Caspian Pipeline

On 22 November 2000, Chevron announced that the Caspian Pipeline Consortium (CPC) had completed the laying of a new crude pipeline in Russia. The 1,580km pipeline connects the Tengiz oil field in western Kazakhstan with the Black Sea port of Novorossiysk.

Costing $2.65bn, the Caspian Pipeline is one of a number of projects designed to access the huge hydrocarbon potential of the Central Asian regions that have been opened up by the collapse of Communism. Almost half of the initial investment came from US corporations, including ChevronTexaco and ExxonMobil.

The pipeline was commissioned in 2001. In 2008, the pipeline transported 675,000 barrels of crude oil per day, comprising 557,000bpd from the Caspian region and 118,000bpd from the Russian field.

Chevron plans to increase the capacity of the pipeline to 67Mtpa by 2014. During 2008, 31.47t of crude oil was shipped from the Tengiz field to the port of Novorossiysk.

Caspian Pipeline expansion

An investment of $5.4bn was announced in December 2009 for the expansion of the pipeline, which is scheduled to be completed by 2015 and is expected to enable shipment of 67Mtpa. The expansion will be primarily funded with the company’s resources.

The pipeline expansion was planned during 2004-2005. It involves construction of ten new pump stations, more storage facilities and a third offshore mooring point. Replacement of an 88km pipeline section in Kazakhstan with a larger diameter pipeline and upgrade of the communication and control system of the pipeline is also part of the project. The company has been negotiating the expansion plan with the shareholders and regulatory bodies since 2005.

CPC signed cooperation agreements with the regions involved in the project in September 2010. The project was approved by the shareholders in November 2010.

In July 2011, groundbreaking for phase one of the project took place. By September 2011, 20% of the upgrade was completed at the Kropotkin pump station. The upgrade works are expected to be completed by September 2012. In November 2011, expansion works on the Tengiz and Atyrau pump stations commenced. Pipe laying of the 88km section was also started during this period.

Market rationale

CPC used local goods, services and contractors to construct the transportation system, and made a considerable contribution to the infrastructure of southern Russia and the North Caspian.

Over the life of the projects, the Tengiz Field and Caspian Pipeline added more than $150bn to the combined gross domestic product of Russia and Kazakhstan. In addition, the implementation of both the CPC and the Tengiz operations resulted in over 200,000 jobs.

Furthermore, the pipeline has encouraged the development of Russian and Kazakh oilfields and the region’s industrial and commercial base.

Project timescale

The main construction effort started in the first quarter of 1999. In November 2001, the first tanker loaded with oil from CPC departed from Novorossiysk. The pipeline loaded over 87t of oil by April 2006. The 1,500th tanker was loaded in 2008. From November 2004, oil from the Russian-producing fields also started to be injected into the pipeline.

The Caspian Pipeline will allow maximum development of the Tengiz Field, which has potential reserves of six to nine billion barrels of recoverable oil.

The field produced over 600,000bpd in 2011, which is expected to increase to about 1.4 billion by 2015 when it reaches peak production.

Tengizchevroil reported production of around 19Mt (152 million barrels) during the third quarter of 2011

Interests and contractors

The equity interest in the CPC is allocated as follows: Russian Federation (31%), Republic of Kazakhstan (20.75%), Chevron CPC (15%), Lukarco BV (12.5%), Rosneft-Shell Caspian Ventures (7.5%), Mobil Caspian Pipeline Company (7.5%), BG Overseas Holdings (2%), ENI International (2%), and Oryx Caspian Pipeline (1.75%).

Stavropol Truboprovodstroi was the general subcontractor in the Starstroi Consortium in the Stavropol Krai and is responsible for construction of Spread 2, which is a 239km section of the CPC pipeline. 80% of the work was further subcontracted to Svarochno-montazhnyi Trust (Field Welding Trust).

The FEED contract for expansion of pipeline was awarded to the Gulf Interstate Engineering (GIE) of Houston in 2004. The contract work included project management feasibility, economic study engineering design, and drafting procurement.

CPC

CPC was established in 1992. The consortium CPC was reconstructed in 1996.