Novorossiisk pipeline

Russia says Azeris not shipping enough oil

MOSCOW (Reuters)—Russia has terminated a contract to pump Azeri oil across its territory, ending a 16-year intergovernmental agreement, because Azerbaijan has not been shipping the agreed quantities, Moscow said in a decree.

The contract, signed in 1996, allowed Azerbaijan to pump oil through a 1,330-km pipeline from the Azeri capital of Baku to Novorossiisk, a port on Russia’s Black Sea coast.

Under the agreement, Azerbaijan guaranteed to ship no less than 5.0 million tonnes a year by 2002 through the pipeline, but it now pumps around 2 million tonnes annually.

Russian oil pipeline company Transneft, which operates the Russian section of the route and has a separate commercial contract with Azerbaijan, said deliveries of Azeri oil would not be affected this year, but its terms of transit could change substantially from 2014.

“Until the end of the year an agreement on oil transportation is in place, and I think we’ll stick to it,” state-owned Transneft’s spokesman Igor Demin said.

The decree to terminate the intergovernmental pipeline contract, signed by Russian Prime Minister Dmitry Medvedev on May 5, was released on Tuesday.

A source at Azerbaijan’s state oil firm SOCAR said it had not yet received formal notification from Russia’s foreign ministry and oil shipments through the pipeline continued.

The majority of Azeri oil is exported through Turkey or Georgian ports on the Black Sea, with only a relatively small amount passing through Russia.

Demin said Transneft had been looking at changing its tariffs on the pipeline since the start of 2013. “From January we will calculate the tariff based on real rates.”

Russia might propose a new contract to Azerbaijan based on a “pump or pay” principle, he said.

The 1996 agreement between Baku and Moscow gave a fixed rate for the pumping of Azeri oil to Novorossiisk and for annual transport volumes, but Azerbaijan has not met the terms and underuses the Russian pipeline, Transneft said.