Agreements Signed in Historic Caspian Pipeline Consortium Restructuring

(Washington, D.C.) -- In a much-heralded closing ceremony over which Russia’s Deputy Prime Minister Boris Nemtsov presided, eleven multinational oil companies and three governments signed agreements in Moscow on May 16 restructuring the Caspian Pipeline Consortium (CPC).

CPC had been established in 1992 by the governments of Russia, Kazakstan and Oman to complete a partially-built pipeline from the Tengiz oil field in western Kazakstan through Russia to the Black Sea, but had not been able to secure financing under its previous structure. Under the new arrangements, the oil companies acquired half the equity in a restructured CPC in return for agreeing to finance the $2.2 billion project.

The pipeline is scheduled for completion in 1999, and is one of the largest infrastructure developments with private participation ever undertaken in the former Soviet Union. With upgrades, the pipeline can transport volumes of up to 67 million metric tons of crude per year (about 1.5 million barrels per day), vastly increasing the ability of Russian and Kazakstani oil to reach world markets. The closing required issuance of decrees by Russia’s President Boris Yeltsin and Prime Minister Viktor Chernomyrdin, and by Kazakstan’s President Nursultan Nazarbaev and Prime Minister Akezhan Kazhegeldin, that established and confirmed protections on tax, customs, currency and regulatory matters affecting the venture.

LUKARCO, a joint venture between LUKOIL of Moscow and Atlantic Richfield Company (ARCO) of Los Angeles acquired 12.5% of the equity. Akin, Gump, Strauss, Hauer & Feld, L.L.P. represented LUKOIL.

San Francisco-based Chevron Corporation, whose subsidiary acquired 15% of the equity in the restructured CPC, was represented by Robert James, Robert Spjut and associate Scott Taylor of San Francisco’s Pillsbury, Madison & Sutro, and by Chevron tax counsel Alexander Ashford.

ARCO was represented by corporate counsel Susan Henderson and tax counsel Stephen Gardner. Fairfax, Virginia-based Mobil Corporation (7.5%) was represented by corporate counsel David Riso and tax counsel Robert Goff. Netherlands-based Shell International Exploration and Production, which acquired 7.5% in a joint venture with Rosneft of Moscow, was represented by corporate counsel Joris Backer. Agip SpA of Milan, Italy (2%) was represented by corporate counsel Mario Columbo and Gabriella Porcelli. Reading, UK-based BG plc (formerly British Gas) (2%) was represented by corporate counsel Cyrus Sanai and John Vercoe.

Dallas-based Oryx Energy Company (1.75%) was represented by corporate counsel Patricia Moore, who will relocate to Moscow and serve as the restructured CPC’s first general counsel. The companies were collectively advised by James Varanese, Brian Zimbler and associates Tamara Barnes and Margarita Greene of the Moscow and Almaty, Kazakstan offices of LeBoeuf, Lamb, Greene & MacRae.

The Republic of Kazakstan (with 19% of the equity) and its interest in a joint venture between state oil company Kazakoil and Chicago-based Amoco Corporation (holding another 1.75%) were represented by Mark Wingerson and associate Thomas Abbondante of New York’s Shearman & Sterling. The Sultanate of Oman (7%) and its investment advisor CS First Boston were represented by Jeffrey Smith and Richard Stolbach of Washington, D.C.’s Patton Boggs. The Russian Federation (24%) was represented by counsel from a variety of its ministries, agencies and state oil companies. The existing CPC, owned by the three governments, was advised by David Slade and associate Ernest Chung of the New York office of Allen & Overy.

Founded in 1945, Akin, Gump, Strauss, Hauer & Feld, L.L.P., a leading international law firm, numbers 625 lawyers with offices in Washington, Dallas, Austin, San Antonio, Houston, New York, Philadelphia, Brussels, Moscow and London. The firm has a diversified practice and represents regional, national and international clients in a wide range of areas, including antitrust; banking and financial institutions; bankruptcy, reorganization and creditors’ rights; capital markets; communications; corporate and securities; employee benefits; energy; environmental; food and drug; government contracts; health care; insurance; intellectual property; international; labor and employment; litigation; privatization; project finance; public law and policy; real estate; and taxation.