The Caspian Pipeline Consortium (“CPC”) – led by U.S. energy behemoth Chevron Corp. (CVX - Analyst Report) – has approved a multibillion-dollar investment to double the capacity of the Caspian pipeline, which carries crude oil from Western Kazakhstan to a dedicated terminal in the Black Sea.
The consortium plans to spend $5.4 billion to boost the 900 mile (1500 kilometer) pipeline’s throughput to 1.4 million barrels per day from the current capacity of 730,000 barrels per day. Apart from Chevron, CPC’s main shareholders are Russian government-owned oil pipeline monopoly Transneft and Kazakhstan’s state-run KazMunaiGaz.
Following the implementation of the project – in three phases between 2012 and 2015 – the expanded pipeline will help the group take advantage of the Tengiz development in Kazakhstan (one of the world's largest oil fields with estimated recoverable reserves of 6 billion to 9 billion barrels) and also transport oil from other Kazakh and Russian fields.
The project, which will consist of the refurbishment of the pipeline’s five existing pump stations with the addition of ten more, the replacement of a 55-mile (88 kilometer) section of the line, as well as put in six new storage tanks and a third offshore mooring point at the Black Sea terminal – is currently in the final stages of contract negotiations with awards expected early next year.
San Ramon, California-based Chevron is the second-largest U.S. oil company by market value after ExxonMobil Corp. (XOM - Analyst Report). It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals and other energy-related businesses.
Chevron shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term 'Neutral' recommendation on the stock.