BP Agrees To Back Expansion Of CPC

BP said Friday that it would back the long-delayed expansion of the CPC pipeline from Kazakhstan to Russia as early as December if it faces no obstacles in selling its stakes in the venture.

Most of the shareholders of the Chevron-led Caspian Pipeline Consortium, which runs to the major Black Sea port of Novorossiisk, have agreed on the expansion terms demanded by Russia.

BP, the only shareholder that still opposes the terms, has said it was considering selling the stake if no compromise was found. The group's shareholders hope to sign the memorandum on CPC expansion at their meeting Dec. 17.

A BP spokesman said Friday that the company wanted to sell its stakes in CPC to LUKoil and Kazakh KazMunaiGaz but that it needed the sale to be approved by all other private and state shareholders of the consortium.

"BP supports the principles of CPC extension only if it has a clear and unencumbered right to sell its stake to a selected group of companies," said Vladimir Buyanov, BP's spokesman in Moscow.

He added that BP was in talks with LUKoil and KazMunaiGaz to sell its stakes in its joint ventures with the Russian and Kazakh companies LUKArco and Kazakhstan Pipeline Ventures, which are members of the consortium.

BP's stakes in the ventures bring its share in CPC to 6.6 percent.

BP, whose percentage interest in the pipeline was bigger than its percentage interest in the Kazakh fields that feed the route, said it was the least interested in the planned expansion among other CPC shareholders.

"BP supports the principles of CPC extension. However, the terms that were proposed have disadvantages to BP as the only company that has not enough oil to transport," Buyanov said.

Pipeline monopoly Transneft, which holds Russia's 31 percent stake in CPC, had long opposed the plan to double the pipeline's capacity from the current 700,000 barrels per day, but it has now dropped its objections.

Transneft previously argued that the pipeline yielded low returns and that expansion would add pressure on the already congested Turkish Straits shipping route.

In the summer, most of the partners agreed to raise the shipping tariff to $38 per ton from $30.24 last year, and private investors agreed to halve interest rates on a $5 billion loan to CPC to 6 percent, easing concerns over funding.

Transneft, which owns all pipelines on Russian territory except CPC, has said BP was insisting on borrowing more to fund the expansion.

Chevron holds 15 percent in CPC. Its private shareholders also include Royal Dutch Shell, ExxonMobil and Rosneft.