BP holding back Caspian pipeline expansion

By Amie Ferris-Rotman and Maria Kiselyova

MOSCOW (Reuters) - The head of Russian pipeline monopoly Transneft (TRNF_p.RTS: Quote, Profile, Research, Stock Buzz) said oil major BP (BP.L: Quote, Profile, Research, Stock Buzz) is against expanding the Caspian pipeline until more funding is secured.

Led by U.S. oil major Chevron (CVX.N: Quote, Profile, Research, Stock Buzz), the Caspian Pipeline Consortium (CPC), in which Russia, Kazakhstan, BP and others have stakes, resolved a protracted struggle in the summer over expansion of the pipeline, which pumps Kazakh crude to Russia.

"We all decided, we all agreed (to expand the pipeline) and then suddenly BP says 'I don't agree. I think we need to get more money'", Transneft President Nikolai Tokarev said in an interview on Wednesday at the Reuters Russia Investment Summit.

Over the summer the partners in CPC finally agreed to double the capacity of the pipeline to 60 million tons per year (1.2 million barrels per day), following months of delays over funding issues.

CPC has been shipping oil since 2001 and pumps up to 750,000 barrels per day from Kazakh oilfields to Novorossiisk, Russia's largest Black Sea port, for re-export to the Mediterranean.

Russia had initially rejected expansion, saying it would put additional pressure on the congested Turkish straits. Debt redemption schedules and interest were also the key disagreement points between Russia and Western partners.

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 the $5 billion loan to CPC to 6 percent, easing worries over funding.

"BP's position is the only thing putting the brakes on this," Tokarev said at the event, held at the Reuters office in Moscow.

He also said BP is insisting on taking out more loans to finance expansion.

A BP spokesman in Moscow said he was not ready to comment immediately.

Russia has a 24 percent stake in the consortium as a host state, while Kazakhstan owns 19 percent. Both have expressed an interest in buying Middle East state Oman's 7 percent stake.

The Gulf Arab state said last month it wanted to sell out as it had become frustrated with other consortium members as the expansion struggle dragged on.

"We are most definitely interested in buying Oman's stake. Whether Oman will sell or not is not known, but we've spent the last couple of months in active talks with them," Tokarev said.

Besides BP, private sector shareholders include Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz), ExxonMobil (XOM.N: Quote, Profile, Research, Stock Buzz), LUKOIL (LKOH.MM: Quote, Profile, Research, Stock Buzz), Rosneft (ROSN.MM: Quote, Profile, Research, Stock Buzz) and Chevron, which holds 15 percent.

"But there's hope. Our American partners support it, as do the Kazakhs and our Russian partners. As a collective we hope to change BP's mind," Tokarev said.  Continued...