AZERBAIJAN: SOUTHERN CORRIDOR STARTS WITH

C O N F I D E N T I A L BAKU 000951 SIPDIS E.O. 12958: DECL: 09/08/2018 TAGS: PGOV PREL AZ KZ ENRG SUBJECT: AZERBAIJAN: SOUTHERN CORRIDOR STARTS WITH CROSS-CASPIAN TCO SHIPMENTS Classified By: Ambassador Anne E. Derse, Reason ¶1. (C) SUMMARY: On October 9 the "Southern Corridor" project will take a huge step forward when the first tanker to carry Tengizchevroil oil to Azerbaijan will begin loading in Kazakhstan, with an expected arrival date in Baku of October ¶11. TCO volumes heading to Baku in October will be approximately 140 thousand metric tons and 250 thousand metric tons in November, towards an eventual plateau of 420 thousand tons per month. Although the absolute volumes of TCO oil to be shipped to Azerbaijan are not massive, the procedures put in place and the cooperative links established among the various entities in Georgia, Azerbaijan and Kazakhstan will prove essential when the truly massive volumes from Kashagan begin to seek ways to market o/a 2013. END SUMMARY. ¶2. (C) On October 8 Energyoff met with Chevron Azerbaijan President Robert Dastmalchi and Chevron's Shipping Marine Superintendent for the Caspian Region Captain Vincenzo Berardi, to discuss upcoming shipments of Tengizchevroil (TCO). ¶3. (C) An upbeat Berardi said that the first cross-Caspian shipments of TCO oil would start the following day (October 9),when a 13,000 deadweigt ton (dwt) ship will dock at Aktau to be loaded up with approximately 11.5 metric tons of oil, to make the 20-22 hour trip to the Azertrans Sangachal terminal 40 kilometers south of Baku. ¶4. (C) This month (October) TCO plans to ship approximately 140-150 thousand metric tons of oil (approximately 1.2 millions barrels, at 7.8 barrels per metric ton) to Azerbaijan in October, half of which (68 thousand metric tons) will go into BTC and half of which (67.5 thousand metric tons) will travel by rail to Batumi. TCO plans to increase the monthly amount shipped by 13,000 dwt ships to Baku to 250 thousand metric tons in November, towards an eventual plateau of 420 thousand tons per month (five million metric tons per year, which would be approximately 430 cross-Caspian trips by the 13,000 dwt tankers). ¶5. (C) Berardi said that despite the increased spare capacity in BTC due to recent production slowdowns, an increased amount of TCO oil cannot be shipped via the BTC pipeline, as TCO volumes are contractually linked to overall BTC throughput. Berardi said that he expects TCO volumes to be shipped via BTC to increase in November, as overall BTC volumes are slated to increase in November (Comment: overall BTC volumes could increase from approximately 300,000 to 540-570,000 bpd in November, if BP Azerbaijan is able to solve platform generator/power problems for the East and West Azeri Platforms). Dastmalchi said that regardless of how much TCO can ship via BTC, it will still seek to ship appreciable amounts by rail to Georgia so as to 'work out the kinks' for this method. ¶6. (C) According to the freight-forwarding contract TCO has signed with the "Cross-Caspian" freight forwarding company in Azerbaijan, for the first few years of the contract TCO volumes will be split between the two Georgian terminals of Batumi (owned by Kazmunigaz) and Kulavi (owned by SOCAR). Berardi said that whereas the Batumi terminal's capacity is for ships up to 140,000 dwt, the Kulavi terminal's current capacity is only 40,000 dwt. TCO has asked Kulavi to increase this capacity to up to "Aframax" ship size (85-125,000 dwt). Kulavi is dredging to this effect, although a recent dredging accident with three fatalities has slowed down the work. Berardi says that Kulavi also needs a larger turning basin. ¶7. (C) COMMENT: The start of TCO volumes coming to Baku is very good news: after years of preparation, TCO volumes are set to start flowing in significant amounts to Azerbaijan and through Azerbaijan to Georgia. Although the absolute volumes of TCO oil to be shipped in this manner are not massive, the procedures put in place and the cooperative links established among the various entities in Georgia, Azerbaijan and Kazakhstan will prove essential when the truly massive volumes from Kashagan begin to seek ways to market o/a 2013. DERSE