Azerbaijan’s state oil business SOCAR has actually concluded an extensive contract with Russia’s Lukoil under which the Russian oil business will provide SOCAR $1.5 billion and supply SOCAR’s STAR oil refinery in Turkey with approximately 200,000 barrels daily of Russian petroleum.
The uncommon contract is obviously structured to get rid of the issues SOCAR was dealing with in acquiring Russian petroleum for its STAR refinery due to the sanctions enforced by the West on Russia over its intrusion of Ukraine.
The sanctions avoid Western business from both purchasing and trading in Russian crude and petroleum items and moving payments to Russia.
Neither Azerbaijan nor Turkey has actually enforced any sanctions versus Russia.
Nevertheless, SOCAR’s trading arm, which is among the providers of petroleum to the STAR refinery and is based in Geneva would be required to observe the sanctions program.
Reports declare that SOCAR stopped purchases of Russian petroleum throughout the summer season. This claim seems substantiated by main Turkish information that reveal imports by both of Turkey’s refiners likewise fell dramatically in July.
Throughout July the STAR refinery imported simply 835,435 lots of crude – from all sources – down 22 percent on June.
And Turkey’s imports of Russian crude throughout July were 706,396 tonnes, down 44 percent on June.
Turkey’s other oil refiner Tupras, which runs 4 refineries in the nation, does not appear to have actually been affected straight by the Western sanctions.
SOCAR’s head workplace in Baku did not react to a question about its contract with Lukoil and it is uncertain how the loan from Lukoil will be structured, or how it is incorporated with the contract to provide petroleum to SOCAR’s STAR refinery.
Commissioned in 2018, SOCAR’s STAR refinery in Turkey has the capability to procedure 11.0 million lots of petroleum a year, producing primarily diesel and jet fuel for Turkey’s domestic transportation market, and naphtha for SOCAR’s Petkim petrochemicals plant, surrounding to the refinery.
The STAR refinery was established by Azerbaijan’s SOCAR. It utilizes petroleum both from fields SOCAR owns and runs itself, and from Azerbaijan’s primary ACG oil field, which is run by a consortium led by BP.
These Azerbaijani crudes are “light” ones, and command a greater rate on international oil markets from refineries developed to make the most of its unique homes and produce a various variety of items from that needed by the Turkish market.
As such, the STAR refinery was developed to process all kinds of petroleum readily available in the east Mediterranean area, consisting of Russia’s much heavier Urals crude which is exported by tanker through the Black Sea.
Enduring relationship
SOCAR and Lukoil have a long history of cooperation.
The Russian business is the 2nd biggest investor in Azerbaijan’s primary Shah Deniz gas field, having in 2015 doubled its stake to 19.9 percent Lukoil likewise previously owned a stake in Azerbaijan’s ACG oil field, in which SOCAR holds a 25 percent stake.
In 2017 the 2 business revealed that they were preparing joint financial investments in Turkey, and in 2020 Lukoil revealed that it was in conversations with SOCAR over possible financial investment in a variety of overseas Caspian oil and gas fields. On both events no last contracts appear to have actually been concluded, nevertheless.
News of SOCAR’s uncommon plan with Lukoil came simply a couple of days before Azerbaijan’s minister for energy, Parviz Shahbazov, checked out Moscow for the sixth International Russian Energy Week.
While there he held comprehensive conferences with Russia’s deputy prime minister Alexander Novak, and conferences on energy system combination with Russian energy minister Nikolay Shulginov and authorities from Iran.
By David O’Byrne by means of Eurasianet.org
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