The Karachaganak Petroleum Operating B.V. (KPO) announced on May 20 that it has begun delivering oil to the Caspian Pipeline Consortium’s (CPC) main export pipeline. The pipeline mostly serves the large Tengiz onshore oil field, operated by ChevronTexaco.
The KPO consortium includes British Gas and Eni-Agip of Italy, each with a 32.5 percent interest, U.S.-based ChevronTexaco, which has a 20 percent stake, and Russia’s Lukoil, which holds a 15 percent interest.
The CPC consortium includes the Russian government, with a 24 percent interest; Kazakhstan’s state company KazMunai, which holds 19 percent; ChevronCaspian and MobilCaspian of the U.S. with 15 percent and 7.5 percent, respectively; Russian-American joint venture Lukoil-ARCo with a 12.5 percent interest; Russian-British venture Rosneft-Shell with 7.5 percent, and lesser stakes by British Gas, Eni-Agip and other partners. Operational since 2002, the CPC pipeline runs for 1,600 kilometers from Tengiz to Novorossiisk in Russia.
KPO oil is fed into a newly commissioned, 635 kilometer connecting pipeline that joins the CPC main line at Atyrau on the Caspian Sea. The CPC pipeline runs to the Russian Black Sea port of Novorossiisk. That port is becoming a major export site for Kazakhstan’s oil.
KPO plans to deliver 6 million tons of oil annually by this route, beginning next year. This volume would increase CPC’s annual throughput to Novorossiisk to 24 million tons in 2005, bringing it close the pipeline’s projected capacity of 28 million tons annually. CPC plans to boost pipeline capacity to 67 million tons, to correspond with increasing oil flow from Kazakhstan’s onshore fields.
The Karachaganak oil field contains one of the world’s richest hydrocarbon deposits.
The KPO consortium’s production sharing agreement with the government of Kazakhstan was signed in 1997 and runs through 2038. Production targets for this period are 320 million tons of liquid hydrocarbons (oil and condensate) and 800 billion cubic meters of gas.
KPO has already invested US$4.5 billion into the project. Total investment in the project is expected to eventually reach US$15 billion.
A triumph of Western, and primarily US technology, the CPC project signifies a huge setback to the U.S. government’s “multiple-pipelines” strategy for Caspian energy development. The CPC pipeline has substantially reinforced Russia’s near-monopoly on transporting Caspian oil and gas. (Interfax, May 20; KPO and CPC websites).