press release

Chevron Press Release - Chevron To Acquire Equity Interest In Caspian Pipeline Consortium

SAN FRANCISCO, Dec. 6, 1996 -- Chevron announced today that it has signed an agreement in Moscow on the restructuring of the Caspian Pipeline Consortium (CPC). The agreement allows Chevron to exercise its right to acquire a 15 percent equity interest in the crude oil pipeline to be completed from the Tengiz oil field in western Kazakhstan to the Russian Black Sea coast.

The CPC pipeline is a key to unlocking the petroleum reserves in Kazakhstan by providing a major outlet to the world market through the Black Sea. The pipeline will ultimately allow the export of 67 million tons per year or 1.5 million barrels per day from the region.

The agreement follows the historic April 27, 1996, protocol signing in Almaty, Kazakhstan, witnessed by President Nursultan Nazarbaev of Kazakhstan and President Boris Yeltsin of Russia. It is expected to close in February 1997 and will result in a number of international oil companies funding the completion of the CPC pipeline in return for a 50 percent equity interest in the overall project. The signatories, with their equity interests, include the governments of Russia (24 percent), Kazakhstan (19 percent) and Oman (7 percent), as well as Chevron (15 percent), LUKoil (12.5 percent), Rosneft-Shell (7.5 percent), Mobil (7.5 percent), Agip (2 percent), British Gas (2 percent), Kazakh Munaigas (1.75 percent), and Oryx (1.75 percent).

"This world-class infrastructure development project will be a model to other foreign investors in the former Soviet Union," said Richard Matzke, president of Chevron Overseas Petroleum Inc. "The pipeline project will be an important example of international partnership between Russia, Kazakhstan, Oman, and major oil companies from six different countries. We congratulate the governments and all the other parties involved on reaching this important agreement," added Matzke.

"The pipeline is not only important to Kazakhstan, but it is also strategic for Russia," said Jeet Bindra, Chevron's senior vice president for pipelines and transportation. "It is estimated that the Russian central and regional governments will receive over $20 billion in taxes and tariff revenue over the 40-year project life. Furthermore, a substantial portion of the pipeline's capacity will be dedicated to exports from Russia, encouraging the further development of Russian oil fields," said Bindra.

Construction of the CPC pipeline is estimated to cost $2 billion, and the pipeline is expected to be commissioned in 1999.

The principal source of oil that will be transported by the new pipeline will be from the super giant Tengiz oil field. The Tengizchevroil joint venture (TCO), which was established in 1993, is a partnership between Chevron and Kazakhstan. Chevron is a 50 percent owner and operates the Tengiz oil field. "Finalization of the CPC deal will allow TCO to plan for the rapid development of Tengiz in order to maximize production," said Nick Zana, general director of TCO.

Notes to editors:

Current production at Tengizchevroil is 150,000 barrels per day, and the joint venture expects to produce at an even higher rate in 1997. In May of this year, Kazakhstan announced it sold half of its interest in TCO, or 25 percent of the total interest, to Mobil.

Updated: December 1996