The pipeline is the first step in Kazakhstan’s ambitious plan to export 3MMbrl/d of oil within 15 years, to make it one of the top three oil exporters in the world. It also represents a multibillion-dollar bet made in 1993 by Chevron Corp, now ChevronTexaco, that is now set to payoff handsomely. Built by the 11-member CPC, the 1510-km long pipeline originates at NE corner of the Caspian Sea at Tengiz, the world’s sixth-largest oilfield. What is claimed to be the longest 36-in pipe in the world then follows a route northwards and westwards around the Caspian before turning west across the plains north of the Caucasus range,and ending at a tanker terminal 15km west of Novorossyisk. Its fullstrength capacity will be 1.3MMbrl/d, more than double its initial capacity. The implementation of Chevron’s ambitious pipeline plans has been fraught with difficulties, of mainly a political nature. When the company took over the Tengiz field from its post-Soviet managers, it created one consortium, TCO, to develop the oilfield, and a second one, CPC, to build an export route for the oil. For the first few years,TCO overcame such obstacles as the extreme 4,000-m depth of the reservoir, its high content of poisonous sulphur dioxide, and the high pressure at which the oil was being produced. Production steadily climbed from 25,000brl/d Bpd; the jinx that gave Tengiz the longest uncontrolled blowout in Soviet history was also overcome. But during those years, CPC was able to progress very little in its efforts to convince Russia and its pipeline monopoly, Transneft, to allow a pipeline through Russia.

In 1996 two Russian companies, LUKoil and Rosneft, joined the consortium, the Russian government took a 24% percent share, and things started moving. “It was a waste of time to try to build a pipeline through Russia that would not benefit the country,” said Stephen O’Sullivan, head of research at United Financial Group. Construction thereafter took less than three years. Transneft director Semyon Vainshtok tried to fight a rearguard battle during this period, insisting that what was bad for Transneft was bad for Russia, but the pipeline consortium, headed by Sergei Gnatchenko, a Russian, and assisted by Chevron deputy director Fred Nelson, argued that Russia stood to gain from the added production. But that was just the beginning. “We had to go through five Russian local governments,” Nelson said recently. “It wasn’t always easy.” Twice, customs disputes halted the flow or the oil at the Russian-Kazakh border, and last year a dispute over pricing turned ugly, derailing an opening ceremony scheduled for 6 August. Until the pipeline was built Tengiz oil was exported entirely through Russia, and mostly by rail. Part of its highly-prized light sweet crude, which sells for up to a dollar per barrel more than benchmark Brent, was mixed along the way with less-desirable Russian crudes to make the Urals Blend, which trades at nearly a dollar less than Brent. “The Russians got a free ride for years,” said a diplomat familiar with the situation. For the pipeline, however, Chevron insisted on instituting what is called a quality bank, a system penalizing those who would add low-quality crude to the mostly- Tengiz CPC Blend. Quality banks are used in many places where low- and high-quality crudes are blended in pipelines, but the Russian partners only relented three days before the already rescheduled inauguration date, which had been due to coincide with the loading of the first tanker. Then, in a final twist, the port authority of Novorossyisk, in a surprise move, extended its jurisdiction to the deserted piece of coast where the holding tanks are buried near the end of the pipeline. There is no port here, as floating hoses are used to fill the tankers as they lie moored offshore. The move,however, allowed the port authorities to demand a port tax, and negotiations caused furtherdelays, although the issue was eventually resolved.

“This achievement comes at a time of increased partnership between the US, Russia, and Kazakhstan,” ChevronTexaco chairman David O’Reilly said at the pipeline inauguration ceremony. “CPC is a bellwether project for successful international cooperation, and demonstrates the confidence the international business community has in investing in Russia and Kazakhstan.” However, while Russia, Kazakhstan, and world consumers can join ChevronTexaco in celebrating the pipeline’s completion, Turkey has shown mostly concern. The extra tankers carrying Tengiz oil, which will eventually number three a week, will further clog the Bosporus Strait and increases the chances that the area will some day have to cope with a major oil spill or even a fire. But Turkey is committed to upholding the 1936 Montreux Agreement and, barring a catastrophe, Caspian oil will be able to navigate the Strait to reach European markets for the foreseeable future, analysts said..