LUKoil Eyes Bigger Stake in Pipeline

Itar-TassAn oil pumping station at the Novorossiisk terminal of the CPC, Russia's only foreign-owned oil-export pipeline.
LUKoil is in talks to buy BP's stake in the Caspian Pipeline Consortium, which may clear the way for expanding the link.

The Chevron-led CPC operates Russia's only foreign-owned oil-export pipeline, which carries Kazakh crude to a Black Sea port for shipment overseas. BP was "blocking" a decision to expand the CPC, LUKoil CEO Vagit Alekperov said.

"We have the first right to buy their share," Alekperov told reporters in Caracas, Venezuela, late Wednesday. The CPC "should be expanded," he said, adding, "Compromise is being found."

The venture plans to expand Kazakhstan's main export link to world markets at a cost of at least $1.6 billion, almost doubling capacity to 1.3 million barrels of oil a day.

The proposed CPC expansion "favors oil producers at the expense of midstream investors," Toby Odone, a London-based spokesman at BP, wrote Thursday in an e-mail. BP is interested "in finding a balanced solution and has made proposals to try and resolve these issues. Selling our share is amongst the options."

Ilya Pustogachev, spokesman for the Kazakh state-run energy producer KazMunaiGaz, said Nov. 13 that Kazakh and Russian officials have been exploring options after BP blocked the expansion.

The British energy company holds 46 percent of LUKArco, a joint venture with LUKoil, and 50 percent of Kazakhstan Pipeline Ventures, a venture with KazMunaiGaz.

LUKArco holds 12.5 percent of the CPC and Kazakhstan Pipeline, Ventures owns 1.75 percent of the venture.

Russia is the largest shareholder in the pipeline with a 31 percent stake after it bought out Oman. Kazakhstan holds 19 percent of CPC.

Chevron is the largest corporate owner with 15 percent, while ExxonMobil and a joint venture between Rosneft and Royal Dutch Shell each hold 7.5 percent.

An oil unit of Eni, Italy's largest oil company, and BG Group, Britain's third-largest oil and gas producer, each hold 2 percent of the CPC.

A unit of Anadarko Petroleum, the second-largest independent U.S. oil producer, holds the remaining 1.75 percent of the pipeline, according to the CPC web site.

n LUKoil requested financing to buy a stake in Repsol, according to Miguel Blesa, chairman of Caja Madrid, one of the banks that may fund the deal.

The Madrid-based bank has asked the oil company for more guarantees, Blesa told reporters Thursday in Madrid. LUKoil spokesman Dmitry Dolgov declined to comment.

"The odds of LUKoil being able to arrange financing are fairly high even with oil prices at $50 per barrel," Steven Dashevsky, managing director of equities at UniCredit in Moscow, said in a telephone interview Thursday. "LUKoil remains a very profitable company."