Azerbaijani Economy 11 september — 11:55

Historic agreement: Turkmen oil too will go through Azerbaijan (New turn)

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International trading firm Vitol and Azerbaijan's state SOCAR have agreed to transport Turkmen oil volumes via Baku-Tbilisi-Ceyhan (BTC) pipeline which will result in a sharp decline of transit shipments via Russia's Black Sea port of Novorossiisk, Reuters reports citing three sources.

'SOCAR and Vitol agreed to transport about 1 million tonnes of Turkmen oil via BTC pipeline per year. The supplies will start from October,' one source familiar with the details of the agreement told Reuters.

Vitol supplies Turkmen oil volumes it purchases from UAE's ENOC under term contracts, the other source added.

Russia and Azerbaijan have a long history of competing for the light and sweet Turkmen oil. Turkmen oil has been part of Azeri BTC flows for years, but Russia has also a long history of offtakes into the Transneft TRNF_p.MM pipeline system.

Although the volumes set to divert are not huge, they come as Azerbaijan is also increasing gas supplies to Europe via a new gas pipeline system, a growing competitor to Russia's Gazprom GAZP.MM.

SOCAR has previously said that it was looking to increase oil supplies to the BTC pipeline by attracting more companies from Russia and Turkmenistan.

In 2019, the bulk of the Turkmen oil went to Novorossiisk, passing via the Makhachkala port on the Caspian Sea first, after trading firm Vitol won the tender for the volumes.

Turkmenistan has been supplying about 160,000 tonnes of oil per month to Russia, exported as a Siberian Light after being mixed with other volumes for shipment via Novorossiisk.

From October, monthly exports of Turkmen producers will fall to just one 80,000-tonne cargo after Vitol diverts volumes meant for Novorossiisk to the BTC pipeline which offers better profitability, the sources said.

SOCAR did not reply to a Reuters request for comment. Vitol declined to comment.

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