A consortium of three Chinese companies has secured a major contract to provide engineering, procurement, construction, and project financing services for building two pipelines. These pipelines will transport associated gas from Kazakhstan's Chevron-led Tengiz oilfield, the country's largest, to downstream processing facilities.

Project Background and Scope

The contract, awarded by the state-run KMG Petrochem, is part of the planned associated gas processing facility at the Tengiz project. This follows a major upgrade at the oilfield that increased oil and gas production by one third, leading to an expected rise in associated gas output. The project involves constructing two pipelines to carry liquefied ethane and propane from the Tengiz gas separation complex (GSK) to gas-to-polymer plants located approximately 200 kilometers away near Atyrau. The GSK itself is scheduled for commissioning by 2029 and will have the capacity to handle up to 9.1 billion cubic meters of gas per year from the Tengiz field.

Contract Award and Value

China Petroleum Pipeline Engineering (CPP) was the winning bidder in the EPC tender, surpassing three other contenders. According to industry sources, CPP's initial offer was $458 million, which was subsequently reduced to $425 million following price optimization negotiations.

Pipeline Specifications and Destinations

The project entails the construction of two distinct pipelines. The first is a 16-inch diameter pipeline designed to transport about 1.6 million tonnes per annum of liquefied ethane from the GSK to a $7.4 billion polyethylene plant. This plant has been under construction since September of the previous year and is operated by a consortium comprising KMG Petrochem, China’s Sinopec, and Russia’s Sibur. The second pipeline, with a 12-inch diameter, will carry up to 360,000 tonnes per annum of liquefied propane from the GSK to a separate propylene production facility that commenced operations in November 2022. Additionally, this second pipeline will enable Tengizchevroil to transport up to 630,000 tonnes per annum of its own liquefied propane to Atyrau.

Consortium Partners and Financing

The contract award involves a partnership between CPP and CPPE Kazakhstan, a Kazakh subsidiary of China National Petroleum Corporation. A third partner, Citic Construction, is responsible for arranging external financing from China to fund the EPC work, a requirement set by KMG Petrochem for the award. Citic Construction typically provides its own financing and collaborates with other financial institutions, such as China’s Eximbank and other Citic Group financial arms, for large-scale projects. Furthermore, KMG Petrochem has stated it expects to sign a financing agreement with the state-run China Development Bank to bankroll the construction.

Construction and Sourcing

It is understood that CPP will utilize a combination of local Kazakh companies and Chinese subcontractors to build the pipelines. The pipe required for the project is expected to be sourced from China.

This material is an AI-assisted summary based on publicly available sources and may contain inaccuracies. For the original and full details, please refer to the source link. Based on materials by Vladimir Afanasiev. All rights to the original text and images remain with their respective rights holders.