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New Caspian

oil pipeline

group formed

ALMATY: Russia, Kazakhstan and Oman on : Saturday signed a protocol restructuring a consortium to build a major oil export pipeline from Kazakhstan to the Black Sea, bringing in eight oil companies to finance the project.

The reformed Caspian Pipeline Consortium (CPC) is aimed at unblocking a three-year impasse in building a line to export oil from Kazakhstan's giant Tengiz oilfield to world markets.

Kazakh President Nursultan Nazarbayev called the deal a "historic economic agreement", and the project is widely seen as the most important investment in this energy-rich former Soviet republic since independence nearly five years ago.

Under the restructuring, U.S. oil companies Chevron and Mobil -- which are developing the Tengiz field -- get 15 percent and 7.5 percent respectively.

The state-owned Oman Oil Company -- which failed to raise financing for the original project -- sees its share shrink to just seven percent from 50 percent.

Russia has in the past shown scepticism about allowing its southern neighbour to pump crude oil across its territory and compete with its own Siberian production.

"For a long time we didn't agree on redistributing shares in the consortium," said Russian President Boris Yeltsin, attending the signing ceremony on a working stopover on his way back from a three-day trip to China.

But, he added, with the signature of Omani Oil Minister Sultan Makbul, "all questions have been solved".

He declared himself satisfied that shares in the consortium were fair. Russia will own 24 percent, Kazakhstan 19 percent, the Russian oil company LUKoil 12.5 percent and Rosneft 7.5 percent.

Remaining shareholders will be AGIP and British Gas, which have production interests in Kazakhstan, with two percent each.

Kazakh state Munaigaz and Oryx both get 1.75 percent.

Russian deputy oil minister Anatoly Shatalov said the $1.2 billion project would be funded by the corporate partners and Russia and Kazakhstan would have no financial commitments.

The new shareholders have made a firm commitment to start raising financing for the 1,500-km (900-mile) link three days after the signing of the protocol, he added.

Shatalov said the pipeline would be sufficient to carry all of Kazakhstan's oil exports until the year 2015.

The Tengiz oil field, which has reserves of between six and nine billion barrels, is expected to reach peak production early next century of around 700,000 barrels per day.

Chevron owns 50 percent of the Tengizchevroil joint venture, while Mobil and Kazakhstan own a quarter each.

Yeltsin and Nazarbayev also signed a joint declaration calling for the signing of an international convention on the legal status of the resource-rich Caspian Sea.

The newly-independent states of Kazakhstan, Azerbaijan and Turkmenistan want to control their own territorial waters and develop offshore oil and gas resources themselves, while Russia and Iran say the sea should be jointly owned.

But, beyond calling for a consensus agreement among the five Caspian states, the declaration failed to offer a clear compromise solution on resource ownership.-Reuter