstan, Russia, US, and Europe.
The pipeline will carry oil for export from the landlocked Caspian Sea oil fields, which include Tengiz feld, with estimated recoverable reserves of 6-9 billion bbl. The pipeline also will transport oil from other Kazakh and Russian fields.
Julia Nanay, a director of Petroleum Finance Co., Washington, told OGJ Online that the CPC line took a decade to plan and build. She does not expect to see competing pipelines built in the region for at least 4 years.
"The lesson is that these pipeline projects are extremely difficult to develop in the region," Nanay said. "I think there will be room for more infrastructure, but additional pipelines will have to be built when oil companies feel they can take the oil to the bank and get financing."
Most of Kazakhstan's oil is exported through Russia. The US supports an alternative pipeline route trough Azerbaijan, Georgia, and Turkey to the Mediterranean Sea. That proposed Baku-Ceyhan route, which bypasses Russia and Iran, is the subject of preliminary engineering work.
Michelle Michot Foss, director of the Energy Institute at the University of Houston, said there is growing industry support for the Baku-Ceyhan route.
"The problem in the Caspian has always been whether sufficient reserves would be discovered, and in what time frame, to support the multiple pipelines scenario, which is what the US and our allies want," Foss told OGJ Online.
"The goal has long been to avoid dependence on any one major pipeline route, given the geopolitical risks in the region," Foss said, adding discoveries have "helped turn the tide in favor of Baku-Ceyhan ... but oil markets need to stay healthy if planning is to be accelerated" for that pipeline.
Regarding the CPC line, Chevron Corp. Vice-Chairman Richard Matzke said, "With the wholehearted support and good will of the governments of Kazakhstan and Russia, CPC will soon complete a world-class project on schedule and on budget, while fully meeting the most demanding technical and environmental requirements.''
By yearend, the initial phase of the pipeline will have an export capacity of 600,000 b/d. Its ultimate capacity with upgrades is 1.5 million b/d.
Russia owns 24% of CPC, Kazakhstan 19%, and Oman 7%. Also, Chevron Caspian Pipeline Consortium Co. has 15%; LUKARCO BV, 12.5%; Rosneft-Shell Caspian Ventures Ltd., 7.5%; Mobil Caspian Pipeline Co., 7.5%; Agip International (NA) NV, 2%; BG Overseas Holdings Ltd., 2%, Kazakhstan Pipeline Ventures LLC, 1.75%; and Oryx Caspian Pipeline LLC, 1.75%.
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