Georgia Relies on Russian Gas, as Shah-Deniz Delayed

As launch of gas supply from Shah-Deniz field is delayed, Georgia has still to rely mostly on import of Gazprom’s expensive gas in the beginning of 2007, Georgian Prime Minister Zurab Nogaideli said.

Import of Shah-Deniz gas to Georgia, which was scheduled to launch on December 22, is delayed because of “technical problems” at the drilling wells, Georgian Prime Minister Zurab Nogaideli said on December 22.

It may take weeks to fix the problem, he added.

Senior lawmakers said after meeting with the Prime Minister late on December 22 that although there will be no problem with gas supplies from January, 2007, expensive price on Russian gas – USD 235, instead of current USD 110 per 1000 cubic meters – remains a major problem.

The government is now seeking ways how to ease burden of Gazprom’s expensive gas on households in Georgia.

State Minister for Economic Reforms Kakha Bendukidze said the government is mulling to subsidize increased gas price for household.

“Your know my opinion, that I am against of subsidizing increased gas price, but the government has a position that it is necessary to undertake some steps to protect the socially most vulnerable people,” he said on December 22.

PM Nogaideli said that the government has already requested the Parliament to postpone hearings on draft 2007 state budget from December 27 to December 29, “as we have to make some amendments in the draft.”

Most of the lawmakers, including those in the opposition, seem to take a populistic streak and back to subsidize gas tariffs at least for winter period.

“As we are now facing an emergency situation [with delay of Shah-Deniz gas] – I do not know why it happened, whether it is a technical problem or something else – the state budget should now compensate increased gas price for next several months and tariff on gas and electricity should not go up,” MP Davit Gamkrelidze, leader of the opposition New Rights party, said after meeting with the PM on December 22.

MP Zurab Tkemaladze, leader of the opposition Industrialist Party, said the government has not yet decided on how the budget will subsidize increased gas price.

Meanwhile, Georgian Energy Minister Nika Gilauri said on Sunday that he agreed with his Turkish counterpart Hilmi Guler in Ankara on December 22 on terms on which Turkey will concede part of its gas share from Shah-Deniz to Georgia.

The Turkish Embassy in Tbilisi declined to make a comment on this report.

According to the Georgian Energy Ministry, Georgia will have part of Turkey’s share – 800 million cubic meters of gas from Shah-Deniz in 2007, plus Georgia’s original share – 250 million cubic meters. But terms, including price, are not disclosed.

But it seems that some details still need to be agreed with Azerbaijan, as Georgian PM Nogaideli is expected to travel to Baku to negotiate with the Azeri officials on, as he put it, “some technical issues.”

Meanwhile, in Moscow Gazprom’s top executive Alexander Medvedev said on December 22 that an agreement has been signed with three companies in Georgia on delivery of a total of 1,1 billion cubic meters of gas in 2007.

One of these companies is KazTransGaz-Tbilisi, gas distributor in the Georgian capital, which signed contract with Gazprom on three-month term.

Two other companies are Saqcementi, a cement producing factory which needs about 250 million cubic meters annually and Russian-owned electricity grid Telasi, which needs about 300 million cubic meters of gas annually for its power generator plant number 9 in Gardabani.