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.
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.
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).
· 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
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:
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
CHEVRON OVERSEAS AND LUKOIL PRESIDENTS TOUR CASPIAN PIPELINE ROUTE IN RUSSIA
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)
 - 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.