Azerbaijan to increase gas exports to Georgia by 22.7%

By bne IntelliNews March 1, 2016

Azerbaijan will supply an additional 500mn cubic metres (mcm) of gas per year to Georgia, according to Rovnag Abdullayev, the president of the Azerbaijani national oil company Socar. Azerbaijan is already the largest gas supplier, having sold some 2.2bn cubic metres (bcm) of gas to Georgia in 2015, which covered 87% of the domestic demand for gas.

Abdullayev's commitment is timely and sensitive, as Georgia has been searching for an additional source of gas since August. Georgian Energy Minister Kakha Kaladze has repeatedly met Gazprom's CEO Alexey Miller to renegotiate a gas transit agreement and the possibility of increasing Russian gas exports to Georgia. However, Georgians have heavily criticised the negotiations with Gazprom, which used to supply most of Georgia's gas before 2007, because they see it as an extension of the Kremlin. With gas consumption increasing by 19% y/y in 2015, Kaladze was hard pressed to find a solution. Baku previously said that it did not have the capacity to increase gas volumes to Georgia quite yet, so the change is certain to be a respite for Kaladze and his government.

Specifically, Abdullayev said that Baku would supply the additional volume from the Shah Deniz field, from which it already exports some 800 mcm a year. The second stage of the Shah Deniz field is currently being developed, and is expected to come on stream in 2019 and to generate exports of at least 16 bcm of gas a year until 2024, and of 24 bcm a year thereafter. Therefore, starting in 2019, Azerbaijan should be able to cover all of Georgia's gas needs.

“Earlier, we were not able to increase gas supplies to Georgia due to technical reasons,” Abdullayev explained. “We then talked to the Shah Deniz consortium. As a result, the supply in winter and summer periods will stand at 70% to 30% compared to 60% and 40% previously.”

Most of Azerbaijan's exports to Georgia flow through a pipeline in the Gazakh district that has a capacity of over 2.5 bcm per year.

Meanwhile, during his visit to Baku on February 29, Kaladze dispersed the rumours about Georgia's negotiations with Iran for gas exports. “Transportation of Iranian gas to Georgia would be possible via two ways, through the territory of Azerbaijan or Armenia. However, the Iranian gas prices are not competitive, so the issue on the purchase of Iranian gas can only be discussed in the future,” he said.

However, his statements were contradicted by Alireza Kameli, head of the Iranian national gas company Nigec, who said in Baku that Tehran was looking to export some 200 mcm of gas to Georgia over the course of seven months. Tehran and Tbilisi would mull a long-term agreement if they find the short-term arrangement economically viable, he added.

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