New agreement on Baku-Novorossiysk oil supplies being drafted

Baku: Azerbaijan and Russia will reconsider the resumption of Azerbaijani oil transportation through the Baku-Novorossiysk northern route pipeline on the basis of good neighborly relations. The Dispatch News Desk (DND) reports.

The contract on the transit of Azerbaijani oil through Russian territory, which had been in effect for 17 years, was revoked in early May. Russian Prime Minister Dmitry Medvedev signed an order to revoke the intergovernmental agreement, which envisaged transportation of 5 million tons a year of Azerbaijani oil via the Baku-Novorossiysk pipeline for a price of $15.67 per ton of oil transit.
The Russian government explained the decision with considerable loss.

Azerbaijan has repeatedly cited the possibility of amending the standing agreement, which would increase the volume of transported oil. Talks on the issue will be continued between Azerbaijan’s state energy company SOCAR and Russian Transneft, Azerbaijani Foreign Minister Elmar Mammadyarov said at a joint press conference with Russian counterpart Sergey Lavrov on May 21. Urging not to politicize the issue, Mammadyarov said that the commercial component of the issue is being resolved.

In turn, Lavrov said the available agreement on oil transportation via the Baku-Novorossiysk pipeline was unprofitable for the Russian operator Transneft due to the insufficient usage of the pipeline’s capacity. Currently, the energy companies of the two countries are drafting a new agreement that complies with the new realities, he said. Meanwhile, SOCAR President Rovnag Abdullayev said that the termination of oil pumping via the Baku-Novorossiysk pipeline will not affect oil production in Azerbaijan, as well as its exports.
He said the oil transportation via the Baku-Novorossiysk pipeline will be continued in accordance with the existing agreement until 2014, adding that the negotiations on the oil transit will go on as well.

Earlier, SOCAR said that Baku will continue the oil transit through the pipeline if it is economically feasible. Otherwise, the supply will be halted. Azerbaijan transports around 2.5 million tons of oil through the pipeline on average. The volume of the Azerbaijani oil transportation via this route was 2.2 million tons in 2010, and 2 million tons each in 2011 and 2012.