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Monday, October 31, 2005

Russia to Increase Profitability of Baku-Tbilisi-Ceyhan

31-10-2005 Azerbaijan Today - By ILHAM SHABAN - Shareholders of the Caspian Pipeline Consortium (CPC - operator of the Tengiz-Novorossiysk oil pipeline) finally decided last week to increase the oil transportation fee by $2.5, bringing it to $30.83 per ton. This has been long desired by the Russian Government. Experts believe that consortium shareholders will also have to approve a method for increasing the price of oil transportation through the Caspian pipeline. Russian governmental representatives previously insisted on increasing transit fees for CPC shareholders to $38 per ton, thereby forcing oil producers in Kazakhstan to seek alternative routes to delivery its product to the world markets. This is why the government of Kazakhstan is now seriously considering transporting its oil through the Baku-Tbilisi-Ceyhan (BTC) pipeline, China, or Iran. Transportation of 1 ton of Kazakh oil cost $26.32 per ton when CPC was launched. This was increased to $27.19 in July of 2004. Transporting this same ton of Kazakh oil through Russia to Mediterranean ports (including expenses for loading and unloading of oil, chartering of tankers and port dues) is currently around $40. Transportation of one ton of Azeri oil through the BTC oil pipeline will cost only $24 for BTC Co shareholders, but there are still concerns over technical aspects.

* With a total length of 1,580 km, the Tengiz-Novorossiysk oil pipeline links oil fields in western Kazakhstan with Russia's Black Sea coast. The first stage of the pipeline with the annual carrying capacity of 28.2 million tons of oil, took time from May 1999 to March 2001. $2.6 billion USD was invested into this project. Nearly 1 million tons of oil was demanded to fill the pipeline. The length of the Russian pipeline section is 1,043 km and 800,000 tons of oil were required to fill it. The first oil was delivered to the Russian terminal in August of 2001. The first test loading of a tanker in the CPC terminal took place on October 13-14, 2001.
According to 2002 estimates, the full cost of the CPC pipeline, with its capacity of 67 million tons annually, will reach $6 billion, including construction of a new terminal near Novorossiysk.
The founding governments of the CPC are Russia (24%), Kazakhstan (19%), and Oman Sultanate (7%). Private shareholders of the CPC are Chevron Caspian Pipeline Consortium Company (15%), LUKARCO B.V. (12,5%), Rosneft-Shell Caspian Ventures Ltd (7,5%), Mobil Caspian Pipeline Company (7,5%), Agip International N.V. (2%), BG Overseas Holding Ltd (2%), Kazakstan Pipeline Ventures LLC (1.75%) and Oryx Caspian Pipeline LLC (1,75%).

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