1 2 3 4 5 6 7 8 9 10 11 12 13 14

4.4. Areas of Participation of JSC “Transneft” in the International Projects for Development of the Pipeline Transport

Project of the Oil Pipeline “Burgas — Alexandroupolis”

The basis for the development of the project is the Agreement among the Government of the Russian Federation, the Government of the Republic of Bulgaria and the Government of Greece on cooperation in the process of construction and exploitation of the oil pipeline “Burgas — Alexandroupolis” (hereinafter referred to as the “Agreement”), signed on March 15, 2007 in Athens.

The oil pipeline project “Burgas — Alexandroupolis” is aimed at creating a new route which will allow for transporting oil from the ports of the Black Sea to the port of Burgas (Bulgaria) in tankers, and further, via the oil pipeline, to the port of Alexandroupolis (Greece) with further transfer to the tankers and transportation to European and world markets. This will allow the volumes of oil transportation in tankers through the overloaded straits of Bosporus and Dardanelles to be decreased.

The founders of the Russian participant — LLC “Pipeline Consortium “Burgas — Alexandroupolis” are: JSC “Transneft” — 33.34%, JSC “Rosneft” — 33.33%, JSC “Gazprom Neft” — 33.33%.

In December 2011, the Bulgarian party announced its unilateral withdrawal from the Agreement.

On March 13, 2012 the joint meeting of the Shareholders, Supervisory Board and Management Board of Trans-Balkan Pipeline B.V. (hereinafter referred to as “TBP B.V.”) at the initiative of the Russian shareholder adopted a resolution fully complying with the order of the Government of the Russian Federation on the report of the Ministry of Energy of Russia on minimization of the TBP B.V. expenses while maintaining the Company as a legal entity — rightholder of the feasibility study of the Burgas — Alexandroupolis oil pipeline project.

In pursuance of this resolution a set of measures were taken to suspend the TBP B.V. activity and minimize expenses. On August 1, 2012, the employment agreements with all the employees of TBP B.V. in Russia, Greece and Bulgaria were terminated.

Financing of further works under the project was suspended.

Caspian Pipeline Consortium (CPC)

In accordance with Contract No. 1/251/01/07/ dated June 22, 2007 JSC “Transneft” is the trustee of 24% of shares of CPC-R ZAO and CPC-K AO, which are federal property, and in accordance with Contract No. 01-13/530/565/18/09 dated December 9, 2009 it is the trustee of 100% of shares of the companies “CPC Company” and “CPC Investments Company” (holders of 7% of shares of CPC-R ZAO and CPC-K AO).

Oil pipeline “Tengiz-Novorossiysk” of the Caspian Pipeline Consortium (CPC) was created to export Russian and Kazakh oil through the Black Sea port. The length of the CPC pipeline system is 1,510 km. The capacity of the operating CPC system is 28.2 mln tons of oil per year without application of any drag reduction agents.

The shareholders of CPC are: Russian Federation — 31% (24% of shares of CPC-R ZAO and CPC-K AO and 100% of shares of the companies “CPC Company” and “CPC Investments Company”, holding 7% of shares of CPC-R ZAO and CPC-K AO); Republic of Kazakhstan (National Company KazMunayGas JSC — 19% and Kazakhstan Pipeline Ventures LLC — 1.75%) — 20.75%; Chevron Caspian Pipeline Consortium Company — 15%, LUKARCO B.V. — 12.5%, Mobil Caspian Pipeline Company — 7.5%, Rosneft-Shell Caspian Ventures Limited — 7.5%, BG Overseas Holding Limited — 2%, Eni International N.A. N.V. — 2% and Oryx Caspian Pipeline LLC — 1.75%.

On December 15, 2010, the shareholders of CPC adopted the final resolution on investments into the project for increase of the capacity of the oil pipeline “Tengiz-Novorossiysk” and the contract “On Making Amendments to the Shareholders’ Contract of 1996” was signed. Before that, the Government of the Russian Federation issued Order No. 2251-r dated December 13, 2010, concerning its approval.

The project for increase of the CPC capacity will result in the expansion of the capacity in the course of 2011-2015 from the current 28.2 mln tons per year up to 67 mln tons per year (using the drag reduction agents — up to 76 mln tons per year).

Financing of the expansion project will be effected primarily out of the CPC’s own funds, receipt of which is guaranteed by suspension of repayment of loans to the shareholders, stage-by-stage commissioning of the expansion objects and application of the “pump or pay” principle. A contract regarding the “pump or pay” principle was signed by all the shareholders-extracting companies.