CPC shuts down two of three single-point moorings for maintenance, triple reduction of shipments possible

MOSCOW. March 23 (Interfax) - The Caspian Pipeline Consortium (CPC) has shut down two of three single-point moorings (SPM), the company's press service said.

"Diver examination by the MT maintenance contractor OOO Transneft-Service of the SPM equipment at the Marine Terminal near Novorossiysk after a storm revealed damage of sections 9 and 13 of the SPM-2 internal hose," the CPC said.

The CPC said earlier that an extraordinary inspection revealed damage in the form of displacement of the reinforcement carcass of one of the SPM-3 floating hoses. In this context, it was decided to decommission temporarily the above SPM for flushing and repair. Timely detection of the fault prevented the risk of oil spill into the Black Sea.

"The above damage is critical and makes it impossible to ensure safe operation of the device. In this context, CPC is forced to suspend operation of the above SPM," it said.

"Pursuant to the MT operation regulatory documents, CPC has an emergency set for replacement of the damaged hoses. However, contracting of SPM spare parts supply in the current market situation may be rather difficult. So, the Consortium Management has to announce potential triple reduction in the transported oil quantities nominated by the shippers in the nearest future. Repairs may take a considerable time due to adverse weather and wait of tanker nomination for flushing," it said.

Deputy Energy Minister Pavel Sorokin said the repairs could take up to two months. "If the damage is confirmed the amount of time [needed for repairs] could be very serious, it could be one and a half to two months. And, of course, with such a lengthy period of restoration work, we are talking about a potential loss of up to 80% of the shipment, that is, up to a million barrels per day," he said.

CPC chief Nikolai Gorban said earlier that the consortium would not be able to cope with nominations by consignors if the SPM-2 and SPM-3 were shut down at the same time. "We'll be forced to announce a reduction, if this lasts for a quite a long time, even to stop pumping. (...) The reduction will be quite significant - more than half, at least," he said.

Reports have said it would take at least three weeks to repair one SPM provided the weather is good and a tanker is available for flushing. Gorban said the SPM-2 and SPM-2 would be repaired not simultaneously but consecutively, and there is currently no confirmed tanker to facilitate the repairs.

The CPC is the main export route for Kazakh oil, accounting for more than 80% of the volumes pumped through the pipeline. After the completion of an expansion project in 2018, the capacity of the pipeline is 67 million tonnes of fuel per year.

CPC's shareholders are Russia with 31% represented by Transneft with 24% and CPC Company with 7%; Kazakhstan with 20.75% represented by KazMunayGaz with 19% and Kazakhstan Pipeline Ventures LLC with 1.75%; Chevron Caspian Pipeline Consortium Company with 15%; Lukarco B.V. with 12.5%; Mobil Caspian Pipeline Company with 7.5%; Rosneft-Shell Caspian Ventures Limited with 7.5%; BG Overseas Holding Limited with 2%; Eni International N.A. N.V. with 2%; and Oryx Caspian Pipeline LLC with 1.75%.

The CPC oil is exempt from the U.S. ban of March 8 on the import of Russian oil.

The Russian side is doing everything it can to restore oil pumping through CPC pipeline in full, Deputy Prime Minister Alexander Novak said in the State Duma on Wednesday.

"This consortium is managed by foreign investors such as, for example, Chevron, other foreign companies, maintenance is also provided by a foreign company. We are doing everything on our part to ensure the quickest [restoration of pumping], including providing support [to the operator] so that this oil pipeline and the overflow in Novorossiysk is restored," he said.

"Nevertheless, according to experts, it will take some time. As colleagues have said, recovery of operations could take 1.5-2 months. And during this period, of course, this volume of oil may not be supplied to world markets, which may affect the oil markets," Novak said, indicating that the CPC pumps 1.1 million barrels per day.