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Press Release May, 20 2005 | |
For immediate release
May 20, 2005
Contacts:
Natalia Prutkovskaya
Maxim Syssoev
at (095) 775-00-77
May 20, 2005 – Moscow, Russia –
The Caspian Pipeline Consortium confirmed today that they are very close to successfully completing negotiations on the basic principles of the CPC pipeline expansion, following a meeting held in Moscow. Five out of seven conditions set by the Russian Federation (RF) for agreeing Expansion can now be considered closed and the remaining two are partially closed.
The meeting was led by RF Minister of Industry and Energy, Victor Khristenko, and Kazakhstan Minister of Energy and Mineral Resources Vladimir Shkolnik.
“We are pleased with the progress being made by the Shareholders to reach a final agreement to expand the pipeline system,” said CPC General Director Ian MacDonald.
The CPC pipeline, which connects oil fields in Western Kazakhstan and Russia with the marine terminal at the Russian coast of the Black Sea near Novorossiisk, is already operating at full capacity for oil of Caspian and Russian origin.
“Expanding CPC is in Russia’s and Kazakhstan’s national interests and will support additional regional economic growth,” added MacDonald. “We expect to ship 32 million tons of oil in 2005, and with forecasts of substantially higher volumes in the next 2 or more years CPC needs to move ahead with its expansion plan."
According to calculations made by CPC, the changes now agreed to by the Shareholders, together with the expansion of the pipeline, will result in all CPC investors being repaid between the years 2013 and 2014, very close to the original assumption of repayment by 2012.
CPC corporate governance is the main issue outstanding in the negotiations. Shareholders have already agreed to the management secondees in CPC being allocated in proportion to equity interests, meaning that the original founding members of CPC would be entitled to 50% of the management positions. However, the Russian Government still wishes to see the establishment of Boards of Directors with substantial powers.
“CPC’s shareholder structure is complex,” said MacDonald. “This in turn is reflected in CPC’s governance, everything from the General Meetings of Shareholders to the management of the Company. This governance structure is best suited to building and maintaining trust among Shareholders and undermining this carefully constructed balance will be the surest way to destroy that trust and stop progress on expansion.”
To date, CPC has contributed more than $600 million to Russia in taxes, fees and contributions. Eighty-five percent of all CPC’s expenditure in Russia goes to Russian suppliers and the Russian Government, which is around $90 million per year. After the pipeline expansion is complete, the pipeline will generate nearly $2 billion a year in tariff revenues.
The CPC expansion will require the construction of 10 additional pump stations, additional storage facilities and a third offshore mooring point. The new construction will be implemented in three stages and is planned to be completed by 2009. By early 2007, CPC could add pumps at existing pump stations, which would result in 10 million tons of capacity or 200,000 bopd. By the beginning of 2008, the first five of the ten new pump stations could be completed, adding a further 10 million tons of capacity and the capacity to transport 1 million barrels a day. The expansion build-out will be possible to complete approximately 12 months later.
The multinational ownership 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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