Azernews.Az

By Gulgiz Dadashova

Azerbaijan's energy company SOCAR and Transneft, the operator of the Baku-Novorossiysk pipeline's Russian section, have started commercial talks on oil transportation through the territory of Russia after the termination of the intergovernmental agreement.

The contract on the transit of Azerbaijani oil through Russian territory, which had been in effect for 17 years, was revoked in early May.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.

Transneft spokesman Igor Demin told Itar Tass that after a three-year break, the negotiations run successfully.

According to him, the issue of the transit oil quality has not been raised during the negotiations, but, obviously, it is impossible to speak about maintaining the quality of Azeri Light oil because of the small volume of transportation.

"This oil can be transported partly to maintain the quality, but it will greatly increase the cost of transportation," Demin said.

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.

Azerbaijan has repeatedly cited the possibility of amending the standing agreement, which would increase the volume of transported oil.

Azerbaijan incurred loss during the transportation of oil through Russia because Azeri Light oil is exported from Novorossiysk under the URALS brand.

Urals -- a mix of heavy and high-grade oil of the Urals with light oil of western Siberia supplied through the Baku-Novorossiysk pipeline and the Druzhba pipeline system -- is traded on world exchanges at a price lower by $4 per barrel than the Azerbaijani crude.

Earlier, SOCAR said that Baku will continue the oil transit through the pipeline if it is economically feasible. Otherwise, the supply will be halted.