Georgy Khukhashvili: "Georgia receiving 100% of gas from Azerbaijan is building a gas storage facility"

Minister of Economy and Sustainable Development of Georgia Georgy Kobulia said that after years of contemplation, negotiations, search of funds and investors, Tbilisi made a final decision to build a large underground gas storage facility. So large, that it can become an important factor of energy security in case of force majeure. The matter concerns a storage in the natural underground spaces, the number of which is quite big in Georgia, especially in the south of the country. However, their construction and creation of an appropriate infrastructure require a significant capital investment.

"The project of the underground gas storage will give us an opportunity to protect ourselves from risks," Kobulia said. "Georgia will have a gas reserve for a month and a half to ensure its supply to the population without interruption." The minister asserts that the project is commercially viable since the country will be able to purchase natural gas for storage during the period of the year when it is "relatively cheap" - during the summer season. Kobulia specified that the Georgian Oil and Gas Corporation intends to sign a contract with the Bank for Reconstruction and Development of Germany, expecting to receive about 150 million euros for the construction of the facility.

Last year, the leadership of the Azerbaijan State Corporation SOCAR confirmed its readiness to participate in the implementation of the project.

Energy expert Georgy Khukhashvili told Vestnik Kavkaza that the issue was certainly agreed with Baku, since Georgia receives 100% of natural gas from Azerbaijan, including from SOCAR.

- Will Azerbaijan participate in the project?

-Georgia can build such a gas storage facility independently with the help of international investors, but this is a very expensive project, and SOCAR has never concealed its interest in it. A degree of the Azerbaijani state corporation’s involvement is another matter, and now, probably, it is being studied in Baku. The project has many advantages. In addition to being an "airbag" in the emergency situations, which for various reasons are not so rare, it is commercially viable. This gas storage can be used not only by Georgia but also by Azerbaijan itself.

In addition, the gas storage is very useful when the contract for the purchase of natural gas is concluded on the "take or pay" principle. The fact is that in Georgia the demand for natural gas increases in winter and decreases in summer - we can buy fuel and "reserve" it for the needs of the winter heating season.

- Is Georgia currently purchasing gas using the ”’take or pay" scheme?

- We have no such problems with Azerbaijan. But if a gas storage facility is built, it is possible to purchase natural gas without fear of financial losses in case of "not mastering" the purchased fuel. We know that there are precedents in the world energy market, but the "take or pay" principle becomes mutually beneficial and safe in conditions when a buyer has a capacity to reserve fuel.

- That is why the gas storage was discussed in the 1990s, isn’t it?

- The project is constantly discussed, we were considering various options. But the necessary conditions have appeared only now. The consumption of natural gas in Georgia is about two billion cubic meters. Sometimes a little more, sometimes less. The whole volume comes from Azerbaijan through SOCAR, as well as from the international consortium, but in any case, it is Azeri gas. While it is difficult to say what capacities will be created due to the construction of the gas storage, how much natural gas can be stored in these spaces - 100 million cubic meters, 200 or more - but in any case, this project is both useful and profitable for Tbilisi and Baku. Probably, the details, including technical parameters, will be announced in the near future.

- From an engineering point of view, can it take years to build such a facility?

- It depends on the properties of those underground spaces that are going to be used. In some cases, nature itself makes it possible to construct an infrastructure fairly quickly. In Ninotsminda district, for example, there is such an opportunity.

- Can the gas storage serve not only as an inventory but also as a pricing factor?

- Of course. Such an infrastructure always contributes to the stability of prices. Especially in conditions when a demand for natural gas varies during the summer and winter periods. Thus, for the first time in the country's history, Georgia will even be able to sell natural gas in a certain period and under certain conditions

- Does this refer to the reservation of natural gas from already contracted volumes that Georgia receives from SOCAR and the international consortium?

- Unnecessarily. We may well conclude with SOCAR an additional new contract for the purchase of natural gas and reserve this volume in the gas storage facility. So we will be calm in case of force majeure since Georgia for the first time will have a resource for balancing the situation in the energy system in all theoretically possible circumstances.