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    Georgian Gas Storage Gets German Loan


It is the only country in the Black Sea region without gas storage.

by: Mark Smedley

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Georgian Gas Storage Gets German Loan

Georgia is to receive a German loan for at least 60% of the cost of a new gas storage facility, it was announced August 23 by German chancellor Angela Merkel during her visit to Georgia’s capital Tbilisi where she met prime minister Mamuka Bakhtadze. The loan agreement was signed the following day.

Merkel travels on to Azerbaijan on August 25 where she will broach the possibility of German firms securing future Azeri or even Turkmen gas supplies. However gas from Azerbaijan’s main export ventures Shah Deniz 1 and 2 is already fully contracted, with only one such contract (Uniper for 1.45bn m3/yr from 2020) held by a German company. In the past German firms were also interested in developing gas in Turkmenstan, but one such DEA tells NGW it no longer has block 23 in that country's part of the Caspian Sea.

German development bank KfW, on behalf of the German government, signed the €150mn ($173mn) loan August 24 with state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia; total investment in the project is €220mn-€250mn ($254mn-$289mn). KfW said the future storage facility’s capacity is around 0.4bn m3, equivalent to 10%-15% of Georgia’s annual gas consumption, and will be close to the capital, Tbilisi. It also said the European Investment Bank (EIB) will also provide some financing.

Georgia’s gas supply is based exclusively on imports from Azerbaijan (90%) and Russia (10%), said KfW, so the project will improve its security of supply. Four-fifths of Georgian households are connected to the gas network so should benefit. It said the loan was being offered pursuant to a requirement for Georgia to create domestic gas storage facilities as part of the EU Association Agreement.

Bakhtadze said earlier this week that KfW and GOGC were close to a deal and that EIB might provide a $100mn loan too. Georgian sources had said the storage capacity would be 0.25-0.28bn m³ of gas and would be completed by 2021.

“To date, Georgia is the only country in the Black Sea region without gas storage facilities. With the construction of the first underground gas storage facility, Georgia is significantly improving its energy supply” said KfW director Joachim Nagel. The German bank has previously financed hydro-electric and energy-efficiency projects in Georgia. 

(Banner photo shows chancellor Merkel on arrival at Tbilisi, Georgia, being received by the country's prime minister Mamuka Bakhtadze; credit: German government/ Denzel)