“There are no such problems in Kazakhstan, but in Russia…” – the Head of the Caspian pipeline consortium Nicolay Brunich talks about pipes, oil workers and land allotments

In February, the Chief of the Caspian pipeline consortium (CPC), the only non-state pipeline that is laid through Russia, was replaced. The ex-Head of Zarubezhneft, the new Director of CPC, Nicolay Brunich told the Kommersant why terms of the pipeline's extension are always postponed, when the project will reach recoupment and how it is to head a private company after a state one.

• Q. At the end of 2012, you left the position of Zarubezhneft’s Director – the contract wasn’t prolonged. Why?
• A. This decision was made by the country’s leadership. Reshuffles in Top-Management are normal. I had been heading Zarubezhneft for over 5 years – this is rather serious period, including for the showing of my worth. And the company achieved a new level. I am grateful to the people, who participated in the appointment of me as General Director of Zarubezhneft. As for my new appointment as CPC’s General Director, this initiative was from its shareholder Transneft. The consortium’s Board of Directors approved it unanimously. The 4-year contract was concluded with me – until April of 2017. I find this project very interesting and perspective. I hope, positive results will be achieved here too and we will manage to settle all tasks, set by shareholders.
• Q. Why is the CPC extension project delayed?
• A.CPC was created to pump oil, produced in Kazakhstan, through Russia to the port of Novorossiysk and from there to Europe. Today the oil pipeline’s capacity is 32 million tons per year. So long as our shareholders-oil workers have the perspective to increase the production at fields of Kazakhstan, the oil pipeline’s capacity must be increased to 67 million tons.

The extension project has been implemented by CPC from 2010. Since that time we were confronted by some difficulties. The first stage was scheduled to be launched in June of 2012 at first, then in December. But on the strength of  objective, as subjective reasons, the launch was postponed for 2013. To date, we have analyzed the whole linear pipeline portion and acting oil-pumping stations; there are reasons to say that the first stage of works will be completed by September of this year.

The launch of the first stage will allow us to additionally pump 12 million tons of oil per year. Agip (a subsidiary of Eni), which develops the Karachaganak and Kashagan fields, will be the first that will use the additional volumes. The project of the CPC extension will be finally completed in 2015; the throughput capacity will increase to 67 million tons per year.

• Q. Is the project budget determined once and for all?
• A. The budget is formed once and for all and makes up $5.4 billion. To date, $2.5 billion of that have been used. Mainly the funds are spent for the design, long lead time of manufacturing equipment, the construction-and-assembling operations and the project management.

Even taking into account that the construction time was extended, we manage with our own funds. CPC has enough cash flow to invest into the whole financial model of the project extension on account of the proceeds from the oil pumping. Today the tariff is $38 per ton, it was determined in 2007.