Moscow and Baku are discussing expanding reverse supplies via the oil pipeline through Tikhoretsk

Moscow and Baku are discussing the option of delivering about 4 million tons of Russian oil in reverse to Azerbaijan via the oil pipeline through Tikhoretsk, which is currently underutilized. This option is beneficial for Azerbaijan, which will be able to profitably export its oil by processing Russian oil. For Russia itself, it is not so obviously attractive, since it drains the ports of Makhachkala and Novorossiysk, which will lead to a significant loss of revenue. The market considers the option of laying a pipe through Iran to India to be more effective.

Russia proposed to Azerbaijan to expand the Tikhoretsk-Baku oil pipeline for reverse supplies. This question, as reported by the government press service, Deputy Prime Minister Alexander Novak discussed with the Minister of Energy of Azerbaijan Parviz Shahbazov.

As the Russian official clarified, the volume of pumping along this route could amount to 4 million tons of oil per year. According to him, Baku has not yet made a decision and is studying the details.

A similar idea was discussed ten years ago. Thus, in 2014, the Azerbaijani SOCAR negotiated with the operator of the Russian pipeline system Transneft on the supply of about 5 million tons of oil along the Samara-Tikhoretsk-Baku route with possible further shipment to the Baku-Tbilisi-Ceyhan oil pipeline to Turkey. Azerbaijan could also send Russian oil for processing at its refineries amid a decline in national production. Baku’s initiative, Kommersant’s market sources say, was supported at that time by Rosneft, which was interested in swap supplies of raw materials with Azerbaijan. According to the plan, oil from the Russian Federation could be supplied to the republic and exchanged for Azerbaijani oil already in Ceyhan on the Mediterranean Sea.

Initially, the oil pipeline from Baku through Novorossiysk, with a capacity of about 7 million tons, pumped raw materials from Azerbaijan, Kazakhstan and Turkmenistan through Russian territory. But in recent years, its load has not exceeded 3 million tons (of which 2 million tons are Kazakh oil). Last year, Kazakhstan was going to double its supplies.

Now, Kommersant sources familiar with the situation note, turning the oil pipeline in reverse is beneficial to a much greater extent for Baku, while Russia will lose part of the cargo turnover in the port of Novorossiysk.

Previously, Transneft estimated the reduction in tariff revenue from changing the direction of supplies through it at more than 1 billion rubles. According to the company, Novorossiysk would also have lost 1.8 billion rubles. revenue from transshipment of additional volumes of oil, the port of Makhachkala – almost 2 billion rubles. In addition, reorienting volumes would require more than 6 billion rubles. for technical reconstruction of the pipeline. Transneft and the office of Deputy Prime Minister Alexander Novak did not comment on the situation.

Kommersant’s sources explain that at the moment Azerbaijan is interested in receiving Russian oil for processing at its own refineries, while the country could export its raw materials through Turkey.

According to Kommersant’s interlocutors, for Russia this option of reversing oil flows makes sense only if the pipeline from Baku to Iran is extended, where there is a route to the Indian Ocean, which will allow the supply of raw materials to India and neighboring states, bypassing Turkey. At the same time, in order for construction to be cost-effective, the volume of supplies in this direction must be at least 50 million tons, Kommersant’s interlocutors say. But this option is unlikely to find support from Azerbaijan and will meet resistance from Istanbul, which is counting on additional volumes of transshipment through its territory after the completion of the canal. At the same time, President Vladimir Putin announced the relevance of the pipeline supply project through Baku and Iran the day before. According to him, events in the Middle East are forcing market players to think about diversifying supplies.

Igor Yushkov, an expert at the Financial University under the Government of the Russian Federation, notes that at the moment the reverse option to Baku does not seem necessary for Russia, which already successfully exports its raw materials. And it will be profitable for Azerbaijan to process inexpensive Russian oil at its refineries and sell its own oil on the world market at high prices, as well as the produced oil products. The expert also notes that if the project is implemented, it will create significant problems for the port of Makhachkala, which currently receives oil from the Caspian Sea, including about 2.5 million tons of heavy oil from Kazakhstan, which Baku is unlikely to agree to accept at its refineries. Thus, the question arises of where to redirect it, says Mr. Yushkov. At the same time, with a significant decrease in transshipment through the Makhachkala port, its planned privatization becomes virtually impossible, notes one of Kommersant’s sources. But the option of laying an oil pipeline through Iran seems to him to be practically unrealistic at the moment, given its length and political situation.

Olga Mordyushenko