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Tuesday, January 09, 2007

Azerbaijan Redirects Novorossiisk Oil

Jan. 08, 2007 - Kommersant - According to unofficial information, the State Oil Company of Azerbaijan has stopped pumping oil through the Baku-Novorossiisk oil pipeline. According to one source, that action is linked to the fact that oil meant for the Baku-Novorossiisk pipeline will now be processed into heating oil to fuel electric plants in that country. Previously, Azerbaijan's electric generators operated mainly on natural gas imported from Russia. Several days before New Year, Azerbaijan refused to buy Russian natural gas for $230-235 per 1000 cubic meters. There was a lengthy decision-making process in Baku to choose between agreeing to Gazprom's conditions or shifting the energy balance in the country toward heating oil. Negotiations were lengthy and finally Azerbaijan announced that the price suggested by Moscow is at odds with “the spirit and substance of bilateral relations.” Potential losses by Transneft from transit on that the Baku-Novorossiisk pipeline are estimated at up to $25 million per year.

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