National Company KazMunayGaz (Kazakhstan) announces decision on investing in Caspian Pipeline Consortium expansion
/KASE, December 20, 10/ - National Company KazMunayGaz (Astana), whose bonds are
officially listed on Kazakhstan Stock Exchange (KASE), has provided to KASE the
following press-release of December 15, 2010:
Final Investment Decision (FID) to expand the Caspian Pipeline Consortium
(CPC) pipeline mechanical capacity to 67 MTPA was passed today in Moscow.
Sergey Shmatko, Minister of Energy of the Russian Federation, Lyazzat Kiinov,
Deputy Minister of Oil and Gas of the Republic of Kazakhstan, representatives of
Transneft and KazMunaiGaz National Companies, as well as CPC General
Director attached their signatures to the document approved by the Shareholders
of the Consortium. The document sanctions commencement of the work on
expansion of the pipeline throughput.
The Decision defines all parameters of the Project: from financial, economic and
Project Implementation Schedule to the HSE parameters. Construction is to begin
in spring next year. Expansion is envisaged in three phases while completion of
the Project is planned for 2014.
Estimated CPC Expansion Project cost is USD 5.4 bln. Financing of the Project
and its ultimate profitability are guaranteed by the Ship or Pay Agreement under
which Shareholders - Producer Companies undertake to use the expanded pipeline
capacities. If the agreed delivery volumes are not reached, a relevant Producer
Company commits to make payments to CPC in the amount of CPC's revenue
Expansion Project will be primarily financed with CPC's tariff revenue
accumulated under the Shareholders' prior decisions to increase the tariff, to
reduce the rate of interest on the loans and to suspend debt servicing.
Upon completion of the document signing ceremony the RF Minister of Energy
stated as follows: "Caspian Pipeline Consortium is an up-to-date project that is
fully consistent with the national interests of Russia. Russia would remain the
biggest energy partner for the Kazakh hydrocarbons transit, while Kazakhstan
would be able to export more crude oil thus increasing its own production. The
Tengiz - Novorossiysk pipeline is very important for the development of the
large oil fields of the Caspian region, including but not limited to those being
developed by the Russian companies. The Russian and Kazakhstan producing
companies would be able to get the full price for their crude and save on the
transportation cost as compared to the alternative export routes. I would like
to stress the importance of this project for the economy of these two countries.
It will give a new spin to the cooperation between Russia and Kazakhstan in the
field of energy."
Commenting on the decision OAO Transneft President Nikolay Tokarev expressed his
satisfaction with the completion by the Consortium Shareholders of anything but
simple work that took several years: agreement of all terms and conditions for
implementation of Phase 2 of CPC development. Mr. Tokarev stressed that signing
of the Expansion Project FID is an important milestone in the history of the
Consortium, which will take it to the breakeven level while preserving the
interests of Russia and Kazakhstan, as well as private companies participating
in the Project.
President of NC KazMunaiGaz Kairgeldy Kabyldin congratulated all attendees on
the signing of the document and emphasized exceptional importance of CPC
expansion for delivery of the increasing Kazakh crude oil volumes to the
international markets. "The decision made today is especially relevant within
the context of the decisions on further increase of production at the fields
such as Tengiz and several others. It also yet again witnesses importance of the
Project as one of the vectors of Kazakhstan oil industry development. We are
pleased to be able to attain this challenging objective together with our
Russian partners and international oil and gas companies", said he.
"This important achievement was made possible by the leadership and support of
the governments of Russia and Kazakhstan," said Chevron Chairman and CEO
John Watson. "Chevron appreciates the valuable contributions of our partners,
Transneft and KazMunaiGaz, toward sanctioning of the CPC expansion project."
General Director of Caspian Pipeline Consortium Nikolay Platonov, in his turn,
stated: "The decision long-awaited by the Company was made today. CPC is ready
to embark on implementation of the Project and to perform all work in strict
compliance with the parameters set by the Shareholders, as well as with all
statutory norms of Russia and Kazakhstan. Application of the best technologies
and equipment will minimize environmental impact and implications for the social
environment and, thus, commission a pipeline system that guarantees safe and
efficient transportation of Kazakh and Russian oil to the international markets
over decades of stable operation. CPC Expansion will be of practical value not
only for the Shareholders in the Project but also for the regions where the
pipeline is located where the Project will generate new jobs, new work and
CPC Expansion Project that envisages expansion of the pipeline throughput to
67 MTPA includes construction of 10 additional pump stations (2 in Kazakhstan
and 8 in the Russian Federation), six crude oil tanks in the vicinity of
Novorossiysk and a third single point mooring at CPC Marine Terminal, as well
as replacement of an 88 km pipeline section in Kazakhstan.