This commentary is from USAK’s Energy Review Newsletter
http://www.turkishweekly.net/energyreview/TurkishWeekly-EnergyReview11.pdf
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The major topic in the contemporary world is how to provide alternative energy supply routes in terms of national security, no matter whether these states producers or consumers. In itself, this idea has been developed in the late 1990s, when some countries and groups of countries have their own energy programs. USA referred to the importance of having alternative ways of imports of oil and gas. EU also focused in its program about importance of increasing the supply routes of energy to the markets of the members of this organization. The first among suppliers of oil and gas states who referred to guarantied alternative energy routes was Azerbaijan. The former Soviet republic after it`s independence, first tried to solve the problem of the use of their own resources and output them to be sold in the western markets. Since the signing Deal of the Century in 1994 to develop oil fields Azeri-Chiragly-Guneschli, for Azerbaijan as a country with no direct access to the open sea appeared problem of constructing the necessary infrastructure to pump oil for export.
Thus at the time when decision-makers selected variant of pipeline to export `early oil` from contracted oil fields, the Azerbaijani government and shareholders agreed on two directions: via Russia, Baku-Novorossiysk pipeline, from which oil with tankers will be transported from the Black Sea through the Turkish Straits to the ports of the Mediterranean Sea and via Georgia, Baku-Supsa, the Georgian port on the Black Sea from where oil tankers will transported to the ports of the Mediterranean Sea.
With the construction of the Baku-Supsa, the first time, one of the countries of the former Soviet Union would have access to the European markets through the channel without passing through Russia. This would bring an end to the monopoly Russia in the pipeline transportation of oil to the world markets. As show time, the decision was strategically correct.
It should be noted that in the western direction only Azerbaijani high-qualified `Azeri light` brand oil has been exported. While in Novorossiysk pipeline Azerbaijani oil is mixed with `Ural light` brand Russian oil with much lower quality and hence Azerbaijani oil is losing in price. Oil pipeline Baku- Novorossiysk and will be referred to as well as the Northern Corridor was opened to pump oil Baku in 1997. With a length of more than 1,000 km, of which 233 km are in the territory of Azerbaijan, the pipeline has a capacity of up to 5 million tons of oil per annum. The length of the West Corridor pipeline or Baku-Supsa pipeline is 920 km of which some 600 km passes through the territory of Azerbaijan. The capacity of the pipeline is about 5.5-6 million tons of oil a year.
In the case of the design of one of the two pipelines Azerbaijan could see a situation in which the transit country would dictate own terms. In such a situation, Azerbaijan has faced to an agreement with Georgia during the negotiation on construction of the Baku-Tbilisi-Ceyhan pipeline. Then Azerbaijan had to give Georgia own income from the transit of oil through own territory.
In addition, the Baku-Novorossiysk pipeline is not economically advantageous transit route for Azerbaijan, and the exports of the Azerbaijani oil from this pipeline rather a political decision. First, as noted earlier, the export of oil through the corridor was necessary to maintain the availability of alternative corridor. In addition to that, transportation oil from the port of Novorossiysk to provide extra charge. Only in the winter season of 2004 the expenditure for departure from the port tankers with oil from the port and insurance costs amounted to $ 100,000. The tariffs for transporting oil through the Northern corridor are significantly higher than those in the West. The price of one barrel of oil which is pumped through this pipeline is 2.57 billion dollars, while the price for transporting through Baku-Supsa consists just 3 dollar per ton.
As the growth of oil production from the Azeri-Chiragly-Guneschli became necessary in the installation of a new main pipeline. Limited capacity of the two existed pipelines through both of which possibly to carry no more than 11 million tons per year, is not responsive to the needs of Azerbaijan, starting from 2006, when production was estimated at more than 20 million tons of oil a year. Initially, for the transfer of the oil Russia proposed to increase the capacity of the pipeline Baku-Novorossiysk.
However, this corridor has many negative elements. First of all, oil from Novorossiysk as well as from Supsa tankers transported through the Turkish Straits passage through which restricted for security reasons more than 10 million populated metropolis Istanbul, located on the Straits. However, through the port of Novorossiysk besides the Azerbaijani oil also exported the Russian and Kazakhstan oil. It could therefore be faced with a situation where the export of such quantities of oil through the straits would be simply impossible. In this case, there is a need to establish a pipeline to bypass the Turkish straits, and this pipeline is the Baku-Tbilisi-Ceyhan.
Constructed in 2005, this pipeline has a length of more than 1,730 km, 468 km of which is in the territory of Azerbaijan, 225 km in Georgia and 1037 km in Turkey with a capacity of up to 50 million tons of oil a year. It is expected that in the near future through the Baku-Tbilisi-Ceyhan pipeline also oil from Kazakhstan will be exported. The Baku-Tbilisi-Ceyhan pipeline has enabled countries in the Caspian region to find alternative ways to pump oil to Europe, and for EU countries to import alternative to Russia and the Middle East sources oil.
Thanks to the realization of this transit route project Azerbaijan consolidated its independence and has been able to implement more independent energy and foreign policy.
In December 2006, Azerbaijan has been able to eliminate the use of gas pipeline when the Russian side demanded by Azerbaijan oil through this pipeline full, or to pay for the transit of 5 million tons of oil, even with a partial implementation. Azerbaijan is one of the first countries of the former Soviet Union that has been able to reap the benefits of alternative oil routes. Perhaps Azerbaijan will seek alternative ways also for the Baku-Tbilisi-Ceyhan pipeline, one of which can be Odessa-Brody pipeline, also held outside the Turkish Straits and having access to the markets of Central Europe. As can be seen, official Baku whose motto is, `Happiness is an availability of alternative routes`, will continue its policy of providing safe and reliable energy exports to the world markets.
