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«Light» import
JSC «UES Russia» ready to supply electric power to Azerbaijan
Azerbaijan proceeds with looking for the opportunities of increasing oil supply through the Baku-Novorossiysk in 2002. As it became known, the government has begun considering the options of electric power purchase from the RAO «UES» with simultaneous suspending the operation of local power energy stations working on mazut, and the transfer thereof to the gas mode.
Mazut limit
«Russia’s proposals on the power energy supply to Azerbaijan are very interesting matters worth of being considered by us», the governmental top executive said. He also noted, that Russia is working with Azerbaijan today on the parallel system of power energy exchange. This system envisages the supply by Azerbaijan to Dagestan of certain volume of electricity in the summer time, with the same equivalent directed to Azerbaijan from Dagestan in the winter season.
Many countries show interest, now, to the opportunity of supplying electricity to Azerbaijan. According to the source, the government is working over the projects and problems, that would ensure the country’s complete provision by the electricity. Namely, a big work is planned on the restoration of the 9th energy block of the AzGress (Hydro electric station).
Pursuant to new initiatives Baku refineries will minimise mazut production (30-35 thousand tons a year) and the released oil volumes will be sent to Novorossiysk. At present Baku refineries produce around 200 thousand tons mazut for which 400 ton crude oil is required. Should this plan be approved, SOCAR export volumes directed to Novorossiysk will increase up 2.9-3 million tons oil in 2002.
Oil released from refusal from the mazut mode could have been exported as crude oil or oil products. Azerbaijan intends to pay for the electricity at the expense of income ensured by such export. Similar scheme has already been applied by Azerbaijan in gas import for electricity needs.
Manufacturers object
This idea, however, has find no support in the republic, yet. The manufacturers of the product simply do not believe in such possibility. Baku refinery «Azneftyag» exporting up 100 thousand tons of mazut a month through the trading company «Intersun» doubts the expediency of such step. «We know about existence of such alternative, but we are not sure that the government will approve the reduction of mazut production to minimum» a source in SOCAR stated. The representatives of the Ministry of Fuel and Energy noted that from energy safety point of view Azerbaijan should not tie the import of all energy carriers to one country. At present two electric power stations of the country receive up 3 billion m3 Russian gas a year instead of mazut and the Ministry of Fuel and Energy considers the increase of the energy power carriers supply from Russia inexpedient.
«We have proposals from RAO «UES Russia» that are being considered by the government and no final decision has been made, so far» the representatives of the ministry said.
Meanwhile the shipment of Azeri oil from Novorossiysk is underway. By the end of this year SOCAR will ship from Novorossiysk 2.55-2.57 million tons of oil. This figure was slightly over 2 million tons of oil for 10 months.
SOCAR intends to increase the supplies through the «northern» pipeline in return to the «Transneft’s» demand to pump to Novorossiysk 5 million tons of Azeri oil in 2002. «Transneft» substantiates its position by the Russian-Azeri intergovernmental agreements of January 18, 1996. SOCAR referring to the same documents states its obligations on pumping to Novorossiysk each new year more oil volumes than in previous year. «Thus, if in 2002 we pump at least 1 litre more than this year, our obligations will be fulfilled» the representatives of SOCAR noted. Nevertheless Azerbaijan proceeds with looking for additional crude oil volumes to be pumped through the «northern» route, having already re-oriented there the export supplies of oil from the onshore fields operated by the western investors.
Return to passed
Moscow doubts expediency of Baku-Ceyhan
Russia holds the position of «multiple alternatives» for the Caspian oil carriers export, the vice-premier of Russia government, co-chairman of Russian-Azeri intergovernmental commission for economic cooperation, Victor Khristenko said.
However, Moscow «doubts» the economical expediency of the Baku-Ceyhan oil pipeline construction, and «is not economically interested in this project, specially taking into account the existing transportation alternatives, namely, the Baku-Novorossiysk and CPC oil pipelines».
In other words, Russia changes its attitude regarding the Baku-Ceyhan oil pipeline for the third time now for the recent 30 days. It should be reminded that recently the vice-president of LUKoil, Leonid Fedun had stated in Moscow that the Baku-Ceyhan project was very real.
The planned profitability of the Baku-Ceyhan pipeline operation makes 24%, and this is rather high index, indicating the economical feasibility of the project. According to L. Fedun, in October BP submitted to the investors the renewed project of the Baku-Ceyhan pipeline. Till now, Moscow proposing its territory for the new export routes construction has regarded the BJ project negatively, however Russia must change its position», L. Fedun stressed.
LUKoil possesses 10% interest in AIOC almost all participants of which have agreed to finance the construction of this oil pipeline. BP suggested LUKoil to join the Sponsor Group, having stated that no final commitment will be made by LUKoil. «We will not invest in the construction unless our governments approves it», Fedun stated.
«Russia must connect its oil pipelines with the Baku-Ceyhan oil pipeline. It will allow to send vast flows of Caspian oil to the Mediterranean, otherwise our economy will be collapsed», said he. According to LUKoil’s estimate, Russian oil will be pushed out of the market by the higher quality Caspian oil. «Today our Brent oil is sold at $1-1.5 discount, but the discount will be $ 2,3,4 and maybe more. This is the threat to Russian oilmen, and consequently to the country’s economy», Fedun said.
According to him, there are various ways for resolving the problem. Thus, for example, Caspian oil could be directed to Ceyhan. «Once the Caspian oil appears in the Black Sea, it will go to Czechia, Hungary, Slovakia, Yugoslavia through the Ukrainian oil pipeline of Odessa-Brody, and Russia will have no chance to sell its oil», he said. It must be considered, that export of a part of Kazakh oil transported through Russian territory will flow via the Baku-Ceyhan oil pipeline. Fedun noted that for this reason Moscow needs to discuss the opportunity of exporting a part of the Kazakh oil through Makhachkala with the consequent pumping through the Baku-Ceyhan. According to him, in 10 years oil export from Kazakhstan and Azerbaijan will make 150-160 million tons of oil a year, which corresponds to Russian oil export volume.
The LUKoil VP clarified that the final decision on the company’s participation in the project being the «geopolitical matter» would be made at the governmental level.
A month ago, the President of LUKoil, Vagit Alekperov, negatively estimated the opportunity of his company’s participation in the project of the Baku-Ceyhan pipeline construction. «This project is not economically expedient for us», stated he.
Moscow’s attitude to this project was also negative, but from the spring of this year it began stating that it would stop setting Russian oil pipelines against the Baku-Ceyhan route, and would even permit Russian companies joining the SG. At the same time, Moscow pushed forward «its» CPC oil pipeline. And now, again, we return to the passed....
It is clear to Russian and Baku analysts that the statement of Russian VP has been dictated not by economic considerations as according to L. Fedun Russian economy will not survive without Baku-Ceyhan. It indicates the existence of the matter’s political implication.
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