SOCAR ready to solve historical problem of Georgian energy

In the near future, Georgia's Energy Ministry will officially announce the tender starting date for the construction of the country's first gas storage facility. Georgia has been the only state in the region that does not have such an important resource of influence on the "seasonal fluctuations" of energy consumption, like a natural gas storage facility.

According to local power engineers, in winter this circumstance has often caused serious problems even in the Soviet era, when the Georgian SSR was part of the energy system of a huge state with seemingly inexhaustible resources. What can we say about the present, when a small country that does not have its own irreplaceable energy carriers, is forced to play by the rules of the world market.

Director general of the subsidiary of the Azerbaijani energy company SOCAR - SOCAR Energy Georgia, Mahir Mammadov, has already confirmed that the company is ready to participate in the tender. Of course, this raises the question of why it is impossible to negotiate directly with the Azerbaijani side without any tender, due to the fact that SOCAR is the main supplier of natural gas to Georgia, which owns a network of gas pipelines, a regional distribution system and the largest Kulevi terminal. But the fact is that a "non-alternative tender" is considered a "bad tone" in political terms in Tbilisi and the opposition is always sensitive to any precedents of direct contracts with investors without their equal participation in a tender or competition. However, given the SOCAR's "trump cards" and arguments, it is unlikely that it will have serious rivals in the tender scheduled for November-December.

Mahir Mammadov

The construction of a underground gas storage (UGS) facility will be started in 2018. And by the end of 2020 the facility can be commissioned. The storage tank, with a capacity of up to 250 million cubic meters of natural gas (about 15% of the country’ current total annual consumption), will be built on the territory of the south Samgori’s capped oil field near Tbilisi.

With the help of this resource, Georgia's Energy Ministry will have an opportunity for the first time in history to flexibly regulate volumes of gas supplies and compensate the peak deficit in the winter period, as well as the daily deficit. In addition, under the agreement with the Shah Deniz consortium, there is a restriction, according to which, if is impossible to develop the delivered gas, the country loses these volumes and the possibility for re-export. The UGS facility removes this issue from the agenda.

The cost of the work had been estimated at $250-350 million. Judging by the statement of the head of SOCAR Energy Georgia, Mahir Mammadov, the Azerbaijani side does not exclude the possibility of making large investments in the project. Although the final decision on funding has not yet been made. "We hope that we will also take part in the design and construction stage, as well as at the stage of commercial operation," Mammadov stressed. Anyway, Azerbaijani gas will be the main resource for pumping into the Georgian gas storage.

Georgian Energy Minister Kakha Kaladze, in turn, said that the construction of the UGS facility is a "strategic project" and reaffirmed that Azerbaijan is Georgia's main partner in the energy sector.

The energy expert Giorgi Khukhashvili, speaking to Vestnik Kavkaza, said that by building a gas storage facility, SOCAR "will create strong guarantees for Georgia's energy security." "Our energy system's feature is a significant difference in seasonal consumption, as well as in the daily peak period," Khukhashvili recalled. According to him, "such fluctuations are always very problematic, especially if we consider force majeure circumstances that arise sometimes in addition to the seasonal and daily fluctuations". Khukhashvili noted that the construction of the UGS facility is "project of the century", which, in his opinion, "will put an end to disputes about methods of ensuring Georgia's energy security and will become a cornerstone of strategic cooperation with Azerbaijan".