BUSINESS
Russian Gas -Theoretical Option
16 May, 2013
In quest of diversified gas supply, Georgian government discusses Russian gas as an alternative if it is reasonably priced. Sector pundits consider this option rather a theoretical one for it can scarcely compete with the double cheaper Azeri gas. Musing over energy security of Georgia, Kakhi Kaladze, Minister of Energy of Georgia, does not rule out Russian gas as an alternative supply option to Georgia depending on Azeri bulk supply at the moment. No talks are going on with Russia
at the moment but Russian gas will be imported only if it will have positive effect on Georgian gas, Minister accentuated on May 7, 2013.
“Our authorities will do everything to have two, three, four suppliers… This will increase competition and have a positive impact on prices,” Kaladze said and wondered why Georgia cannot buy Russian gas if it imports electricity from Russia all the time. Because of price, the sector pundits respond. They hold the idea of Russian gas-supply as something theoretical for it can never compete with Azeri gas in price and find comparison with the electricity irrelevant to this end: out of three electricity importers to Georgia Russian electricity is the cheapest compared to Azeri, Armenian and Turkish ones whilst Russian gas is double expensive than the Azeri one. Russia puts a political price on gas to Georgia as its political contender crying for the West. Secondly, Georgia’s small consumption is not commercially attractive to Russia to make discounts.
Therefore, Russian gas can be an option only under force majore situations or if Russia acquires a company in Georgia and will provide it by cheap gas. But the latter presumption cannot be conjectured as Georgia’s diversified gas-supply but just kind of inter-company strategy that cannot influence the price-making process at large, Liana Jervalidze, an energy expert said in the interview to Georgian Journal.
As a matter of fact Georgia has three diversified gas-supply routes: two running from Azerbaijani Shah-Deniz fields [including the Baku-Tbilisi-Erzurum (BTE) pipeline leaving 5% of the transported gas in Georgia as a transit fee] and the North-South pipeline running from Russia to Armenia through Georgia and leaving 10% of transported gas as a transit fee. Moreover, 500 million cubic meter (cm) is available at special discounts averaging to USD 60-62 per thousand cubic meter (tcm) in frames of BTE. The transited and discounted gas makes around half of Georgia’s overall gas consumption varying between 1.2-1.7 billion cm. The remainder part is provided by Azeri national company SOCAR including the so called social gas [meant for household consumption and thermal power stations] for preferential price of USD 189 per tcm and commercial gas for USD 240. Russia prices its gas to Georgia for USD 300-400 likewise to Europe but takes USD 110 per tcm from Russia’s strategic partner Armenia where gas goes through Georgia and transportation costs more apparently. According to sector pundits, even if Russia demanded the market price this might be by USD 50-70 higher than Azeri price. Firstly, the transportation route between Azerbaijan and Georgia is much shorter, secondly, Azerbaijan will always take into consideration interests of Georgia, its strategic partner in all regional transit projects: Azerbaijan has no other route than the one passing via Georgia to take its energy resources to international markets while Russia has an extensive pipeline ramification connecting with Europe and enjoys export rights on Kazakh and Turkmen gas transported through pipes of Gazprom, the Kremlin owned energy giant. This very obstacle hinders Georgia to import from either Middle Asian countries. Kazakh gas was supposed to be available at USD 110 per tcm after KazMunaiGas, the Kazakh state company, acquired gas distribution network of Georgian capital but Gazprom defies to give a passage to Tbilisi-bound Kazakh gas in spite of international obligations Russia assumed in frames of the World Trade Organization. WTO requires free passage to all kinds of goods through its member territory and perhaps this is the point Georgia should press on.
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