GEORGIA’S OIL ANATOMY
20 November, 2014
GEORGIA’S OIL ANATOMY
Crude oil prices keep falling on the world markets. According to the latest data on the London Stock Exchange, the price of one barrel of Brent oil has slid to $82.86 and on the New York stock-exchange the price of Light Sweet oil – to $77.91. But in Georgia the prices have hardly changed and this, besides the discontent of the consumers, questions the honesty of oil-importers and buyers.

Georgia consumes 100 percent imported fuel, a major portion of which
comes from the neighboring Azerbaijan and if we don’t consider the profit margin, a large part of the retail price is caused by transportation expenses. Conversely, Georgia itself produces the Brent oil, the whole amount of which is exported because we have no suitable oil refinery. So we got interested in oil fields and reserves in Georgia. As it turned out Georgia possesses a rather promising potential but this issue is beyond the attention of authorities.
Soso Ghudushauri, Expert-Chief Geologist of the Production Sharing Agreement Management Department of Georgian Oil and Gas Corporation says, “In Georgia there are many oil seeps and in this regard we outstrip many countries. The seeps are in the mountainous Kakheti, the Gombori mountain ridge, Guria, and Tbilisi’s surroundings. Navtlughi, one of the districts of Tbilisi was given its name due to the seeps.
Relatively systematic attention to this sphere was given in the XIX century when the Siemens brothers entered Georgia. By the end of the XIX century the oil production reached thousand tons, which was a rather big amount for the world in that period.

Q. – When was the largest amount of oil produced?

A. –Until 1974 about 15-30 tons of oil were annually produced in the country. But the discovery of a medium-size field, according to world standards, in Sartichala became a turning point of the industry. If earlier the daily oil production rate per well was five or ten tons, wells from the newly discovered field produced hundreds of tons.
In three-four years the oil produced in Georgia reached a million tons; the maximum figure was in 1980-1983 – from 3 to 3.3 million tons a year. Beginning in 1983 the production volume began to decrease. The Sartichala field was depleted and unfortunately no fields of such scale have been discovered yet.

Q. – What happened with this industry during the years of independence?

A. – After the disintegration of the Soviet Union the oil production reduced and later the drilling as well as effective production from the existing oil fields stopped. In 1999 a law on Oil and Gas was enacted. In 2000 the Oil and Gas Agency was set up. Currently seven foreign foreign companies are producing oil and carrying out explorations. The existing license blocks are distributed among them. The whole territory of Georgia, including the Black Sea shelf is divided into blocks and the interested firms can obtain the right to work on them through tenders: The biggest territory belongs to Jindal, an Indian Company; the American Frontera is working in Gare Kakheti; Canargo is near Tbilisi, etc. Currently the annual production of oil in Georgia is about 50 thousand tons.

Q. – What is necessary to get back to the earlier scale of oil-production in Georgia?

A. – All the 16 oil fields that are currently under production were discovered during the Soviet times. All of them are already depleted. A new one hasn’t been discovered. This needs large investment. The works come out to several millions of US dollars. For this reason our contractors go about the exploration with great caution. If the contractors use modern technologies maximally, the work will yield results. In our geological condition from the already existing oil fields there is the potential of producing 150-200 thousand tons of oil annually.
According to Soviet scientific research as well as exploration made by foreign companies, in Georgia there are a total about 40 prospective fields, including the Black Sea Shelf; there may be new discoveries if wells are drilled there. It is to be noted that the Anadarko Company carried out exploration work on the shelf for years and as a result several places were identified as potential oil fields but due to certain reasons the company left Georgia. Currently, there are all conditions for another company to start exploration works on the shelf. Besides, intensive works are ongoing at the Manavi and Norio-Martkopi areas. Several wells were drilled there and first signs of oil were identified. If expectations come true, in several years the oil production in Georgia may increase drastically.

Q. – What could be the volume of reserves?

A. – Remaining oil reserves in the depleted oil-fields are about 7.3 million tons of oil and 7 billion cubic meters of gas. In Georgia we have resources of oil – about 51 million tons and about 15 billion cubic meters of gas. And finally, potential resources are assessed by geologists at such areas where no wells are drilled yet, but certain estimations can be made. These estimations include 680 million tons of oil and 150 billion cubic meters of gas. These figures indicate good prospects and that the exploration work should continue.

Record difference in prices

Several days ago information was discovered about the prices of fuel that the companies supply to the state. Compared to the retail price the difference is record-breaking: If the retail price of one liter of premium brand petrol is 2.16-2.22 GEL, state companies buy the same product for 1.66 GEL. The oil-import companies supply the state offices with the super brand fuel for 1.80 GEL per one liter that costs 2.25-2.29 GEL. The price for one liter of Euro-Diesel is 1.66 GEL, while retail price is 2.09-2.17 GEL.
The difference between the retail and tender prices is large but the final say in this case belongs to the competition agency, which, as we believe, has good reason to be interested in these figures.

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