BAKU

Azerbaijan is ready to fulfil its obligations to transit the volumes of oil agreed with Russia’s oil pipeline operator Transneft through the Baku-Novorossiisk pipeline, despite the fears of shipowners over the safety of entering this Russian port.

“Oil shipments from Novorossiisk are still on schedule. In February, two tankers left Novorossiisk with our oil – 80,000 tonnes of oil each, and one shipment of 80,000 tonnes is scheduled for March,” a source at Azerbaijan’s state energy firm SOCAR, told the Tribune.

In January, 80,000 tonnes of Azeri oil had been exported from Novorossiisk to the world market.

Last year, SOCAR said it planned to transport 1.209 million tonnes of oil via Russia in 2022, up from 1.09 million tonnes that was expected to be shipped in 2021.

The source said that SOCAR had filed an application for the transportation of 340,000 tonnes of oil through the Baku-Novorossiisk pipeline for the second quarter of 2022.

“Some changes in our obligations for the transit of oil through the Russian Federation can occur only in the event of force majeure, and there are currently none,” he said.

Azerbaijan pumps oil through a 1,330-km pipeline from the capital Baku to Novorossiisk, a port on Russia’s Black Sea coast, a route it has used since 1997. It also exports oil via Georgia and Turkey through the Baku-Tbilisi-Ceyhan (BTC) pipeline and via Georgia by rail and through the Baku-Supsa pipeline.

Some experts say that Azerbaijan is interested in transferring part of its oil exports from Baku-Novorossiisk to the BTC pipeline, which has free capacities as the country will suffer financially from the reduction in purchases of the Urals blend by oil refineries.

SOCAR stopped supplies to Novorossiisk in March 2019, citing planned maintenance on the Baku-Novorossiisk pipeline, although experts were citing disagreements between sides on shipment volumes and prices. The company diverted crude flows to the BTC pipeline after the suspension of transit via Russia. Shipments resumed in July 2020 and the total transit of oil from Azerbaijan via Russia amounted to 613,029 tonnes in 2020.

Shipments were suspended again in January 2021, but SOCAR signed a contract with Transneft to transport more than one million tonnes of oil through the Baku-Novorossiisk pipeline in 2021.

“The existence of the Declaration on Allied Cooperation, the current delicate political situation, confirmation of obligations to Transneft will not allow SOCAR to redirect oil flows now, although the company will lose from the cheaper Urals blend,” one of energy analysts said.

Azeri Light, which is exported to the world markets through the BTC, was traded at CIF Augusta with a premium to Brent of +$2.85 per barrel, while Russian Ural blend fell to its record low last week. In addition, many refineries in Europe and Asia refuse to buy Urals or taking it at a big discount, and many shipowners say they are not sure whether they will call at Russian ports amid international sanctions against Russia.

But SOCAR has not been deterred by fears yet.

“Even if Azerbaijani oil goes to the world market in the form of Urals, its origin is Azerbaijan … and it will not be subject to sanctions,” a SOCAR source said.