Pump station upgrade under the CPC expansion project is proceeding ahead of schedule

On 6-7 October there was a press tour of CPC's facilities in the Kavkazskiy District of the Krasnodar Krai. Russian and international mass media representatives learned about the operation of the Kropotkin Pump Station and visited a construction site where facilities are built that are intended to increase the capacity of the oil pump station.

In the course of a press conference arranged for the press tour participants CPC's top managers told them about the progress of the Expansion Project. The construction started on 1 July 2011 is continuing successfully. On some sites (specifically at the Kropotkin Pump Station that is being upgraded), it is ahead of schedule.

Answering questions from journalists, William Simpson, CPC Deputy General Director, Projects & Engineering, stated that the announced investment into the Expansion Project in the amount of USD 5.4 bn was justified and no revision of it was planned.

Alexander Blagov, Deputy General Director, CPC-R, also informed that the Expansion Project was substantiated in detail and all around and that additional volumes of crude oil will be delivered to consumers regardless of the future construction of any pipeline routes bypassing the Black Sea straights.

In his turn, Igor Lisin, Russian Pump Stations Coordinator, communicated that the lead time on the Kropotkin Pump Station schedule was two months at that stage. Overall about 20% of the construction and installation scope is currently completed for the pump station upgrade. Full completion of the upgrade and the commissioning of the facility for operation are planned for September 2012.

The work speed and quality are assured, primarily, by the professionalism and experience of the contractors as well as efficient work management and comfortable accommodation conditions for the workers at the construction camp. Compliance with international standards in all aspects is CPC's trademark. The journalists could see that with their own eyes, taking a look around production facilities and accommodation buildings, having lunch at a workers' canteen and visiting the gym and a sports area.

In its activities CPC invariably follows the principles of social responsibility. The corporate policy in that area provides for the provision of assistance in the most critical community-related areas: health and education. Supporting medical and children institutions and relevant community-related projects is another of the company's priorities.

In the course of the trip the journalists saw examples of such approach used by the consortium, visiting the Lokomotiv Stadium in Kropotkin (CPC assisted in its refurbishment) and a school at the village of Timzhbekskaya (here a new canteen will be constructed at the company’s expense).

Vitaliy Ochkalasov, the head of the Kavkazskiy district, told a press conference about constructive cooperation between CPC and local authorities. He stressed that the Consortium’s role for local communities where its facilities are located is not limited to only making tax payments and creating new jobs. Quite significant is also CPC’s participation in solving pressing community-related issues. In addition, the district head pointed out that the high operational culture typical for CPC is a benchmark for local companies.

The CPC pipeline system is the largest investment project with foreign capital in the CIS. The length of the pipeline connecting oil fields in Western Kazakhstan with the Marine Terminal in Novorossiysk is 1,511 km.

CPC’s Marine Terminal is equipped with Single Point Moorings that allow to load tankers safely at a significant distance offshore, including bad weather conditions.

The CPC project was originally developed with a view to future increase of its initial capacity by 2.5 times up to 67 MTA (76 MTA with DRA).

The Expansion Project includes upgrading the existing pump stations and building 10 new additional ones (2 in Kazakhstan and 8 in Russia), six oil storage tanks near Novorossiysk and a third single point mooring at the CPC Marine Terminal, and also the replacement of an 88 km pipeline section in Kazakhstan with a larger diameter pipe. The total amount of investment into the project will equal USD 5.4 bn. The expansion is planned to be completed in 2015.

The CPC expansion is a necessary condition for complete fulfillment of the project's economic potential in the interests of Russia, Kazakhstan and the Shareholder companies.

CPC Shareholders: Russian Federation (represented by Transneft – 24% and CPC Company – 7 %) – 31%; Republic of Kazakhstan (represented by KMG – 19% and Kazakhstan Pipeline Ventures LLC – 1.75%) – 20.75%; Chevron Caspian Pipeline Consortium Company - 15%, LUKARCO B.V. - 12.5%, Mobil Caspian Pipeline Company – 7.5%, Rosneft-Shell Caspian Ventures Limited – 7.5%, BG Overseas Holding Limited - 2%, Eni International N.A. N.V. - 2% and Oryx Caspian Pipeline LLC – 1.75%.