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Press Release October 7, 2004 |  | |
For immediate release
October 7, 2004
Contacts:
Natalia Prutkovskaya
Vadim Bely
at (095) 775-00-77
October 7, 2004 – Moscow, Russia –
The forecasted demands of CPC shareholders call for a fully built out system by 2008 with the capacity to move at least 67 millions tons of oil a year – over 1.4 million barrels a day. Caspian developments in both the Russian and Kazakh sectors will see demand for CPC capacity from the Caspian rising to over 50 million tons a year – over a million barrels a day. These data were announced today by CPC General Director Ian MacDonald in his presentation at KIOGE in Almaty (Kazakhstan).
It is anticipated that additional capacity would be coming on line in three stages. By the first half of 2006 additional pumps at existing pump stations will add some 10 million tons of capacity or 200,000 bopd. By the end of 2007, the first five of the ten new pump stations will be completed adding a further 10 million tons of capacity and taking the line to 1 million barrels a day. Full build out will be completed 12 months later.
“To accomplish these ambitious plans will require the full support of our host Governments and all of our Shareholders,” said Ian MacDonald. “The good news is that all of CPC’s Shareholders support expansion. At the initiative of Minister Khristenko of Russia and Minister Shkolnik of Kazakhstan, a shareholder task force was established in July this year which is now working towards agreeing the basis for proceeding with expansion. Matters being addressed by this Task Force include the ensuring the economic success of expansion, shareholder representation in the management of CPC, and the approach to engineering and construction.”
CPC’s economics were always based on full build out of the system with the assumption that the final stage of the project would be complete in the year 2014. In fact, volume forecasts for the next 5 years require individual expansion stages to be compressed and that full system build out must take place much earlier than predicted. This means that the predicted rate of return for CPC remains robust and may well exceed the original assumptions made by CPC’s shareholders.
CPC has already had a substantial beneficial impact on the host Governments. Almost $500 million has been paid to Russia in taxes, fees and contributions. 85 percent of all of CPC’s expenditure in Russia goes to Russian suppliers and the Russian Government, which is around $90 million per year. For Kazakhstan, CPC has allowed major oil field developments to proceed bringing with them substantially increased royalties and taxes, ensuring through a Quality Bank that Kazakhstan receives full value for its light oil, and reducing the cost of transportation relative to the alternative of rail transportation.
“The benefits to both countries will increase considerably after expansion,” said Ian MacDonald. “67 million tons a year at present tariff rates will generate well over $1.5 billion a year in tariff revenue providing both host Governments with a high level of secure income for the next 35 years.”
Since May of this year, CPC has been operating at or above its design capacity from the Caspian Region. It is designed to ship 1.8mm tons a month or 460,000 bopd; in fact with flow improvement chemicals it is currently shipping 2mm tons per month from Atyrau, or 510,000 bopd. Meantime, in Russia, work is almost complete in constructing a rail off-loading facility near Kroptkin in Krasnodar Krai. This will allow Russian oil to enter the CPC system. With Rosneft and additional Russian shippers entering the line during the year CPC will be shipping over 30 million tons a year – 640,000 bopd.
“Currently CPC is the principal export route for Caspian Oil. Construction of BTC and the China pipeline will mean that Kazakhstan producers have choices. The challenge to CPC’s Shareholders is to make sure that they do not force regional oil producers to look for alternative export routes. Expanding CPC in a timely manner will ensure that CPC retains its competitive advantage,” stressed Ian MacDonald.
The multinational ownership interest in the CPC is as follows: Russian Federation – 24%, the Republic of Kazakhstan – 19%, the Sultanate of Oman – 7%, Chevron Caspian Pipeline Consortium Company – 15%, LUKARCO B.V. – 12.5%, Rosneft/Shell Caspian Ventures Limited – 7.5%, Mobil Caspian Pipeline Company – 7.5%, Agip International (N.A.) NV –2%, BG Overseas Holding Limited – 2%, Kazakhstan Pipeline Ventures LLC – 1.75%, and Oryx Caspian Pipeline LLC– 1.75%.
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