Azerbaijan’s state-run oil firm SOCAR is using its own new tankers to supply Russian oil to its STAR refinery in Turkey, saving on freight for Moscow-sourced oil transportation, according to traders and LSEG data.
Freight rates for Russian oil jumped in 2022 and stand two to three times above regular rates due to Western sanctions imposed on Moscow after it sent thousands of its troops into Ukraine. For instance, it costs about $8-9 million to charter a big tanker like SOCAR’s for a one-way trip between Russian Baltic ports and India.
Most Western companies refuse to transport Russian oil, which is being increasingly shipped by Russian, Middle Eastern or Asian companies.
Three Azeri-flagged Aframax tankers – Karabakh, Shusha and Zangezur – have been shipping Russian oil from the Baltic port Primorsk to Turkey’s Nemrut Bay terminal since last November, according to LSEG data. SOCAR said it bought the tankers last year via a joint venture with Azeri state shipping firm ASCO.
It declined to comment on the Russian oil shipments and how much it is saving by using its own tankers to supply its Turkish refinery.
ASCO said the three new Aframax tankers were under a time charter with SOCAR and ASCO did not decide on the commercial use of the three vessels.
They are the first large oil tankers in ASCO’s fleet and the company said it plans to buy more of them in coming years. Such vessels can carry from 500,000 to 850,000 barrels of oil.
Previously ASCO’s fleet consisted of smaller vessels, which fit Caspian ports.
Last year SOCAR signed a deal with Russian oil major Lukoil to supply its Turkish refinery. The deal allows SOCAR to supply half of the refinery’s capacity with discounted Russian oil and using its own tankers helps to save even more, two traders said.
The cost for the Aframax journey from Russia’s Baltic ports to Turkey is about $5 million for the Moscow-sourced oil if you charter the ship in the public market, one of the traders said.
Group of Seven countries introduced a price cap on Russian oil in late 2022. The cap allows Western companies to provide shipping and insurance services for Russian crude as long as the oil is sold below $60 per barrel.
Reuters could not establish the price at which SOCAR bought the Russian oil transported by the three tankers.
Prices for Urals have been below $60 per barrel since November as Brent prices eased.
Source: Reuters (Reporting by Reuters reporters in MOSCOW and Nailia Bagirova in BAKU; Editing by Dmitry Zhdannikov and Emelia Sithole-Matarise)