02.07.10 Caspian Focus Section of CPC expansion completed

Caspian, Tengiz to Novorossiysk pipeline

As it embarks on its step-by-step plan to double its throughput capacity to 1.4 million b/d by 2014, the Caspian Pipeline Consortium has completed a new 130km section of its pipeline that runs from Kazakhstan's Tengiz field to the Russian Black Sea port of Novorossiysk. The new segment, in the Atyrau region near Tengiz, will replace a 116km spur that was built in 1991 and was considered unsafe.

Phase 1 of CPC's expansion, due to be implemented by 2012, will enable 500,000 b/dof Kazakh crude to flow through the pipeline; Phase 2, for completion by 2013, will raise Kazakh throughput to 700,000 b/d, while the third and final phase would enable Kazakhstanto pump up to 1 million b/d of crude. Russian producers can inject crude into the pipeline at a rail loading facility at Tikhoretsk, which is operated by Dublin-based Trumpet, a fullyowned subsidiary of state giant Rosneft.

Rosneft, meanwhile, could increase its stake in CPC by buying part of the 12.5% stake held by Lukarco, a 100%-owned vehicle for Lukoil. Both companies have confirmed that discussions are being held, but no decision has been reached. Rosneft holds a 7.5% stake in CPC jointly with Shell. On top of this the Russian government holds a 31% stake – 24% held directly and 7% via Caspian Pipeline Company, which handles the equity purchased from Oman more than two
years ago. The government's share is managed by state pipeline monopoly Transneft.

CPC is now effectively a Russian-controlled company, which is exactly how Moscow wants it to be. On 1 May, a new Russian chief executive took the helm: Alexander Tarakanov, previously a senior manager at state-owned Zarubezhneft. Tarakanov took over from another ex- Zarubezhneft man, Vladimir Razdukhov.

For more news and expert analysis about the Caspian region, please see Caspian Focus or visit the Menas Associates Blog.