Belarus Unlikely to “Pull” Azerbaijani Oil

Belarus sent commercial offers on oil purchases from these countries to Ukraine, Poland, Kazakhstan, Azerbaijan and the Baltic countries, Belarus First Deputy Prime Minister Dmitry Krutoy said on January 14.

“All commercial services of our refineries, our oil company conduct negotiations almost on a daily basis. I think we will soon receive alternative options for the supply of specific oil," added the First Deputy Prime Minister of Belarus.

It should be noted that since the beginning of 2020, discussions have been going on between the main oil supplier for Belarusian refineries - the Russian Federation - and Belarus on changing tariffs for its transportation and transit.

Belarus believes that the Russian Federation sells it oil at a price higher than the world’s price, while the Russian Federation denies it.

Last week, President of Belarus Alexander Lukashenko signed a decree imposing an environmental tax on the transit of oil and oil products through his territory, citing the fact that in 2019 Belarus suffered from contaminated Russian oil that went to Europe through the Druzhba pipeline via this country.

“In order to form a source of funds for eliminating possible environmental consequences in the event of an accident on the main oil pipeline, or other unforeseen situations related to the movement of oil and oil products through the territory of Belarus, a 50% profit tax rate has been established for organizations engaged in the transportation of oil and oil products from January 2020," the press service of the President of Belarus said.

“In addition, the transit transportation of oil and oil products through pipelines via the territory of Belarus was recognized as an object of environmental taxation,” the press service added.

Sources on the Russian oil market reported that the Belarusian side is seeking to abolish the premium on the price of duty-free oil supplies, citing the rise in the cost of raw materials in connection with the implementation of a tax maneuver in the oil sector in the Russian Federation.

Meanwhile, two Russian companies, Russneft and Neftysa, intended to deliver 650 thousand tons of oil by pipeline and 100 thousand tons of oil by rail to the Belarusian oil refineries Naftan and Mozyr at a price of 83 % of the world oil price from the beginning of the current week and in January.

In all likelihood, the Belarusian side wants to get great preferences from the Russian Federation and therefore turned to other oil-producing countries, both EAEU members and the CIS.

COMMENTS BY AZERBAIJAN

“Representatives of Belarusian refineries met with our traders. The Belarusian side has been notified of our price level and is considering whether our commercial conditions are suitable for them,” an informed source in the State Oil Company of Azerbaijan (SOCAR) told ASTNA / Turan.

According to him, the price reference is the Azeri Light oil price in the world market.

A barrel of Azeri Light is currently being sold for about $ 70.

In 2019, taking into account the fact that world oil was traded cheaper than in 2018, the average price of Azeri Light Azerbaijani oil was $ 66.79 per barrel compared to $ 73.3 per barrel in 2018.

Belarusian refineries can process 18 grades of oil.

A source in SOCAR recalled that technically Azerbaijan had experience in delivering oil to Belarus.

“We had experience delivering oil to the Mozyr Oil Refinery through Ukraine. In 2011, we delivered about 1 million tons to this Belarusian plant, and in 2016 - 80 thousand tons. Logistics has been tested, but I think that everything depends on the economy,” a source in SOCAR noted.

The same point of view is shared by the head of the independent oil research center of Azerbaijan, Ilham Shaban.

“A few years ago there were supplies to the Belarusian refineries from SOCAR Trading. For this, the Odessa-Brody pipeline, which is interfaced with Druzhba, and the railway route were used. But an important point is that Minsk didn’t buy the Azeri Light brand of Azerbaijan at all, but supplies were just delivered by SOCAR Trading,” I. Shaban noted.

In his opinion, it would not be profitable for Belarus to buy Azerbaijani oil, since Azeri Light is quite expensive oil (more expensive than the reference brand Brent).

“In addition, since the end of 2019, the EU has tightened environmental requirements for the sulfur content of oil. Azeri Light has no more than 0.3% sulfur, which makes our brand expensive, and for Belarus it can become more expensive compared to other options. It is possible that Belarus hopes for the assistance of SOCAR Trading in finding raw materials available for the country,” I. Shaban noted.

The main buyers of Azerbaijani oil in Europe are Italian refineries. Periodically, it is taken by refineries in the Czech Republic, Poland, India, China and other countries.