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    Georgia eyes $171mn German Bank Loan


This, added to another expected loan, would provide the bulk of the money needed for a gas storage construction project covering a good chunk of the country's gas demand.

by: Dalga Khatinoglu, Ilham Shaban

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Natural Gas & LNG News, Europe, Corporate, Import/Export, Infrastructure, Storage, News By Country, Azerbaijan, Georgia

Georgia eyes $171mn German Bank Loan

Georgia is hopeful of a €150mn ($171.3mn) loan from the German Bank for Reconstruction and Development (KfW) so it can build its first underground gas storage (UGS) facility. Prime minister Mamuka Bakhtadze said that KfW and the Georgian Oil and Gas Corporation (GOGC) were close to a deal, the government’s official website has announced.

"The project ensures the correction of an imbalance between the supply and demand for natural gas in the country, thereby meeting the peak demand in winter," he said.

The UGS is planned to be built near Tbilisi on the southern side of the former Samgori oil field in eastern Georgia and have a capacity of 250-280mn m³ of gas, or 15% of Georgia’s annual demand. It is estimated to cost $250-$300mn.

Georgia has already said that the European Investment Bank also intends to allocate a $100mn loan for the project and the rest of the money would come from GOGC, so perhaps $30mn based on the upper end of the cost estimate. 

Construction of the UGS could be finished by 2021, when Azerbaijan starts supplying 16bn m3/yr Shah Deniz phase 2’s gas to Turkey and EU.

Georgia receives 5% of what Azerbaijan exports to Turkey as its transit fee, based on a 40-year contract, signed in 2007 between Azerbaijan and Georgia.

That means Georgia receives 1.125bn m³/yr as transit fee from SD1’s 6.5bn m³/yr and 16bn m³/yr from SD2 gas transit after 2020, which would account for 45% of its total demand in early 2020s. Azerbaijan’s state-run Socar also separately exports gas to Georgia, which only receives gas from that country. Socar itself might be interested in building the UGS.