Supply of Azerbaijani oil products to Kyrgyzstan requires great transportation costs

Oil&Gas Materials 19 January 2012 10:52 (UTC +04:00)

Azerbaijan, Baku, Jan.19 / Trend V. Zhavoronkova, E. Ismailov /

The issue on supply of oil products by the State Oil Company of Azerbaijan (SOCAR) to Kyrgyzstan was left open, Kyrgyz Oil Traders' Association President Jumakadyr Akeneev told Trend on Thursday.

Yesterday, it was expected to discuss the supply of oil products within SOCAR head Rovnag Abdullayev's visit to Kyrgyzstan. However, the agenda only included construction of an oil refinery with a capacity of 2 million tons by SOCAR in Kyrgyzstan. The agreement was reached was reached at a meeting of the Kyrgyz President Almazbek Atambayev and SOCAR head Rovnag Abdullayev on Thursday. The oil refinery is expected to be commissioned in late 2013.

"Yesterday [...] the agenda included construction of oil refinery. Representatives of the Azerbaijani delegation said they were not ready to discuss supply of fuel and lubricants to Kyrgyzstan, as they came only to discuss construction of the oil refinery. The issue was left open," Akeneev said.

He said Azerbaijan and Kyrgyzstan are located at great distance from each other, and therefore, arranging the whole logistics process is quite difficult. Transportation costs will be sufficiently high when arranging oil products supply by the Azerbaijani side.

As Akeneev said, in this case, first, there is no guaranteed transportation route. In particular, it remains unknown whether it would be possible to arrange supplies through Turkmenistan and Kazakhstan, and ensuring transportation through Russia requires overcoming a large distance.

"Therefore, a ton rises in price by $200-$250, and this issue stands no longer in economic terms," Akeneev said.

Akeneev said 300,000 tons of fuel and lubricants may be supplied from Azerbaijan to Kyrgyzstan per year. Although Kyrgyzstan has a contract with Russia, the country wants to diversify sources of fuel and lubricants supplies.

The sides, according to Akeneev, can either create a joint venture, or reach an agreement on the direct supply of oil products to the republic.

Akeneev estimated the country's demand for fuel and lubricants for 2012 at one million tons.