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Chevron says Kazakh project needs bigger pipeline

ASTANA. February 19. KAZINFORM. TengizChevroil LLP, the Kazakh oil venture led by Chevron Corp., needs increased export capacity before expanding the project further, according to Ian Macdonald, a vice president at the U.S. company. Expansion plans are dependent on boosting the capacity of the Caspian Pipeline Consortium, or CPC, oil link, which transports crude from Kazakhstan to an export terminal on the Black Sea. Chevron, the second-largest U.S. oil producer, and partners intend to approve the pipe work by the end of this year. Shareholders believe that there will be enough cash generated to fund the expansion, Macdonald said today at the International Petroleum Week conference in London. The partners plan to invest at least $1.6 billion to almost double capacity on the link to 1.3 million barrels a day from 2013. TengizChevroil, Kazakhstans biggest oil exporter, completed construction of a $5.5 billion gas-processing plant and gas- injection system last year to help boost crude output in the Central Asian nation. Delays to the CPC expansion have forced the partners to ship Tengiz crude by rail and tanker across the Caspian Sea, adding to costs. TengizChevroil transports 210,000 barrels of oil a day by railcar to the Black Sea ports of Odessa and Feodossia in Ukraine. It sends about 100,000 barrels a day across the Caspian Sea, through Azerbaijan and Georgia to the Black Sea, or through the BP Plc-led Baku-Tbilisi-Ceyhan pipeline to the Mediterranean. Kazakh oil production is expected to peak at 3 million barrels a day between 2020 and 2025 and then decline to about 2 million barrels a day in 2030, Chevron said in a presentation today, citing data from Wood Mackenzie Consultants Ltd. Output will reach about 1.7 million barrels a day next year, it said. Azeri oil extraction may peak at 1.2 million barrels a day in 2010 through 2012 and then fall below 300,000 barrels a day in 2030, the U.S. company said, also citing Wood Mackenzie estimates. Some will say, including myself, that this is a conservative picture, Macdonald said. Still, any drop in Azeri output may open up export capacity in BPs BTC pipeline, he added. TengizChevroil is already pumping 30,000 barrels to 40,000 barrels of crude a day through the BTC link, he said. Kazakhstan will still need an additional 1 million-barrel-a- day export route to transport its crude to world markets after the CPC expansion, to be able to reach the targeted 3 million- barrel-a-day production rate, Macdonald said. Small tankers, which can carry about 95,000 barrels of crude, are taking some of TengizChevroils output to Baku in Azerbaijan for rail shipment to the Black Sea or for injection into the BTC pipeline. Kazakhstan will need to build larger tankers to boost exports across the Caspian Sea from the planned port of Kuryk. Theres no existing shipyard capacity in the region to build such vessels, and its impossible to bring them into the landlocked sea, Macdonald said. The Kazakh port of Atyrau can ship about 100,000 barrels a day to Baku and as much as 3 million tons to the Russian port of Makhachkala, he estimated. Chevron holds 50 percent of TengizChevroil, while Exxon Mobil Corp. has 25 percent, Kazakhstans state-run KazMunaiGaz National Co. owns 20 percent and Russian producer OAO Lukoil has 5 percent; Kazakh Embassy in the USA informs referring to Bloomberg News.


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