Azerbaijan upgrading its fleet in anticipation of transit boom Review by Caliber.Az

The Azerbaijan Caspian Shipping Company (ASCO) is gradually increasing the potential of its cargo fleet, booking orders for the construction of ships at the Baku Shipyard. On December 7, President of the Republic of Azerbaijan Ilham Aliyev attended a ceremony to launch the “Academician Khoshbakht Yusifzade” tanker built at Baku Shipyard by the order of the “Azerbaijan Caspian Shipping” Closed Joint-Stock Company (ASCO). This is the third oil tanker built at the domestic shipyard by order of ASCO. Starting next year, the Caspian Shipping Company is expected to bolster the participation of its tanker fleet in the transshipment of oil and petroleum products from Central Asian countries for subsequent delivery to the European market.

"Today, we are creating new transport infrastructure facilities, very much in line with the policy of the Great Leader. The foundation for the creation of this tanker was laid with the commissioning of a shipyard nine years ago. I made that decision and we achieved it. We can build several tankers, bulk carriers, Ro-Ro ships, and ferries every year," President of Azerbaijan Ilham Aliyev said at the ceremony.

Prominent Azerbaijani oil scientist and geologist, first vice-president of the State Oil Company (SOCAR), academician Khoshbakht Yusifzade also took part in the ceremony of launching the new vessel. "Naming this tanker after me was the initiative of President Ilham Aliyev. The head of state made this proposal on my 90th birthday and today he took part in the ceremony of launching the vessel," he noted.

During familiarization with the new tanker, ASCO Chairman Rauf Veliyev briefed the head of state on the capabilities of the new generation oil tanker. The tanker "Academician Khoshbakht Yusifzade", which has been under construction for more than two years at Baku Shipyard, is equipped with two Wartsila engines, 1,200 kW each, which allows move at a speed of 10 knots per hour. With its length of 141 meters and breadth of 16.9 meters, it displaces 7.884 thousand tons and is able to carry crude oil and different oil products (for example methanol, acetone, ethylene glycol, ethyl t-butyl ether, ethyl alcohol and etc) in six cargo tanks of the total capacity of 9,212 cubic meters. Such versatility of the vessel allows being flexibly adapted to changing demand on liquid cargo transshipment in the Caspian waters.

According to some basic parameters the new tanker is comparable to the first oil tanker of domestic construction - tanker "Lachin" with a deadweight of 7,8 thousand tons, which was put into operation in December 2019. It should be reminded that another tanker, "Kalbajar", also with a deadweight of 7.8 thousand tons, was put into operation at the shipyard, located in the Garadagh region of Baku, on September 10 last year.

It is noteworthy that all three tankers of the Volqa-Don MAX project were designed with the assistance of specialists of the Marine Engineering Bureau of Odessa and belong to the river-sea ships, i.e. with their dimensions and draught they can easily pass through the Volga-Don channel and are able to enter shallow ports, at maximum load.

These parameters are extremely important, because the tankers built on the slipway of Baku Shipyard, if necessary, can be used to transport hydrocarbon and petrochemical products not only in the Caspian Sea but also beyond. This practice is not new, since 2014, ASCO began to pursue a policy of optimizing cargo transportation and, depending on demand, moving part of its fleet outside the Caspian Sea. In part, these processes were related to the consequences of the 2014-2016 energy crisis, when the transshipment of oil from Kazakhstan's fields decreased many times. A sharp decline in the transportation of hydrocarbons was also observed after the collapse of the global oil market in the spring of 2020. Accordingly, part of ASCO's tanker fleet, including new tankers of domestic production, transshipped cargoes between the ports of the Black Sea and the Mediterranean Sea, while a number of other oil tankers operated in the Baltic and North Seas.

At the same time, the energy crisis observed since last year in Europe and the growing need for fuel day by day have multiplied the demand for hydrocarbons and chemical products coming from Azerbaijan, as well as the Central Asian region. These trends were further intensified with the start of the Russian-Ukrainian war and subsequent sanctions, which effectively interrupted the traditional logistics of oil shipments from Russia to Europe. From February 5, 2023, an embargo will be imposed on oil supplies from Russia to Europe by sea, thereby less than half of the total volume of Russian oil supplies to the EU - 4.5 million barrels per day - will very soon arrive. These facts, as well as Kazakhstan's plans to diversify the transshipment of oil to Europe by increasing transit through Azerbaijan, create excellent conditions for the expansion of transportation by the ASCO tanker fleet within the Trans-Caspian route.

In particular, ASCO tankers transported 2.3 million tons of oil and petroleum products during 9 months of 2022, and next year these figures can significantly grow taking into account the plans of Kazakhstan and Turkmenistan to increase transshipment of oil, fuel, and other liquid petrochemicals.

However, the plans of Azerbaijan's partners in the Caspian region include not only increasing the transshipment of hydrocarbons. Taking into account the shift of the transport logistics of the Eurasian region towards the "Middle Corridor", the interest of forwarding companies in the transportation of non-oil, multimodal, containerized cargo within the "Silk Road" and Chinese "One Belt, One Road" corridors has recently increased manifold. In particular, the next few years are expected to see a tangible increase in non-commodity freight traffic along rail-ferry routes (TRACECA, TMTM, Lapislazuli) between Caspian Sea ports, with additional transshipment of transit cargo from the Middle Kingdom and other Far-Eastern countries.

According to experts, the above trends increase the demand of Caspian countries for new dry-cargo carriers, ferries, and feeder ships engaged in the transshipment of dry and containerized cargo in the Caspian Sea. To reach the set goals, Caspian Shipping Company steadily increases its integration into regional shipping projects, mastering new routes. At the same time, ASCO carries out a large-scale fleet renewal process, having purchased about two dozen of new vessels of different types over the past decades, including those for the transshipment of non-resource cargoes.

This work goes on, and according to plans up to 2030, ASCO eyes purchasing about 50 vessels, including cargo and passenger ships, ferries, tankers, tugs, launches, and crane ships. It is noteworthy that most of the cargo ships will be built in Azerbaijan - ASCO is gradually placing most of the orders at Baku Shipyard. Having its own shipyard (the plant was built in 2013) allowed Azerbaijan to achieve significant self-sufficiency in tankers, ferries, and Ro-Pax vessels in recent years. At the moment Baku Shipyard's portfolio has a total of ten ASCO orders for the construction of various types of vessels: in addition to tankers it is planned to build tugs, a 100-ton crane ship, a 50-ton crane ship DP1, a 50-ton pontoon ship, a 120-ton anchor-handling support ship, etc.

It is noteworthy that Caspian Shipping Company is not going to slow down the pace of fleet renewal, and alongside its own means and budget financing, it plans to attract foreign credits. At present, the negotiations on getting a $100mn credit for ASCO (without state guarantees) from the European Bank for Reconstruction and Development (EBRD) are about to finish. According to the Ministry of Economy, the credit means are to be used for expanding the fleet of ASCO, developing the shipyard and other activities, and contributing to the expansion of transport and logistics capabilities of the country, taking into account the current realities.

Well, in the longer term Azerbaijani shipbuilders are planning to accept orders from other Caspian countries, but in the coming years, the Caspian Shipping Company will be the main customer.