Transneft and SOCAR started talks concerning oil transportation through Russia

Russian Transneft and State Oil Company of Azerbaijan (SOCAR) have started discussion of transportation of Azerbaijani oil through Russia.

Igor Demin, representative of the Russian pipeline monopoly Transneft, said that after three-year-long break SOCAR and Transneft resumed the commercial talks on transportation of oil through Russia.

“The issue of quality of transit oil has not been brought up at the talks, but the volume of Azerbaijani light oil transportation is small to maintain its quality. Oil could be transported in batches to maintain quality, but this will lead to increase in the transportation costs,” Demin said.

The intergovernmental agreement on the Azerbaijani oil transportation through Russia (Baku-Novorossiysk pipeline) was signed on January 18, 1996. According to the agreement, if none of the sides is opposed to the agreement, the document will automatically enter into force next year. However, on May 5, 2013 Russian Premier Dmitrii Medvedev signed the resolution to terminate the agreement on January 1 2014. The document was published in press on May 14, 2013. This means if the sides fail to find an agreement till the end of the year, then pumping of Azerbaijani oil via the Baku-Novorossiysk pipeline will be suspended.

However, if this happens, Azerbaijani production companies will not suffer losses.

Azerbaijan exported 2 million tons of oil to Russia a year, of which about half belonged to itself and another half to the companies extracting oil onshore Azerbaijan. If SOCAR refines the volume of oil exported via the Baku-Novorossiysk pipeline, its incomes will more than double. The companies will be able to deliver their oil to the Georgian ports and offer the clients higher quality oil, than Russian Urals. Therefore, they will cover their railway transportation losses.—0—