Azernews.Az

MOSCOW – Russian oil pipeline monopoly Transneft has offered Azerbaijan to review the intergovernmental agreement on transporting Azerbaijani oil through the Baku-Novorossiysk pipeline, Vedomosti business daily quoted sources at the company and the Russian government as saying.

Transneft is reportedly seeking to reduce by 30-35 percent to 3-3.5 million tons a year the quota for pumping oil via the pipeline, which stretches from the Azerbaijani capital to the Russian Black Sea port of Novorossiysk.

A source close to the Russian monopoly said that according to the 1996 contract, Azerbaijan is to transport 5m tons of oil a year through the pipeline, but is failing to meet its obligations. For instance, the volume of pumped crude was only 2.5m tons in 2009 and 2.2m tons in 2010, though the conduit’s throughput capacity is as much as 7m tons per year, the source said.

Russian oil giant Lukoil, which began producing oil at the Yuri Korchagin field in the Caspian Sea last year, is reportedly looking to use the quotas unused by Azerbaijan. In 2012, the company is expected to bring production to 2.4m tons a year, the volume envisioned under the project. However, Transneft cannot guarantee that additional volumes will be pumped through the Baku-Novorossiysk pipeline, as this right is reserved by Azerbaijan, the source said. Thus, the pipeline is "half-empty" and barely profitable, and Transneft incurs a loss of $50m a year to operate it, Transneft head Nikolai Tokarev said in January.

In order to ensure an acceptable level of profitability, Azerbaijan is to pump 3-3.5m tons a year via Baku-Novorossiysk for a current fee of $15.7 per ton for every 1,000 km, Tokarev said in a letter to Russian Deputy Prime Minister Igor Sechin.

Azerbaijan is ready to reduce the quota for pumped oil, but calls for reducing the fee for transportation by a third - to $10 per ton, one of the sources told Vedomosti. Transneft, on its end, says it can offer a concessional price only for additional volumes of oil exceeding the proposed quota, according to Tokarev’s letter.

Nonetheless, it is possible that Russia will eventually make concessions, an energy ministry official says.

Russia could compensate the loss to be incurred as a result of lowering the fee by increasing the volume of pumped oil by means of other players, such as Lukoil, analyst Andrei Polishchiuk said.