Russian Industry and Energy Minister Viktor Khristenko
Photo: Dmitry Azarov
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Chevron That Tastes Caspian Grief
Russia’s Industry and Energy Ministry has turned down the widening project of private holders of Caspian Pipeline Consortium (CPC). Instead, Chevron-led companies are urged to hike tariff rates by nearly 40 percent and increase capacity under the terms, which could be hardly called advantageous for them. But the real threats are that CPC could pass under the state control or face bankruptcy.
Caspian Pipeline Consortium (CPC) is the owner of Russia’s sole private oil pipeline that connects fields of Kazakhstan with Novorossiisk-port of the Black Sea. The biggest state holders are Russia (24 percent), Kazakhstan (19 percent) and Oman (7 percent); the private owners are Chevron (15 percent), venture of LUKOIL and BP (12.5 percent) and venture of Rosneft and Shell (7.5 percent).
For CPC, the difficulties began in May 2006, when Russia’s Federal Tax Service (FTS) blamed tricky tax patterns on it and set to collecting 4.7 billion rubles in back profit taxes from it. Russia and Kazakhstan entered into an understanding memorandum that spells out proposals prompting CPC to change operating procedures.
In return, private holders of CPC put forward a compromising plan to settle the conflict, which was duly specified in their address. They proposed to add $2.5 to $27.38 charged per a ton of crude delivered from Kazakhstan to Novorossiisk, widen the annual capacity of the pipeline from 34 million tons to 67 million tons, amend the Charter to increase the share of producing companies in CPC, curtail to 10.5 percent the annual rates of private holders loans to CPC and restructure debts of CPC maturing in 2014. The changes are proposed to be passed as a package.
Khristenko rebuffed both in part and in whole, including to package suggestion. The minister strongly doubts that the revised Charter will meet Russia’s laws, doesn’t think that hiking prices by $2.5 will suffice and suggests settling the debts not by 2014 but by 2012.
Though Khristenko came up with no definite figures for delivery rates, the sources say the requirement is to hike them to $38 per a ton, i.e. 38.79 percent above today’s prices.
Industry and Energy Ministry doesn’t object to widening the pipeline’s capacity, but is ready to do it on terms that could be hardly called advantageous for private holders. Khristenko suggests paying off the debt (around $5.3 billion as of today) irrespective of expansion and step up capacity under the take or pay terms, stripping the extension project of all allure for private producers.
www.kommersant.com
All the Article in Russian as of Nov. 13, 2006
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