Russia, Oman, Kazakhstan Ink Pipeline Deal

Russia, Kazakhstan and Oman said Friday that they signed an agreement with eight oil companies that will finance a $2-billion pipeline from the oil-rich Caspian region, opening the way for construction to start early next year.

Chevron Corp. and Atlantic Richfield Co. and AO Lukoil Holding of Russia are among the companies that agreed to finance the 900-mile pipeline to carry oil from western Kazakhstan to the Black Sea port of Novorossiisk.

Although plans so far call for only one pipeline, $2 billion in revenue could help pay to expand it once the pipeline starts exporting in 1999. San Francisco-based Chevron, which is developing the giant Tengiz field, will be the primary customer early on.

Signing of the 11-party Caspian Pipeline Consortium accord had been planned since an initial agreement was reached in December.

The consortium, composed of eight companies and three governments, plans to transport about 560,000 barrels per day through the pipeline in the early stages, building volumes gradually to 1.34 million barrels per day by 2014.

“This is the biggest investment project in Russian history,” Energy Minister Boris Y. Nemtsov said.

The agreement will allow full financing of the project to proceed and construction to begin, the consortium said.

Although the project does not involve oil production on Russian soil, Russia is set to earn huge transport fees.

Jeet Bindra, president of Chevron Pipe Line Co., said he expects the line to be completed by September 1999 and oil to flow shortly thereafter. But officials added that the consortium still needs to complete feasibility studies, environmental reports and rights of way agreements before it can dig ditches and lay pipes.

The Russian government is the biggest shareholder in the consortium, with 24%. Kazakhstan holds 19% and Oman holds 7% of the shares. Chevron has a 15% stake and is the largest single shareholder among the companies in the consortium. It is followed by Lukarco, a joint venture between Los Angeles-based Arco and Lukoil, Russia’s biggest oil producer and exporter.

Rosneft-Shell owns 7.5%; Mobil Corp. owns 7.5%; Agip of Italy owns 2%; and BG owns 2%. A joint venture between Amoco Corp. and Kazakoil owns 1.75%, and Oryx Energy Corp. owns the last 1.75%.

Chevron holds 45% of the Tengiz field venture, while Mobil and the Kazakh government hold 25% each and Lukarco owns 5%.

Chevron shares lost 37.5 cents to close at $70.50, and Arco shares declined 87.5 cents to close at $142.125. Both trade on the New York Stock Exchange.