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    Georgia Seeks Better Terms from Gazprom

Summary

It is paid in cash for Russian gas transit to Armenia, but it buys gas from elsewhere.

by: Dalga Khatinoglu, Ilham Shaban

Posted in:

Natural Gas and LNG News, Europe, Premium, Corporate, Import/Export, Political, TSO, Infrastructure, Pipelines, News By Country, Georgia, Russia

Georgia Seeks Better Terms from Gazprom

The former Soviet republic of Georgia wants a better transit deal with Russian giant Gazprom. Its minister for the economy and sustainable development Georgi Kobulia said January 19 that negotiations with Gazprom are underway on the terms of new agreement for shipping gas to Armenia as the old agreement expired at the end of last year.

Kobulia said the sides may reach a deal in two weeks as Georgia eyes “a significant improvement in the new contract”, without giving further information as the terms are confidential. In 2017, gas transit to Armenia was paid for in a mix of cash and raw materials and in 2018 it was paid in cash only.

At the same time, Gazprom Export guaranteed payment for gas transportation through the territory of Georgia to Armenia in volumes of 2-2.2bn m³/yr, as well as gas supply to Georgia in 2017-2018 under flexible conditions at $155/'000 m³, about $30 less than 2016 prices.

Georgia relies almost entirely on imports and predicts a 5.8% growth in demand this year, almost all of which will come from Azerbaijan. Last year it consumed 2.56bn m³.  Georgia imported 135mn m³ from Russia in 2017 but none last year or, it expects, this year, despite the low price.

Socar's sales rise

Socar told NGW that last year the Azeri state producer sold 1.4bn m³ gas to Georgia, which was up by 20mn m³ on last year. 

This was on top of the 1.1bn m³ that the BP-led Shah Deniz consortium delivered as a mix of transit fees and sale gas. Socar is a member of that consortium.

Socar also distributed 1.8bn m³ of the total to retail customers in 2018, accounting for about four fifths of the country's demand. Socar bought the gas distribution company Telavgaz at the end of last year. Telavgaz has a 400-km gas grid which supplies 16mn m3/yr gas to 19,100 customers in and around the city of Telavi. 

According to Socar, the new acquisition is a continuation of the measures undertaken by the company over the past years as part of a large-scale project for managing a gas distribution network in Georgia. Today, Socar-affiliated subsidiaries provide natural gas to over 600,000 Georgian clients. Georgia has large gas reserves but very little production of its own.