OREANDA-NEWS. October 29, 2009. Realization of the agreement signed on December 26 in Tbilisi by State Oil Company of Azerbaijan (SOCAR) president Rovnag Abdullayev and then Georgian economy minister Lasha Zhvaniya is ongoing.

The agreement covers purchase of 22 gas-distributing companies in such regions as Kakheti, Mtsekhta-Mtianeti, Shida and Kvemo Kartli, Adzharia, Guriya, Imereti, Samegrelo (the Marneuli, Gardabani, Dmanisi and Bolnisi regions were added to them later).

SOCAR reports that on 27 October its subsidiary SOCAR Georgia Gas commissioned a gas pipeline in village Tskhratskharo of Zastafon region of Georgia.

Earlier SOG opened a gas pipeline in Dmanisi (eastern Georgia) to ensure gas for Dmanisi and region’s villages.

This year the Company will invest USD 20 million in construction of gas distributing networks in Georgia with overall length of up to 800 km.

That will allow gasification for 57,000 consumers and is part of Georgian government’s social programme on gasification of villages.

By the present SOCAR Georgia Gas has accepted 100% networks in Gardabani and Dmanisi and 42.55% in Bolnisi under its authority, and the Company has already launched the works to gasify the regions.

By 2010, SOCAR Georgia Gas should connect 57,000 new gas consumers to gas supply, including 10,000 ones in Marneuli, 7,000 in Gardabani, by 5,000 in Bolnisi and Dmanisi.

The chosen districts are places of compact residence of Azerbaijanis in Georgia.

Under the contract, SOCAR has the right to gasify 30 cities and districts (over 150,000 gas consumers) in regions of Georgia and invest USD 40 million in industry development.

Initially the investment plan intended to expand up to 250,000 gas consumers. In order to provide coordinated number, the company will have to supply 250-300 million cu m gas against existing demand for 60 million cu m.

Starting from February 10 the gas networks transferred under authority of SOCAR Georgia Gas.

Already from 1st March the Company started providing them with gas due to own deliveries. Daily the networks receive 2.5-3 million cu m of gas. The deliveries had to make 5-69 million cu m a day, but smooth weather conditions allowed supplies with lower volumes.

On January 22, SOCAR Georgia Gas paid privatization cost of these distributing networks.

At the signing ceremony Abdullayev said that the Company undertook the commitment to implement all the undertaken functions and gasify 300,000 consumers in Georgia for three years.

Under the contract, SOCAR has the right to gasify 150,000 gas consumers in regions of Georgia and invest USD 40 million in industry development.

According to the decree issued by Georgia’s President in May 2008, SOCAR got a gas distributing network of Georgia’s 29 regions.

The Company is entering Georgia’s gas market through its subsidiary enterprise SOCAR Georgia Gas. For this the Ministry of Economy of Georgia and SOCAR should sign an agreement on privatization of part of Georgian regional gas networks.

Over the three years SOCAR Georgia Gas plans gasification of 250,000 subscribers in Georgian regions. Investments will total USD 111 million.

Earlier Abdullayev emphasized that the Company intends to increase its share at the Georgian gas market up to 80-85% in 2009-10. In 2009, SOCAR will supply 452 million cu m of gas to Georgia for social category of gas consumers.

On November 14, the SOCAR president and energy minister Alexander Hetaguri of Georgia signed the Memorandum on gas supplies for Georgia.

The Memo creates opportunities for SOCAR active operations at the Georgian market for the next five years starting from 2009 to be conducted through created subsidiaries. The Memo says of realization of commitments undertaken by the Georgian government before individual gas consumers. Both Azerbaijan and Georgia will create possibilities for realization of these commitments. In particular, SOCAR subsidiary in Georgia will sell gas on fixed price not exceeding the price of gas delivered to Georgia within Shah Deniz project and for transit of Russian gas through its territory. SOCAR is ready to supply its gas to implement its subsidiary’s commitments in Georgia.

At the same time according to Georgian leader Mikhail Saakashvili, gas price for retail consumers will not increase in Georgia. Within the framework of the 50-month programme the Government will be able to keep its promise and ensure 80% of gas supplies for the population.

Earlier, hostilities in Georgia upset signing of a contract with SOCAR for management with gas distribution networks in this country.

Mair Mammadov, the head of SOCAR subsidiary Socar Energy Georgia, said that contract signing was scheduled for August 13, but because of events in South Osetia the date was re-considered. The contract is oriented to 30 gas economies consuming around 45-50 million cu m of gas.

Currently Azerbaijan is the main natural gas supplier of Georgia. Gas deliveries are implemented by the State Oil Company of Azerbaijan Republic (SOCAR) (1.5 million cu m a day). Another 1 million cu m are received by Georgia via SCP from Shah Deniz and 10% of the whole gas volume transported through its territory from Russia to Armenia. Besides, a range of Georgian large enterprises purchase Russian gas themselves under direct agreements.