/24-7PressRelease/ - ATLANTA, GA, June 19, 2007 - According to the Atlanta-based Energy Pipeline News newsletter, U.S. oil major Chevron and Russian state-owned oil company Transneft have opened talks on expanding the Caspian Pipeline Consortium (CPC) system.
Expansion of the CPC system is key to the future of the proposed Burgas-Alexandroupolis crude oil pipeline.
Officials of the two oil companies opened talks aimed at boosting CPC's annual capacity to 67 million tons from the current 30 million at a business forum in St. Petersburg, Russia, on June 9.
Chevron wants to expand the capacity, but might have to make important concessions to secure support of Transneft, which was recently given the Russian government's 24 percent stake in the consortium.
Transneft would throw its support behind the expansion plan if Chevron agrees to Russia's demands - lower interest on the loans extended by shareholders to CPC, as well as higher transit fees for the oil pumped through the pipelines.
With Transneft in agreement, Chevron would have no trouble in swinging the vote in favor of the expansion, since it owns 15 percent and the government of Kazakhstan, with 19 percent, traditionally votes in agreement with Transneft.
Combined, the three shareholders hold 58 percent in CPC. That would defeat the opposition led by ExxonMobil, which is against the Russian proposals.
CPC shareholders will meet in Moscow in July to discuss the proposal.
A favorable outcome to the expansion plans would bode well for the future of the Burgas-Alexandroupolis pipeline since it would set the stage for Chevron to buy into Burgas-Alexandroupolis.
Bypassing the congested Bosporus straights, the Burgas-Alexandroupolis pipeline will transport Caspian oil coming in from Russia's oil terminal at Novorossiysk. Russia will have a controlling 51 percent stake in the company, set up through a treaty signed with Bulgaria and Greece in May, while the other two countries would split the rest evenly.
Bulgaria wants to sell its 24.5 percent to Chevron, which has been reluctant to commit itself to the deal until the CPC expansion is a reality.
The 280-kilometer Burgas-Alexandroupolis pipeline, with 166 kilometers passing through Bulgaria, will have an initial annual capacity of 35 million tons, which could be later expanded to 50 million tons. Its cost is estimated at up to US$900 million.
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