Vladimir Razdukhov, Caspian Pipeline Consortium’s General Director, spoke at the CIS Oil & Gas Summit in Paris on 28 May, covering CPC's major business highlights and development strategy.
The first phase of the CPC oil pipeline system was commissioned in 2002. By mid 2005 the pipeline ramped up to its full Initial Construction Project capacity of 28 MTA. In 2007-2008 CPC shipped 32-33 MTA making good use of drag-reducing agents and operational efficiencies. Simultaneously the consortium was making preparations for an Expansion Project.
Last December the negotiations among the shareholders on the terms of the CPC expansion have resulted in signing of a Memorandum of Understanding on Expansion principles which activated design & cost estimate development and permitting and approvals for the requisite facilities.
The Expansion is planned to be completed in 3 phases which will allow to ramp up the system’s capacity step by step. The first step is the upgrading of the existing pump stations to increase oil movement capacity by 7-8 MTA. The estimated completion date for that phase is mid-2012. The second phase, building five new pump stations and three 100k cum tanks at the Marine Terminal and replacing 88 km of pipeline, will allow to bring the capacity up to 48 MTA (without DRA) by mid-2013. And finally, the third phase will be to build another five pump stations, three tanks and an additional single point mooring at the Marine Terminal, enabling the pipeline to reach its planned 67 MTA capacity by mid-2014.
To have this schedule achieved, it is necessary for the CPC Shareholders to take Final Investment Decision no later that in mid-2010.
Touching upon CPC's current business plans, the General Director reported CPC intended to maintain shipment volumes at around 32-33 MTA in 2009, reminding that last year this volume was 32.2 MTA. He also noted that there were no plans to raise transportation tariffs this year.
CPC's General Director went on to say that the consortium's 2008 IFRS operating profit exceeded USD 600 mm. Last year CPC reduced its debt by USD700 mm. V. Razdukhov stated that CPC would not make any shareholder loan payments this year as it had been decided to accumulate operating revenues to be used for the Expansion project at a later date. The use of mainly internal funds makes the project implementation less dependant on the financial market situation.
Consortium’s GD reminded that the total Expansion project cost was estimated at USD 2 bn in terms of 2005 prices, USD 2.5 bn in 2007 and over USD 3 bn in 2008The project cost estimation is currently underway and it will be finalized by late this year/early next year. To this end the company is having some tentative bids conducted among contractors and equipment suppliers. The current crisis potentiates certain service cost reductions from some contractors and vendors which may improve the project cost.