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Why “Gazprom” Comes to Georgia: Energy Geopolitics Case

A story of launching a mild cooperation between Russian energy merger “Gazprom” leadership in name of its President of Director Council, Alexey Miller and Georgian government in name of Fuel and Energy Affairs Minister, Vice-premier Kakha Kaladze since September 2015. In 2016 in Brussels two VIP persons met in Brussels to discuss matter of cooperation between the parties. More in detail – During the meeting, the sides discussed the cooperation in gas sphere. They were talking about the supply of Russian natural gas to Georgia, as well as its transit to third countries .The negotiation was hold in very secret manner however soon it was discovered by the mass-media means. Georgia, by and large, needs only 2 billion cubic meters of gas annually. As it is known “Gazprom” supplied to Georgia about 0.3 billion cubic meters in 2014, this is about 25% of the Georgia’s consumption of gas and the rest is being supplied by the Azerbaijani merger that is also state-run energy corporation “SOCAR”. Moreover, Georgia receives about 0.5 billion cubic meters of gas as tax fee from the transit from the South Caucasus Pipeline. However, the tax fee condition for the accessible gas supply to Georgia expires a year later in 2016 and it means that Azerbaijani side could reconsider and change the fee conditions for Georgia. For commercial purposes, the Georgian government purchases about 1.2 billion cubic meters of gas mainly from Azerbaijani SOCAR merger and the prices is determined by the merger itself. The price is also changed due to the realms of geopolitical configuration and economic crisis erupted in Azerbaijan and in Georgia. In addition to that SOCAR partially monopolize the Georgian energy market and seeks to expand its activities in the country. However, main directions of SOCAR Georgia Gas activity comprise import into the Georgian market and sale of natural gas, as well as construction and rehabilitation of gas pipelines. Main revenues for the SOCAR merger comes from Shah-Denis gas deposit and ACG oil filed. As for gas supply to Georgia itself, the gas volumes for social consumption has been contracted for a fixed term, mainly for short-term period three-six months, upon to which gas retail price has not changed steadily in favour in no consumer country interests. Far more, SOCAR Trading, headquartered in Geneva, markets SOCAR crude oil export volumes from Ceyhan, trades third party crude and oil products and assists SOCAR with international investments in logistics, downstream and sales.  The Gas Processing Plant produces processed gas, liquefied gas and natural gasoline. In 2010, the plant produced 4 billion cubic meters of processed gas, 24,800 tons of liquefied gas and 26,700 tons of natural gasoline. Alongside with its field of activity in marketing and sales, SOCAR Trading assists SOCAR in expanding SOCAR’s assets as well.

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