Chevron Corporation affiliate Chevron Neftegaz announced at a groundbreaking ceremony in Atyrau, Kazakhstan, that the Caspian Pipeline Consortium has started the construction phase of the Caspian pipeline expansion.

The capacity of the 1,500 km pipeline, which carries crude oil from western Kazakhstan to a dedicated terminal in the Black Sea, will increase to 1.4 MMbbl/d from its current capacity of 730,000 bbl/d.

The project will consist of the refurbishment of the existing five pump stations, the addition of ten new pumping stations, the replacement of a 88 km section of the line, six new storage tanks, and the addition of a third offshore mooring point at the Black Sea terminal, 10 km north of the Port of Novorossiysk. CPC awarded all the major construction contracts in May 2011.

The project is estimated to cost $US5.4 billion and will be implemented in three phases with capacity increasing progressively from 2012 to 2015.

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Chevron, one of the largest Caspian Pipeline Consortium (CPC) shareholders, is providing project management services to the project.

Neftegaz President Andrew McGrahan said “CPC is a model of co-operation between Russia and Kazakhstan and is an indication of the confidence we have in Russia and in oil transportation from the Caspian region. This groundbreaking event represents years of dedication and commitment to expanding the commercial links between the two countries and sends a powerful signal that Russia and Kazakhstan are countries where major, long-term capital investments can be made with confidence.”

The equity interest of CPC is divided between the following companies: Russian Federation (24 per cent), Republic of Kazakhstan (19 per cent), Chevron Caspian Pipeline Consortium Company (15 per cent), Lukarco B.V. (12.5 per cent), Rosneft-Shell Caspian Ventures Ltd (7.5 per cent), Mobil Caspian Pipeline Company (7.5 per cent), Caspian Pipeline Company (7 per cent), ENI International (2 per cent), BG Overseas Holdings Ltd (2 per cent), Kazakhstan Pipeline Ventures (1.75 per cent), and Oryx Caspian Pipeline (1.75 per cent).