OREANDA-NEWS. July 22, 2011. CPC Expansion Project Construction Groundbreaking Ceremony was held in Atyrau, in the vicinity of the CPC namesake pump station, reported the press-centre of CPC.

At the ceremony Nikolay Platonov, CPC General Director, presented to the construction contractors certificates of readiness permitting commencement of the work. Sauat Mynbayev, Minister of Oil and Gas of the Republic of Kazakhstan, Sergey Shmatko, Minister of Energy of the Russian Federation, Nikolay Tokarev and Nurtas Shmanov, Presidents Heads of the national companies Transneft and KazMunaiGaz National Companies, representatives of the Shareholders in the Consortium congratulated all attendees on the significant event. In their addresses they stressed the importance of CPC Expansion Project start for further successful development of the Russia- Kazakhstan relations, as well as for enhancement of the global energy security.

CPC General Director then gave a command to launch the first weld of a large-diameter pipeline designed to replace the existing 88 km “bottleneck” section within the territory of Kazakhstan that currently limits the pipeline capacity to accept the increasing Kazakhstan oil volumes.

Upon successful completion of welding the guests of honor attached their signatures to the new pipe and then inspected work of the modern construction machinery and equipment to be used.

Besides the replacement of the “bottleneck” section of the pipeline that runs from Atyrau PS the construction contractors will upgrade the existing 5 CPC pump stations in Kazakhstan and in Russia, build 10 new pumps stations (2 in Kazakhstan and 8 in the Russian Federation), six oil tanks in the vicinity of Novorossiysk and a third single-point mooring at the CPC Marine Terminal. Communications and pipeline control system will be upgraded.

CPC Expansion Project cost will be USD 5.4 billion. Project completion and achievement of the breakeven level by the Project are guaranteed by the Ship or Pay Agreement under which Shareholders – producer companies undertake to provide the volumes for the expanded pipeline. In the event of non-delivery of the previously agreed volumes to the system the producer company must pay to CPC an amount equal to the tariff revenue lost by the Consortium. Principal Expansion financing source is CPC own funds, i.e. tariff revenue accumulated pursuant to prior Shareholders’ decisions to increase the tariff, reduce loans interest rate and to suspend debt servicing.

After the ceremony General Director of Caspian Pipeline Consortium Nikolay Platonov stated: “Over the last few years the Consortium and its Shareholders completed a really considerable volume of preparatory work. During all this time we’ve been more than willing to finally embark on practical implementation of the Expansion and now we are like a rocket on a launching pad. Certainly, there is a lot of work ahead of us before CPC reaches its design capacity. However, I am convinced that the experience of cooperation among the Shareholders and support rendered by the Governments of Russia and Kazakhstan will help to overcome all problems and ensure success of the CPC Expansion Project”.