- The Washington Times - Tuesday, August 21, 2001

TENGIZ, Kazakhstan — Sometime in the next few weeks, a tanker will set out into the Black Sea loaded with oil from Kazakhstan's massive Tengiz field, marking a commercial triumph for the U.S.-led consortium that runs it.
The oil will be the first to reach markets through a recently completed $2.6 billion Caspian Pipeline Consortium (CPC) pipeline that links the Tengiz field on the northeastern shore of the Caspian Sea to a Russian Black Sea port near the city of Novorossisk.
That's good news for the 15 million residents of this Central Asian nation and the government of President Nursultan Nazarbayev. It is also good news for Russia, which has been locked in a race with its neighbors, including Iran, to offer the first viable route for marketing the Kazakh oil.
"Tengiz" means "sea" in Kazakh, but for the consortium that runs the field — led by Chevron Corp. — the oil field's Caspian Sea location was tragically flawed because it offered no access to the open oceans.
Overcoming the unusual challenges posed by geography and geology at Tengiz, the world's sixth-largest oil field, has been a mainstay of activity for the consortium, called Tengizchevroil or TCO.
When TCO was formed to take over the oil field in 1993, there were 90 wells, of which only 15 were working. At 25,000 barrels a day, total production was only 10 percent of today's production. All was exported by pipeline to Samara, Russia.
Chevron owns half of TCO and operates it, while ExxonMobil Corp. has 25 percent. The national Kazakhstani oil company, Kazakhoil, has 20 percent, and Russia's LukArco has 5 percent.
While Chevron executives negotiated with Russia to run a pipeline around the top of the Caspian Sea and across the North Caucasus to the Black Sea, a distance of about 950 miles, they pondered what to do with Tengiz's steadily expanding production, which soon exceeded the capacity of the Samara pipeline used in Soviet days.
"Someone suggested trains," recalled plant superintendent Keith Coleman.
"At first everyone thought it was a crazy idea — it had never been done on such a scale anywhere. But in the end, it worked for us."
So to export two-thirds of its production, TCO leased 7,000 oil cars and 3,000 LNG cars, sending out a half-dozen trains a day toward four Russian ports on the Black Sea. It remains the world's largest rail-based oil-transport system, carrying 80 percent of Tengiz's oil production.
Russia eventually gave its agreement and construction began on the CPC pipeline. Last spring, after obtaining permission from five regional governments, CPC started moving the oil westward.
There were difficulties and delays, notably when the oil had to cross the Russian border. A ceremony was set for Aug. 6, with Russian President Vladimir Putin and Kazakhstan's Mr. Nazarbayev in attendance.
The ceremony was scheduled to coincide with the loading of the first tanker carrying Tengiz crude, but when that event seemed unlikely to take place before September and disputes among the 11 owners of CPC failed to be resolved in time, the event was indefinitely postponed.
Extracting a barrel of Tengiz oil costs about $3, and the cost of transporting it to the Black Sea has been $6; it will drop to $3 when the switch is made from trains to the CPC.
"Chevron deserves a pat on the back for bringing the project where it is today," said Robert Ebel, director of energy and national security studies at the Center for International and Strategic Studies in Washington.
"When they went in, there was clearly a lot of risk involved — political, technical and mostly how they were going to get that pipeline built.
"But their real success will come only when they reach peak production," he said.
"Tengiz is still in its infancy," said Tom Winterton, director of TCO. "We believe that 700,000 barrels a day at the end of this decade is not unrealistic."
Tengiz also has to deal with another product — sulfur, a byproduct of Tengiz's kind of oil.
There are 4.5 million tons of canary-yellow sulfur at Tengiz, spread out on football-field-sized cakes 25 feet thick.
In addition, every day an additional 4,500 tons of liquid sulfur are sprayed with agricultural watering equipment onto the slabs, solidifying rapidly into a luminous, porous material that, mercifully, has little sulfur smell.
It has accumulated in such quantities because the cost of getting it to market is more than what people will pay for it: Sulfur is a commodity used as fertilizer, but in the chemical industry today, it is in abundant supply.
Mr. Winterton said he is building a $40 million plant that, starting in 18 months, will turn the yellow slabs into coated pellets, eliminating the sulfur dust that irritates the eyes of people living downwind from Tengiz.
The market for pellets, though weak, is stronger than the market for crushed sulfur, he said, but he said it will still need to rise in order to overtake the cost of transporting it by rail and ship.
"We plan to sell to the Mediterranean markets, but we don't expect it to generate a tremendous amount of profit," he said. "We'll have to see what the market allows us to do."
Tengiz, discovered in 1979, is an unusually challenging oil field. Not only is it huge, but the oil comes out scalding hot at a pressure of 12,500 pounds per square inch, one of the highest in the world.
It is the deepest giant field in the world, and its oil contains a large proportion of gas — rich in hydrogen sulfide.
The sulfide not only yields considerable amounts of sulfur, but is also extremely poisonous.

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