OMAN - The Caspian Pipeline.

Deuss lost the presidency of OOC partly because of a long dispute with Chevron (now part of ChevronTexaco) of the US over the role he played in the Caspian Pipeline Consortium (CPC). Deuss wanted to dominate the venture but could not provide the funding needed. Eventually, OOC's equity in CPC was reduced to 7%.

This is a $2.3 billion venture between the governments of Oman, Russia and Kazakhstan and several companies led by ChevronTexaco. It involves a 1,510 km crude oil pipeline from the Chevron-operated Tenghiz oilfield in Kazakhstan running along the northern coast of the Caspian Sea, across Russian territory, to a terminal on the Black Sea just north of Novorossysk's existing Russian oil terminal. The first phase of the pipeline, with a capacity of 560,000 b/d, began operating in October 2001 after many delays.

First loading at the terminal began in November 2001. The start up was delayed from the previous schedule of June because of disputes over a quality bank needed to compensate producers of better-quality crude oil for degradation of their grade by blending with inferior crudes.

As a result, according to Petroleum Argus of Dec. 24, 2001, only the Chevron-led Tenghizchevroil group signed up to use the CPC pipeline. But Argus said other oil producers in Kazakhstan were expected to follow, including Hurricane Hydrocarbons of Canada which has become the third-largest oil producer in Kazakhstan.

The pipeline has enabled oil producers in Kazakhstan to raise their output to more than 800,000 b/d. Kazakhstan in 2002 will also export 110 million barrels of crude oil through Russia, under an agreement between the two governments signed in December.

Now the transportation tariffs for the whole CPC system, which the firm's shareholders pay under an agreement announced in December 2001, is $3.33 per barrel. This is approximately half the charge paid by Kazakh oil producers for shipping their output to export destinations through the old Atyrau-Samara pipeline, which also passes through Russia.

The CPC project started with an energy co-operation agreement between the governments of Oman and Kazakhstan on Juney17, 1992, which envisaged a pipeline to carry Kazakh crude oil to world markets. OOC, under Deuss, then conceived the pipeline idea and called it CPC.

Eventually, CPC was registered and based in Bermuda. But the project was delayed by complex intrigues and the dispute between Chevron and Deuss. The US major, upset by Deuss' attitude, insisted that he and OOC get out of the venture as a precondition to its participation.

Finally, as Deuss lost favour in Muscat, the government of Oman lowered its stake in CPC to 7% at the request of the main partners. Now US and other Western companies are the key partners in CPC. The pipeline's capacity will be increased gradually to reach 1.5 million b/d by 2014. Russia and Kazakhstan have guaranteed the volume of crude oil required for the current phase.

The current phase of the CPC system has involved improving Russia's pipeline facililty and infrastructure at the terminal on the Black Sea, and laying a 250 km pipeline of 1,020ymm diameter from Kropotkin, 50 km south of the Russian city of Tikhoretsk, to the new terminal on the Black Sea just north of Novorossyisk.

A spur line from the Karachaganak gas and condensate field is being built to carry the liquids to the Black Sea terminal, as part of the CPC system.