Azerbaijan wants Baku-Novorossiysk pipeline to keep functioning

Dec 04, 2006 01:00 AM

Azerbaijan is interested in the continued operation of the Russia-controlled Baku-Novorossiysk oil pipeline, and will not reduce its own oil transit tariffs, the country's prime minister said. Earlier, Azerbaijan's president said the energy-rich republic was considering reducing its oil exports via the pipeline to Russia due to higher prices for Russian natural gas.
"We are interested in this oil pipeline's functioning, but bear in mind that it is five times more expensive today than oil shipments to Supsa on the Black Sea. We will keep this tariff and will not lower it," Prime Minister Artur Rasizade told.

Rasizade said following talks with his Russian counterpart Mikhail Fradkov that Azerbaijan is ready to resume talks on Russian gas deliveries in 2007. Since last year, Russian energy giant Gazprom has been pushing for European prices for the gas it sells to its ex-Soviet neighbours, which previously enjoyed preferential rates. The Azerbaijani president said December 1 that 4-5 bn cm of gas is produced in the republic, whose gas demand is 10-11 bn cm annually.
"That is why, we are considering Russia's proposal [on raising the price of natural gas supplied to Azerbaijan to $ 230 per 1,000 cm]. But it is obvious that $ 230 per 1,000 cm is a very high price," Ilham Aliyev said.

Azerbaijan has been receiving Russian natural gas at a price of $ 110 per 1,000 cm this year. Azerbaijan has no other way to ensure its electricity security but to reduce the volume of oil exported via the Baku-Novorossiysk pipeline to Russia, Aliyev said then.
"If we fail to receive gas from Russia, we will have to produce electricity from fuel oil, and fuel oil can be obtained from oil refining," Aliyev said.

Gazprom has said it will reduce gas exports to Azerbaijan in 2007 by 66.7 %, to 1.5 bn cm, against 4.5 bn this year.
"Gazprom intends to reduce next year the volume of natural gas deliveries to Azerbaijan to 1.5 bn cm," Sergei Kupriyanov, a spokesman for Gazprom, said in November. "This volume will fully meet Azerbaijan's demand for imported natural gas, taking into account the price increase for Russian natural gas imports and the natural gas production increase in Azerbaijan," he said.

Azerbaijan has been in talks on deliveries of natural gas to Georgia, which rejected purchases of Russian gas due to the price increase.
"Azerbaijan is preparing to export its own natural gas," Kupriyanov said. "We are not against competition, but it is not expedient for Gazprom to support it [the competition] at the expense of its own resources." According to agreements between Georgia and Gazprom, the gas price in 2006 was $ 110 per 1,000 cm. Gazprom recently suggested that Georgia pay $ 230 per 1,000 cm of Russian natural gas as of 2007.

The Georgian leader said the price hike for Russian natural gas was politically motivated and that the move amounts to an economic blockade of Georgia, which now buys all of its gas from Gazprom.
A Georgian energy official said November 2 that his country is in talks with a consortium that is developing a gas field in Azerbaijan to ensure alternative gas deliveries, and that buying gas from Iran and Azerbaijan is being considered.

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