press release

CPC Starts Transportation of Russian Oil

NaftaTrans completed construction of a transshipment facility connected to Kropotkin pump station in Krasnodar Krai, South Russia


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MOSCOW, Russia, Nov. 9, 2004 -- The Caspian Pipeline Consortium has begun receiving oil produced on the Russian territory. ZAO NaftaTrans completed construction of Kavkazskaya transshipment facility in the Kavkazskii district of the Krasnodar Krai in South Russia. The facility consists of a rail receiving and storage facility close to CPC's Kropotkin Pump Station along with a connecting pipe to the pump station. The State Act of Acceptance was signed on October, 31.

NaftaTrans and its affiliates are authorized to ship oil into the CPC on behalf of Russian producers in accordance with the rights of access to the Russian Federation, one of the founding governments of the consortium, as well as act as Inter-connectors for affiliates of other CPC Shareholders such as Rosneft-Shell and LUKArco. These rights are a combination of Preferential Rights and rights to access excess capacity according to a schedule set out in CPC's Foundation Documents.

"The beginning of Russian oil transportation is a milestone event not only for CPC but also for Russia and Russian oil producers," said CPC General Director Ian MacDonald. "It is important for Russia to continue to benefit from CPC not only in terms of financial contributions to the Russian state but also through having this additional export route for Russian oil. Financially, CPC has already paid over $500 million to Russia in taxes, fees and contributions."

"We are happy to provide CPC with a technical facility for transportation of Russian oil," said NaftaTrans General Director Alexander Voloshin. "We have completed the construction on schedule and will do our best to secure uninterrupted oil shipments at the projected level of 6 mln. tons per year."

The first Russian oil shipped through the CPC pipeline belongs to OAO Surgutneftegaz. It is planned that by the end of November NaftaTrans will deliver to CPC about 300 thousand tons of crude oil. CPC expects to start receiving oil produced by its shareholder company Rosneft in Chechnya in December.

In October CPC both transported and shipped to world markets over 2.1 mln. tons of oil, all of which originated in Kazakhstan. On reaching the project capacity of the Kavkazskaya transshipment facility CPC will be able to exceed its full initial throughput capacity, transporting over 30 mln. tons per year.

"The CPC project provides significant benefits to all of its shareholders, including host governments," says Ian MacDonald. "Eighty-five percent of all CPC's expenditures in Russia goes to Russian suppliers and the Russian Government, which is approximately $90 million per year. During construction, CPC provided direct employment for up to 6,000 Russian citizens. Currently CPC employs, either directly or through contractors, some 1,500 operational specialists. The expansion of the pipeline system will bring new major contracts to Russian construction organizations and suppliers."

Currently CPC shareholders are actively discussing the existing grounds for approving the expansion. The increase of CPC throughput capacity to 67 mln. tons per year requires the construction of 10 additional pump stations, additional storage facilities and a third offshore mooring point.

ZAO NaftaTrans was specially created to erect and operate the Kavkazskaya transshipment facility. The company is registered in the Kavkazskii district, Krasnodar Krai.

The multinational ownership interest in CPC is as follows: Russian Federation - 24%, Kazakhstan - 19%, the Sultanate of Oman - 7%, Chevron Caspian Pipeline Consortium Company - 15%, LUKARCO B.V. - 12.5%, Rosneft/Shell Caspian Ventures Limited - 7.5%, Mobil Caspian Pipeline Company - 7.5%, Agip International (N.A.) NV -2%, BG Overseas Holding Limited - 2%, Kazakhstan Pipeline Ventures LLC - 1.75%, and Oryx Caspian Pipeline LLC- 1.75%.

Updated: November 2004