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Rovnag Abdullayev: â€˜Transit transportation of Azeri oil through the Russian territory under present-day conditions will continue by the year-endâ€™ - UPDATED

15 May 2013 13:06 (UTC +04:00)

In parallel, there will be conducted negotiations by the year-end on implementation of commercial terms of transportation through the territory of Russia. If an agreement is reached between the sides, starting from 2014, the transportation of Azerbaijani oil through the territory of Russia will be continued on the basis of commercial terms, said President of SOCAR Rovnag Abdullayev, APA-Economics reports.

Note that, up to this day, Azeri oil used to be transported through Russian territory on the basis of the agreement, signed between the two countries on January 18, 1996. According to that agreement, transportation of 1 tonne oil cost $15.57/ a barrel - $2.4.

Abdullayev added that termination of the agreement by Russian side wasn’t unexpected for Azerbaijan: ‘The talks on this issue are continued for several years’.

At one time, commissioning of this pipeline allowed transportation of first oil of Azerbaijan. But over the past period, transit opportunities of Azerbaijan have increased: ‘At present, Azeri oil can be transported via Baku-Ceyhan, Baku-Supsa pipelines, as well as by railroad. Consequently, approximately 2.5 mln tonnes of oil was transported by Baku-Novorossiysk pipeline during the recent years. During the discussions, Transneft told the Azerbaijani side that, such volume of oil transportation by this pipeline leads to a loss of $50 mln per year.

Abdullayev said Azerbaijan had received the arguments of Transneft: ‘We also know that many things have changed since 1996 and the tariffs of the pipeline do not pay their spendings. They also face great losses’. Moreover, Azerbaijani side declared that as the transportation is regulated in accordance with the intergovernmental agreement, Azerbaijan can not do extra payments here: ‘Even it has not a right to add additional 1-2 cents or compensate the losses’. So, the Russian side terminated the agreement 6 months beforehand by warning.

‘It is an economic decision and there is not any political factor here’, noted Abdullayev.

He said that termination of the agreement would not create problem for transportation of Azeri oil to world markets: ‘We consider Baku-Novorossiysk pipeline as one of the diversification opportunities in the transportation and transportation of oil by this pipeline had the character of diversification’.

He noted that at present time, Azerbaijan has enough opportunities to transport oil by other pipelines: ‘Baku-Ceyhan works with 70-80% capacity, Baku-Supsa with 805. Besides, we can transport oil by railroad, too’.

Abdullayev mentioned that transportation tariffs basing on commercial terms of oil can be higher than the existing. However, everything will depend on the talks. That is, Azerbaijani side intends to raise some issues at the negotiations, including the issue on quality bank. The fact is that, in line with Azerbaijani oil, Urals and Kazakh oil are also transported by Baku-Novorossiysk pipeline. As the types of oil mix during the transportation process, Azeri oil is sold under Urals brand, which is cheaper and less qualitative. And it causes loss of Azerbaijani side: ‘We thank Transneft company for long-term cooperation and intend to cooperate in future, too’.

Note that, Russian government passed a decision on termination of the agreement, signed with Azerbaijan on January 18, 1996, on the transit of Azerbaijani oil through Russia. The decision was signed by Russia’s Prime Minister Dmitry Medvedev on May 5 and published yesterday.

Besides, the Ministry of Foreign Affairs of Russia has been tasked to inform the Azerbaijani side in this regard.

Remind that, Azerbaijani oil was transported via the Baku-Novorossiysk pipeline.

Representative of Russia’s Transneft company Igor Dyomin said that, in the past 5 years official Baku did not fulfill terms of the intergovernmental agreement, signed between Russia and Azerbaijan, on Transit of Azerbaijani oil through Russian territory and transported oil 2 times less than the number considered in the document.

To him, according to terms of the agreement, though Azerbaijan should transport 5 mln tonnes of oil per year, in fact the country transported 2 mln tonnes: ‘The incomes from transit did not meet the expenses for maintenance of Transneft oil pipeline in a required technological situation. At the same time, Transneft could not change the parameters of tariffs, considered in the agreement. Because the tariff parameters were determined under the intergovernmental agreement. From next year, Transneft company will transport Azerbaijani oil on the basis of commercial contract.