DATE:12 April 2001                                                                                              International Institute for Caspian Studies



Kazakhstan gears up to open first oil pipline

Vahid Ahmadi (Energy markets &finance expert)



·        CASPIAN NO LONGER closed:

Since the Soviet Union broke up at the end of 1991, the new nations of Kazakhstan, Azerbaijan, Turkmenistan and Georgia have seen oil and gas as providing their best hope of becoming rich. Because of that and after a decade of hype, diplomacy and drama the first dedicated pipeline to move oil from the Caspian, the world's last great undeveloped hydrocarbon reserve, direct to international markets opened on Monday March 26. As well as potentially transforming the economies of Kazakhstan and other countries in the region, the line will also have an impact on global markets, delivering perhaps the largest single slug of new oil to markets for a quarter of a century.


  • About Kazakhstan Oil Pipeline Network
    Kazakhstan possesses significant hydrocarbon reserves. Total oil reserves are estimated at 5.4 billion barrels, gas reserves at 65 tcf, and coal reserves at 37.5 billion tons
    Kazakhstan is the second largest oil producer among former Soviet republics after Russia, producing over half a million barrels per day (bbl/d). Almost half of Kazakh production comes from three large onshore fields - Tengiz, Uzen, and Karachaganak.Under the former Soviet Union, Kazakhstan's pipeline network was integrated with the Russian pipeline system, and all of Kazakhstan's oil was exported through the Russian pipeline system. Kazakhstan’s pipeline system is consisting of the two export pipelines in the west, the import pipeline in the east, and a smaller internal line in the south. Kazakhstan's largest oil export line is the Western Kazakhstan pipeline system that transports oil from fields in Atyrau and Mangistau in the northern Caspian region to Russia. This 1,800-mile pipeline runs from Uzen-Atyrau-Samara, and accounts for 75% of Kazakhstan's oil exports. The other export pipeline is the Kenkyak-Orsk line that transports oil from western Kazakhstan to Russia. This pipeline runs from the Aktyubinsk fields to the Orsk refinery in Russia, and has a capacity of 130,000 bbl/d. Oil is imported via the Eastern Kazakhstan and Central Asia pipeline system that transports oil 1,268 miles from Russia to southern Kazakhstan Pavlodar refinery.The other major pipeline transports oil from the Kumkol fields in central Kazakhstan to the southern Kazakhstan Shymkent refinery. Nearly all of Kazakhstan’s oil is exported west through Russia, except for a small amount barged across the Caspian to northern Iran
    . In April 1997- to manage Kazakhstan's pipeline network- KazTransOil was created, with the state owning 100% of its shares. KazTransOil currently transports about 80% of the oil produced in Kazakhstan, but will face competition when the CPC (Caspian Pipeline Consortium) pipeline becomes operational in 2001[1].


  • Pipeline history

On6April 1993 -- The Republic of Kazakhstan and Chevron Corporation announced the formation of their joint venture company, Tengizchevroil (TCO), to develop the Tengiz (with 6-9 billion barrels of estimated oil reserves) and Korolev oil fields on the northeastern Caspian Sea coast.

This$20 billion joint venture is the largest such arrangement between the Republic of Kazakhstan and a major multinational oil company. The pipeline had its groundbreaking in May 1999.

The Tengizchevroil joint venture produced 190,000 bbl/d in 1999, and production could increase to 340,000 bbl/d by 2002. Given adequate export outlets, the Tengizchevroil joint venture could reach peak production of 750,000 b/d by 2010. Tengizchevroil exported about 170,000 bbl/d of crude oil in 1999 through the Russian pipeline system; by barge and rail to the Baltic; and by ship, pipeline, and rail to the Black Sea.Caspian Pipeline First Pipe

While Chevron and other oil companies are investing $20 billion to develop the Tengiz field transportation has been a major problem. Much of the crude was shipped by train. At last the new plan to ship it along a 900-mile pipeline to the Russian port of Novorossiysk became operational on March 26, 2001

·        Current events about new pipeline:

On March 26, 2001 The prime minister of Kazakhstan opened the valve that sent the first Kazakh oil on its 900-mile (1,500 kilometer) journey to CPC's marine terminal north of Novorossiysk on the Black Sea from where it can move by tanker anywhere in the world. Giving the Central Asian producer Storage facilities there are almost ready, and the port is on schedule to start filling tankers with Kazakh oil this summer, it is said and estimated that the first tankers to arrive in June or July.  By year-end, the initial phase of the pipeline will have an export capacity of 28 million tons of oil per year (approximately 600,000 barrels per day). With upgrades, the ultimate capacity of the pipeline is 67 million tons of oil per year (1.5 million barrels of oil per day).
 The pipeline will extend three miles (five kilometers) over the seabed from the coastline, ending out in the open sea with a floating terminal for pumping oil into tankers.

·        Benefits for two sides:

The line is the first stage in an ambitious program to ship crude oil from the Caspian, the world's largest undeveloped oil reserve, and which could transform Kazakhstan into one of the world's major oil exporters over the next decade. As well as potentially transforming the economies of Kazakhstan and other countries in the region, the line will also have an impact on global markets, delivering perhaps the largest single slug of new oil to markets for a quarter of a century and from the Russian side can point to these advantages:  While this move is an important step in tapping the oil resources of the Caspian, it is also part of the Russian government's struggle to regain credibility with foreign businesspeople.   It will bring Moscow welcome new transport tariffs (billions of dollars of tax revenue to Russia over the life of the project) for years to come -- and added political clout in the strategic region, permanent jobs, a heightened role in world energy markets, strong private sector partnerships, and increasing flow of oil to world markets. (It should be noted that Over the life of the projects, the Caspian Pipeline and the Tengiz field will directly and indirectly add more than $150 billion to the combined gross domestic product in Russia and Kazakhstan. In addition, the implementation of both the CPC and the Tengiz operations will sustain, on average, more than 200,000 jobs annually (directly and indirectly).) . Chevron has estimated that during its 35-40 year expected life, the pipeline could bring in $8 billion in taxes for Kazakhstan, and development of the Tengiz field and operation of the pipeline would earn about $150 billion for Kazakhstan and Russia. With the completion of Phase I of the CPC line in mid-2001 and the expansion of the Atyrau line, Kazakhstan will have about 1 million bbl/d of pipeline export capacity.


·        Some mentioned disadvantages:

Environmental groups in Russia claim that nearly ninety percent of the people of Novorossiisk and Anapa are opposed to the project. They know that no project is safe enough to prevent spills that will kill the land and sea on which they depend. In 1997, a breakdown in the pipeline system spilled at least 800 tons of oil. The beaches of the Anapa and Gelendgic resorts were heavily polluted and the clean- up took several months. Because the oil was spilled into an isolated body of water, the Cemess bay, it was easier to block and gather. Local environmental groups speculate that the consequences would be much more catastrophic if a spill happens on the open sea. The CPC's new pipeline terminal poses exactly that threat.
 Other countries reactions:

Although The United States has struggled to limit Russia's control over petroleum exports from the Caspian region, but welcomes the formal completion of construction of the Russian portion of the Caspian Pipeline Consortium pipeline.

·        The U.S.A reaction about this new route:

Although The United States has struggled to limit Russia's control over petroleum exports from the Caspian region, thought to hold vast oil reserves and described as a key source of energy for the 21st century during strong support of  baku-ceyhan project  but The United States appreciated the formal completion of construction of the Russian portion of the Caspian Pipeline Consortium pipeline maybe because of high participants of   USA chevron company in the project

·        Pipelines  map





















          SAN FRANCISCO, June 29, 1998

·          TENGIZCHEVROIL EMPLOYEES SUSTAIN SAFETY PERFORMANCE AND SET NEW OUTSTANDING RECORD(This press release was issued by Tengizchevroil on December 22, 1999)





[1] - The Caspian Pipeline Consortium project is the largest U.S. investment in Russia to date, with the U.S. partners investing nearly half the estimated $2.5 billion necessary to complete the project in Russia and Kazakhstan. The project includes the U.S. firms Chevron, Exxon-Mobil, and Kerr McGee. Amoco and Arco, now owned by BP, are also participants.