SOCAR GAS GAINED HOLD OF ALL GEORGIA
by Maka Kharazishvili
Rezonansi, Tbilisi, Georgia
Nov 2 2012
[Translated from Georgian]
SOCAR [State Oil Company of Azerbaijan Republic] Gas has become a
monster of the energy sector. The SOCAR Gas company has finally took
over the assets of the [natural gas retailer] Itera Georgia. The
agreement has resulted in a further increase in the gas sector
monopoly. Except for Tbilisi (Kaztransgas) and Telavi (Wissol),
entire Georgia is being supplied by SOCAR-owned gas distributors,
although even these companies purchase gas from SOCAR.
In Georgia, SOCAR imports, distributes and sets prices of gas. In
addition, the company manages preferential natural gas secured from
the Shah-Deniz gas pipeline for Georgia.
To ensure that we received cheap gas from Azerbaijan for five years,
SOCAR became an absolute monopoly in Georgia. While the population
did not benefit from cheap gas, politicians and experts say government
officials did.
In an interview to Rezonansi, Itera Georgia General Director Davit
Beradze said that as a result of the deal, 10 gas distributing
companies had been handed over to SOCAR.
SOCAR “in full control” of gas supplies in Georgia
“I am not aware of the details of the deal. This is shareholders’
competence,” Beradze said. At the moment, SOCAR owns 38 gas
distributing companies throughout Georgia and is in full control of
gas supplies in the country.
Experts say after such an increase in the degree of monopoly, the
Ministry of Energy should review the previous minister’s decision
and freshly regulate tariffs of gas supplies to the population. At
the moment, the tariffs are deregulated and are unanimously set by
appropriate companies.
Head of the Azerbaijani state-owned oil company (SOCAR), Rovnaq
Abdullayev, officially confirmed that SOCAR had purchased the Itera
Georgia gas distributing company. Abdullayev, at the request of the
second party, declined to release details of the cost of the agreement,
but said that SOCAR did not have to pay much to obtain the assets. “The
negotiations had been under way for a long time and the agreement
was signed after all risks had been assessed,” said Abdullayev.
According to the Azerbaijani news agency Trend, SOCAR became the only
gas distributor in all of Georgia, except Tbilisi.
In 2009, Georgia handed over 30 regional gas distributors to SOCAR. At
that time, SOCAR only paid 10m dollars for the entire network.
As we have already noted, due to the fact that the country needed
uninterrupted gas supplies, the previous government made significant
concessions to the gas exporter. In exchange for the five-year
agreement and 167-dollar gas, SOCAR became an energy giant in Georgia.
This was the first time the Azerbaijani side expressed the willingness
to sign a long-term contract. Before that, the SOCAR leadership would
have the Georgian government beg for an even one-year contract. Often
Azerbaijan would promise a one-month contract to Georgia.
Specific individuals, not people benefited from gas deal
It appeared that the Georgian government, faced with Russia, accepted
all of Azerbaijan’s terms. However, this was not the sole reason –
specific individuals also benefited from this contract. Therefore,
it is interesting to analyse these contracts, to look into whether or
not Georgia could engage in energy cooperation with Azerbaijan without
SOCAR becoming the energy giant in the country. It is noteworthy
that to transport its energy resources, Azerbaijan needs Georgia as
a transit country as much as Georgia needs Azerbaijan’s oil and petrol.
Today, Azerbaijan fulfils all necessary functions on the natural gas
market: it imports, distributes and sets prices for gas. According
to Rezonansi, SOCAR also ensures supplies of gas received from the
Shah-Deniz consortium and Russia in exchange for the Armenia transit.
SOCAR controls Georgia’s oil business
Apart from this, SOCAR controls Georgia’s oil business. SOCAR holds
the exclusive right to import petrol and diesel from Azerbaijan to
Georgia. SOCAR also owns the Qulevi oil terminal. SOCAR obtained all
these assets as a result of the five-year gas agreement four years ago.
Moreover, in August 2008, it was announced specifically for SOCAR that
gas tariffs for the population had been deregulated. Before that,
the Georgian National Energy and Water Supply Regulatory Commission
would set the maximum tariff of supplies. Specifically, within the
frameworks of the previous government’s programme called “Gas for
Every Village”, SOCAR started the construction of gas distributing
networks. Consequently, under the pretext of implementing additional
investments, it raised the issue of raising gas tariff before the
government. Therefore, on the basis of a relevant order by former
Energy Minister, Aleko [Aleksandre] Khetaguri, the tariff was declared
partially deregulated. Consequently, SOCAR was granted the right
to impose higher tariffs on its new customers, which is why the gas
tariff for new customers is 59 tetri, instead of 51. However, when
SOCAR purchased gas distributing companies at a low cost in 2009, it
pledged to place a 50-million-dollar investment in the construction of
new networks. At that time, there were no talks about the deregulation
of the gas tariff.
In an official statement, the ministry said that removing regulatory
frames from the tariff had been prompted by rising competition. How
the three companies – Itera Georgia, Kaztransgas Tbilisi and SOCAR –
would create a climate of competitiveness is another matter. However,
given that even these scales of competitiveness were eliminated,
the new energy minister will hopefully reconsider his predecessor’s
decision and regulate the gas tariff, which is now determined by a
monopoly company.
Regarding the monopoly of SOCAR Gas, Minister Kakhi Kaladze so far
has only said that he would study the market and would not permit
monopoly in the energy sector.
[Translated from Georgian]
From: Baghdasarian