Publication: Monitor Volume: 2 Issue: 7

Rekindled hopes that the Caspian Pipeline Consortium (CPC) would begin work on the Tengiz pipeline project after January 1, or at least set an early date for its commencement, have again been dashed. Russia’s fuel and energy minister Yury Shafrannik had raised such hopes for the CPC — comprised of Russia, Kazakhstan, and Oman — just before the new year. The pipeline is projected to connect Kazakhstan’s giant Tengiz oil field on the Caspian Sea with Russian oil terminals on the Black Sea. Tengiz is being developed by a Kazakh-Chevron joint venture, but Chevron is not a party to the CPC.

According to Almaty officials, Kazakhstan’s oil and gas ministry rejected Oman’s version of the draft consortium agreement because it neither sufficiently spells out Oman’s financial obligations, nor defines the rules for changing the consortium’s composition. Kazakhstan intends to go ahead with building the pipeline together with Russia and other partners, "regardless of whether Oman takes our remarks and proposals into consideration or not," the officials said. The most recent delay may have created an opening for western companies. Kazakhstan seeks to create an alternative to CPC and is said to be negotiating the formation of a consortium with the American companies Chevron and Mobil Oil, British Petroleum, Italy’s Agip, and Russia’s Lukoil. (16). CPC, founded in 1992, has made scant headway because its three partners have been unable to come up with the financing for the projected pipeline. Russian-Kazakh bilateral cooperation, moreover, is hampered by Russian rejection of Kazakh proposals to divide the Caspian Sea into sectors and limitations on Kazakhstan’s use of the Russian pipeline system.