Oil by-passing Ukraine

Mar 12, 2014 12:00 AM

By Victoria Panfilova, Vestnik Kavkaza

Cooperation between Azerbaijan and Russia in the sphere of oil and gas production and transportation from the Azerbaijani sector of the Caspian Sea began in 1994; it continues successfully. Considering the current challenges and existing infrastructure, cooperation in the sphere could be extended under certain political will of interested parties. The situation in Ukraine increases the risks of Russian oil transportation through the territory of the country. According to the chairman of the board of the union of companies “Analysis. Consulting. PR”, Islamil Agakishiev, a part of Russian oil could be reoriented to the Novorossiysk-Baku route and then to Europe through the Baku-Tbilisi-Ceyhan (BTC) pipeline to reduce the risks.

A partner of the consulting company of RusEnergy, Mikhail Krutikhtin, opposes the view and says that the annual capacity of the Mozyr-Uzhgorod pipeline is no more than 35-40 million tons, and less than 8 million tons are transported to Odessa. “It is not only Russian, but also Kazakh oil. The BTC capacity won’t be enough for the additional volume. Moreover, a certain oil refinery plant produces a certain sort of oil, and it could prevent reorientation to the Novorossiysk-Baku pipeline,” Krutikhin told Vestnik Kavkaza.

However, Ismail Agakishiyev sees no problem here. First of all, it could involve not only a part of oil which passes through Ukraine. At the moment, up to 5 million tons of oil is transported through the pipeline to Azerbaijan. Moreover, it will need less spending than construction of a new pipeline similar to the BTC. Volumes of oil transportation through the Novorossiysk-Baku pipeline could be boosted up to 15 million tons and more. Furthermore, of the Novorossiysk-Baku pipeline is used, such a notion as monopoly for Russian oil transportation, i.e. Russian oil companies will be freer in choosing transit rates. Secondly, the BTC will be completely loaded. Its projected capacity is 60 million tons of oil annually.

Doubts of some experts on transportation of less qualitative Russian oil are dispelled by the exonomic expert Ilham Shaban: “It is not a big problem, as Rosneft could transport it from Tikhoretskaya where sulfur share is less than 1.3-1.5%. Considering the fact that about 37 million tons of oil are transported through the BTC at the moment, it doesn’t influence the quality. Rosneft could raise purifying to 1%; it is not a big deal. It is a technical matter.”

However, using of the route through Azerbaijan and refinery of Russian oil at Baku plants began to be discussed in summer by Rosneft and the SOCAR, after Vladimir Putin’s visit to Baku, according to the political scientists, MP of Azerbaijan, Rasim Musabekov. “We can shift to refinery of this sort of oil again. Both sides will benefit from this,” Musabekov believes.

At the same time, Ismail Agakishiyev says that Azerbaijan has to import certain oil products. At the same time, oil refinery plants are being taken away from the city and it is planned to build a major modern plant in the country, in Garadag. Thus, Rosneft and the SOCAR could build the plant together and refine oil together.

Meanwhile, political scientists believe that relations between Kiev and Moscow won’t be broken, including in the transport and communication sphere.

According to Musabekov, “we have a bright example nearby. Russian gas transportation to Armenia through Georgia wasn’t interrupted, despite breaking-up of diplomatic relations between Moscow and Tbilisi. Nobody seized Russian property in Georgia. Therefore, consumers of Russian oil and gas from Central Europe, i.e. Hungary, Slovakia, Austria, Czech Republic, partially Germany, will still get them through Ukraine. The Black Sea countries could get Russian oil from Novorossiysk. But the port is overloaded, and sometimes it has to be closed because of bad weather conditions.”

At the same time, sharpening of relations between Kiev and Moscow made Ukraine remember about Caspian oil and gas. Recently the head of Gazprom Alexei Miller has stated that gas supplies to Ukraine could be stopped due to its debts. But there is no necessary infrastructure in Ukraine for import of oil and gas from the Caucasus region. “We transport small amounts of oil, gasoline and diesel oil to Ukraine. There is no pipelines for gas transportation,” Rasim Musabekov says.

Another obstacle is that Azerbaijani gas volumes are not very great, and all of them are being sold to Georgia and Turkey. “Probably in the future, if Azerbaijan has additional export resources from other promising fields, it could sell gas to the CIS Black Sea market,” Musabekov considers. But anyway the volumes wouldn’t replace Russian Gazprom even partially. According to the political scientist, interests should be combined, rather than dictated and in some extent “Moscow and Baku have learnt how to do this in recent years.”

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