Azerbaijan/Georgia Upstream, Downstream/Transit Country Cooperation

Transcription

1 Azerbaijan/Georgia Upstream, Downstream/Transit Country Cooperation 2nd SOCAR INTERNATIONAL CASPIAN AND CENTRAL ASIA DOWNSTREAM FORUM TRADING, LOGISTICS, REFINING, PETROCHEMICALS Baku, Azerbaijan, Аpril 2017 Liana Jervalidze, Research Fellow, Orbeliani Center for Advanced Strategic and Energy Policy Studies, PSI Georgia 5/2/2017 Liana Jervaldze 1

2 Content Georgia s Energy Market oil and gas import dependent. Strategic Cooperation with Socar in Natural Gas sector Oil Products Sector Transit Issues Liana Jervaldze 5/2/2017 2

3 Georgia and International Platforms, EP, EC Full Membership EU Association Agreement, Chapter on Energy and Transit in force since 2016 EC full membership protocol signed in 2016 to be ratified in coming months Approximation with EU standards in domestic energy sector development and transit but derogations from directives regulating domestic gas market and transit. 5/2/2017 Liana Jervaldze 3

4 Georgia s Energy Market- Small, Import Dependent on Oil and Gas Annual consumption : 1,225,6 mln tons in 2015 imported; 2,422 bcm natural gas in ,156bcm from Azerbaijan, 250 mln m3 from Russia for transit to Armenia(185 mln m3) and commercial gas (66 mln m3); 11,730 billion kwh of electricity 70% hydro, self-sufficient, 30% thermal based on imported natural gas; 5/2/2017 Liana Jervaldze 4

5 Structure of Georgia s Gas Market Total Consumption in 2016: 2,422 bcm natural gas in ,156bcm from Azerbaijan, 250 mln m3 from Russia for transit to Armenia(185 mln m3) and commercial gas (66 mln m3); Social Gas- 1,4 bln m3 Consumption by households Power Generation 80% Met by gas of SD-1 contract and Russian gas transit to Armenia Commercial gas- supplied by Socar and very small volumes by Gasprom(66 mln m3 in 2016) 5/2/2017 Liana Jervaldze 5

6 New Terms of Russian Gas Transit for Armenia Valid for Two Years Monetization in two phases : First year % of in kind payment for 50% of gas transited to Armenia Second year monetization 100%. No take-or-pay No use-or-pay Georgia eligible to buy gas from Gasprom in case Socar fails to supply in winter peak-demand Georgia shall have to buy some gas from Gasprom to meet winter peak demand if and when Socar fails to supply; 5/2/2017 Liana Jervaldze 6

7 Georgia-Azerbaijan Gas Pipeline System Khazakh Georgia old soviet gas pipeline with technical limitations to 7 mln m3 of gas per day, while the peak demand in Georgia in December 2016 reached 12 mln m3 per day South Caucasus gas Pipeline- the SCP consortium kindly allowed Socar to use the network capacity for supplying additional gas to Georgia 5/2/2017 Liana Jervaldze 7

8 Policy Georgia s Hydro Power Sector and Renewables Development Wind farm of 20 MW built and producing since 2016 In new hydro projects initiated Installed capacity 3,00MW, production 12 bln kwh, investment needed $4,1 bln But some projects undergo revision for compliance with environmental standards 5/2/2017 Liana Jervaldze 8

9 Armenia, Georgia s Power System Well Connected with All Neighbors Azerbaijan Russia Turkey new 500 KW line With ENTSO expanded to Georgia /Turkey border, potential power trade with EU member countries 5/2/2017 Liana Jervaldze 9

10 Georgia Transit for Azerbaijani Thermal Electricity to EU Market in Winter (new 500kW line) 5/2/2017 Liana Jervaldze 10

11 SOCAR in Georgia Strategic Supplier of Natural Gas, with Access to Downstream, SOCAR the main supplier of gas to Georgia since 2007 long term gas supply agreement up to 2028; SOCAR Access to downstream SOCAR Georgia Gas, Ltd (SGG) was established in June 2007, in 2008 acquired 30 distribution companies in the regions of Georgia Kakheti, Mtskheta-Mtianeti, Inner and Lower Kartli, Ajara, Guria, Imereti, Samegrelo. SOCAR Gas has consumers in the regions. Total investments of SOCAR Georgia Gas in 10 years about $1bln. 5/2/2017 Liana Jervaldze 11

12 SOCAR in Georgia Strategic Supplier of Oil Products SOCAR Petroleum Georgia was established by SOCAR Energy Georgia in September 2006, SOCAR Petroleum opened first filling station on 25 April 2008 and currently operates 120 filling stations, holds and operates Kulevi oil terminal at the Black Sea shore with 10 mln tons transshipment capacity per annum; In 2016 SOCAR share on products market was about 20% ; 5/2/2017 Liana Jervaldze 12

13 SOCAR One of The Largest Taxpayer since Socar Petroleum Georgia - investor and taxpayer At present the company has more 1500 employees. The total amount paid by SOCAR Georgia Petroleum, Ltd to the state budget of Georgia in GEL. Socar Energy Georgia LTD SOCAR Georgia Gas, Ltd (SGG) daughter of Socar Energy Georgia LTD distributes gas and builds new and refurbishes old gas pipelines in 30 regions, such as Kakheti, Mtskheta-Mtianeti, Inner and Lower Kartli, Ajara, Guria, Imereti, Samegrelo. At the present time more than new users are included in the general gas network. SOCAR Georgia Gas, Ltd's total investments amount to 215 million USD dollars. At that moment more than 5300 km of new network is built. The number of workers in main staff and specialists is up to persons. 5/2/2017 Liana Jervaldze 13

14 Strategic Cooperation on Transit Issues Existing Projects in Low Price environment Transit of Oil: Baku-Tbilisi-Ceyhan about 28, 8 mln tons in 2016 (with 50 mln tons capacity) Baku/Supsa- oil- about 2 mln 383 thousand tons in 2016 (7,5 mln tons of capacity) South Caucasus Gas Pipeline to Turkey: 6,23 bln m3 in 2016 (capacity 6,6 bln m3) Railway transportation Fell from 6,747,571 mln tons in 2015 to 5,494,131 tons in 2016 Khulevi terminal on the Black Sea also not fully loaded Problem: BTC, Baku/Supsa and SCP not fully loaded, Georgia s income depends on barrels and cm transported per day 5/2/2017 Liana Jervaldze 14

15 New Geopolitical Conditionalities SOCAR-Rosneft, Gasprom Cooperation, Swaps and exchange of assets, joint operations? Impact on Trans Caspian Gas Pipeline? Load of BTC? 5/2/2017 Liana Jervaldze 15

16 Transit of Natural Gas through South Caucasus Corridor Development of Shakh Deniz -2 by 2019? For supplying Turkey yes but Tap still uncounters problems Routes selected: Tanap Tap Maybe coming Trans Caspian Gas Pipeline? With only DS-2, Southern Gas Corridor only 16 bcm per year, very limited to compete with historical and new suppliers in EU 5/2/2017 Liana Jervaldze 16

17 Price Collapse, Increased Competition for EU Gas Market Historical Suppliers: Russia 34% of market in EU, 180 bln m3 sold in 2016 Norway-24% of the market in EU Algeria- about 10% New suppliers US shale LNG(some already reached EU) East Mediterranean Urgent need for developing competitive strategy; 5/2/2017 Liana Jervaldze 17

18 Oil and Gas Transit through South Caucasus Corridor 5/2/2017 Liana Jervaldze 18

19 Historical Suppliers Gasprom Nord Stream 2, price of Russian gas very competitive- about $5 per million BTU 5/2/2017 Liana Jervaldze 19

20 New Suppliers East Mediterranean, Israeli and Cyprus 30 BCM per year Pipeline in deep waters, Israel, Cyprus, Greece, Italy to be built in 7 years Cost of the pipeline $6 bln. Israeli and Syprus 5/2/2017 Liana Jervaldze 20

21 AGRI Azerbaijan, Georgia, Romania Interconnector, Black Sea Platform Joint company and board set up (SOCAR, GOGC, Romgas), Construction sites identified Capacities and costs identified Prefeasibility by Penspen Slow dawn: TANAP number-1 priority, potential for LNG swaps, fuel for inland transportation and marine fuelling 5/2/2017 Liana Jervaldze 21

22 Georgia s Position on Transit Offer clear, transparent and stable transit conditions to its partners Facilitate Producer Consumer Dialogue 5/2/2017 Liana Jervaldze 22

23 Exploration and Production Prospects Licenses granted to develop a number of onshore blocks, small companies engaged Preparation to open bidding for an offshore block in the Black Sea Hope to attract majors in E&P 5/2/2017 Liana Jervaldze 23

24 Thank You 5/2/2017 Liana Jervaldze 24