OREANDA-NEWS. December 19, 2008. The Shareholders of Caspian Pipeline Consortium (CPC) have reached agreement on the principles of CPC pipeline expansion aimed at increasing its throughput capacity from its current 33 MMTF to 67 MMTA, reported the press-centre of CPC.

A Memorandum of Understanding on CPC Expansion Principles has been signed by the Shareholders, the Ministry of Energy of the Russian Federation and the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan.

British BP remains the only company which has not yet approved the MOU. At the same time, it continues to support the Project, awaiting finalization of legal documents in 2009 based on the outcome of commercial negotiations with LUKOIL, its partner in Lukarco JV which is a CPC Shareholder. Nevertheless, implementation of the MoU will continue through 2009 with BP’s consent.

The Expansion will be phased in and its completion is currently expected to occur in 2013. Front-end engineering and design work and receipt of necessary permits and approvals will continue through 2009 with the Shareholders to sanction the Project in late 2009 when the Project schedule will be finalized.

The Expansion Project includes the addition of 10 additional pump stations in Russia and Kazakhstan, six crude oil storage tanks near Novorossiysk and a third Single Point Mooring (SPM) at the CPC Marine Terminal. The Project will be financed with CPC’s internal funds generated from tariff at USD/MT and an extension of the 6% interest rate on the loans. As has been agreed with the Shareholders, current debt of CPC will be deferred until completion of the Expansion Project.

The system Expansion will allow the Company to achieve a new level of economic efficiency, bring added value not only to the Project Shareholders, including two Government Founding Members but also to the transited regions that will get new job opportunities, additional contracted work scopes and material supplies.

Commenting on the completion of CPC Expansion talks, Transneft’s President N. Tokarev said he was satisfied with the execution of the MoU ensuing from the hard work by all Shareholders. He also thanked Chevron and KazMunayGaz for their active involvement in the work to develop the MoU. Transneft considers the signing of the MoU to be the first and most significant step toward the implementation of the CPC Expansion Project which has been negotiated by the Shareholders since 2002.

President KazMunayGaz K. Kabyldin characterized this signing of the MoU as a long-expected and highly necessary event that would contribute to delivery of the ever growing volumes of crude oil produced in the Republic of Kazakhstan to the world markets. Chevron Eurasia President Mr. Jay Johnson also expressed his congratulations and said that Chevron ‘recognizes the significant efforts of all the shareholders and in particular applauds Transneft and KazMunayGaz for the lead they have taken in reaching this landmark agreement’.

CPC Shareholders: Russian Federation (represented by Transneft – 24% and CPC Company – 7 %) – 31%; Republic of Kazakhstan (KazMunayGaz) – 19 %; Chevron Caspian Pipeline Consortium Company - 15%, LUKARCO B.V. - 12,5%, Mobil Caspian Pipeline Company - 7,5%, Rosneft-Shell Caspian Ventures Limited - 7,5%, BG Overseas Holding Limited - 2%, Eni International N.A. N.V. - 2%, Kazakhstan Pipeline Ventures LLC - 1,75% и Oryx Caspian Pipeline LLC - 1,75%.