press release

Chevron Press Release - Chevron Announces Groundbreaking for Caspian Pipeline

SAN FRANCISCO, May 12, 1999 -- The Caspian Pipeline Consortium (CPC) today celebrated a major milestone as construction began on the marine terminal for the 900-mile crude oil pipeline from Western Kazakhstan to the Russian port of Novorossiysk, announced Chevron Corp.

Participants in the groundbreaking ceremony, held in Novorossiysk, included: Russian Deputy Minister for Fuel and Energy Victor Kalyuzhny; Kazakhstan Vice Prime Minister Khasymzhumart Tokaev; His Excellency Humed Al Rumhi, Oman; Richard Matzke, a director of Chevron Corp. and president of Chevron Overseas Petroleum Inc. (COPI); and Nick Zana, managing director of COPI's Eurasia Business Unit.

The pipeline is expected to be completed in mid-2001 with an initial export capacity of 560,000 barrels per day (bpd). With upgrades, the pipeline capacity will ultimately reach 1.5 million bpd.

The pipeline is essential to maximizing transportation from the Tengiz, Kazakhstan oil field, in which Chevron is a majority partner with a 45 percent interest.As the largest oil company shareholder in CPC, Chevron will be able to fully maximize its investment in the Tengiz field and reach peak production of 700,000 bpd in 2010 from its current average production of 215,000 bpd.

"The CPC groundbreaking is an historic event for the region and a winner for all involved," said Matzke, at the ceremony. "We congratulate our numerous friends, colleagues, and supporters in Russia and Kazakhstan on this outstanding occasion. We appreciate their valuable cooperation, insight and guidance, which have been critical to CPC's progress."

Together, Tengiz and the CPC will directly and indirectly add more than $150 billion to the combined gross domestic product in Russia and Kazakhstan over the life of the projects. In addition, the implementation of both the CPC and the Tengiz operations will sustain, on average, more than 200,000 jobs annually (directly and indirectly).

"CPC reached this milestone because of one critical factor - its strong team spirit. CPC is a model project to other foreign investors in the former Soviet Union," said Zana. "CPC General Director Viktor Fedotov is one of those leaders whose wisdom and vision have led the multi-language and diverse team of CPC shareholders to today's achievement. We hope the same team spirit will strengthen in the future and allow us to keep CPC under budget and on schedule."

Notes to Editors:

The equity interest in the CPC is allocated as follows: Russian Federation, 24%; Republic of Kazakhstan, 19%; Sultanate of Oman , 7%; Chevron Caspian Pipeline Consortium Co., 15%; LUKARCO B.V., 12.5%; Rosneft-Shell Caspian Ventures Ltd., 7.5%; Mobil Caspian Pipeline Co., 7.5%; Agip International (N.A.) N.V., 2%; BG Overseas Holdings Ltd., 2%; Kazakhstan Pipeline Ventures L.L.C., 1.75%; and Oryx Caspian Pipeline L.L.C., 1.75%.

The CPC received approval of the Construction Feasibility Study (TEOC) from all expert commissions in both Russia and Kazakhstan in late 1998 and has proceeded with detailed engineering, placement of orders for long-lead materials, and awarding of construction contracts. Deliveries of line pipe have already begun, and the construction contracts for the marine terminal and pipeline have been awarded. The marine terminal facilities include the tank farm, control center, and offshore loading system. To date, about $1.5 billion worth of contracts have been bid and/or awarded.

Tengiz Field has an estimated 6 billion to 9 billion barrels of recoverable oil. Tengiz crude oil is currently transported by a combination of rail, pipeline and barge through Azerbaijan, Georgia, Finland, Russia and the Ukraine and sold to numerous countries in Eastern and Western Europe.

Updated: May 1999