President of Azerbaijani state energy company SOCAR, Rovnag Abdullayev, held talks with Georgian PM Giorgi Kvirikashvili and Energy Minister Kakha Kaladze in Tbilisi on January 13.

The visit came amid Georgia’s talks with Russia’s Gazprom on terms of transit of Russian gas to Armenia via Georgia and on purchase of additional gas from Gazprom.

Energy Minister Kakha Kaladze says that Georgia will need additional volumes of gas to fill the gap amid increasing gas consumption in Georgia.

Kaladze says that further increase of supplies from Azerbaijan, which provides about 87% of Georgia’s annual gas needs, is not possible because of “technical” reasons, especially during the winter period when gas consumption peaks in Georgia.

Georgia receives gas from two sources in Azerbaijan. About 720 million cubic meters of Azerbaijani gas came in 2015 as part of the deal in frames of the BP-operated South Caucasus Pipeline, which transports gas from Shah Deniz offshore field in the Caspian Sea to Turkey via Georgia. 1.35 billion cubic meters were imported in 2015 as part of a separate contract with SOCAR, according to data provided by the state-owned Georgian Gas Transportation Company.

“We have discussed the existing situation, technical problems and deficit that Georgia has… during consumption peak, especially in the winter period and when the gap is filled by Russian gas,” Kaladze said. “Today it is technically impossible to receive [more gas from Azerbaijan during consumption peak] and it has been the case for years – we have been filling the gap from Gazprom; that has been happening for years already and will probably continue.”
 
“SOCAR’s pipelines, through which we receive gas, work at their full capacity. But there is a possibility and we plan to implement a project, which will allow us to increase their capacity,” Kaladze said.

He said that “additional investments” will be required, specifically for a gas compressor station, in order to increase volume of gas supplied by SOCAR.

Kaladze, however, also added that it will not be possible to complete these works this year, indicating that Georgia will require increasing supplies from Gazprom to offset the deficit.
 
Georgia receives as a transit fee 10% of Russian gas delivered by Gazprom to Armenia via Georgia. Gazprom wants to pay cash as a transit fee instead of giving Georgia 10% of gas transported to Armenia. On top of gas received as transit fee, Georgia purchased 61.1 million cubic meters of gas from Gazprom in 2014. Georgia received total of about 295 million cubic meters of gas from Russia in 2015, according to data provided (without detailed breakdown of what was a precise share of transit fee in this total amount) by the Georgian Gas Transportation Company. In separate remarks on January 12 Kaladze said that the deficit that Georgia will have to fill, most likely by purchasing Gazprom gas, may reach 300-400 million in 2016.

After talks with SOCAR leadership, Energy Minister Kaladze also stressed that completion of the second phase of Shah Deniz project, expected by 2019, will help Georgia to fill the existing gap in gas supplies.

“It is also very important that the second phase of Shah Deniz project is scheduled to be completed by 2019, which will also allow us to receive additional natural gas,” Kaladze said.

Chief executive of SOCAR’s Georgian subsidiary, Mahir Mammadov, who was also present at the meeting with the Georgian PM and Energy Minister, said that “technical capacities of gas supplies, especially during peak period,” were discussed.

“We discussed how to fill the deficit. We have agreed that our expert groups will work on this issue… We will try to increase supplies [from current 6-6.5 million cubic meters per day] to 7 million cubic meters. On the other hand we are also exploring possibilities to offset this deficit during the winter period by increasing supplies [to Georgia] from Shah Deniz project [via South Caucasus Pipeline],” Mammadov told journalists after the meeting.
 
The Georgian Energy Minister reiterated “strategic partnership” with Azerbaijan and added that SOCAR has expressed interest towards Georgia’s planned gas storage facility. Kaladze said that Georgia plans to launch construction of the gas storage in 2016.

Mammadov said that Azerbaijan “welcomes and supports” Georgia’s plans to build gas storage facility and confirmed that SOCAR is interested in participation of the project. He said “format of our participation” will be defined in further negotiations.

“But today we already have willingness and consent from the both sides to jointly implement this project,” Mammadov added.

Georgia’s talks with Gazprom over supply of additional gas volumes has become source of opposition’s criticism of the authorities as opponents fear that it may lead to Georgia’s energy dependence on Russia and affect negatively on ties with strategic partner Azerbaijan.

In his opening remarks at a meeting with the SOCAR President Rovnag Abdullayev, Georgian PM Giorgi Kvirikashvili reiterated strategic partnership with Azerbaijan.

“Strategic partnership with Azerbaijan is extremely important for us. Despite of all the political speculation we’ve been hearing in recent days, strategic relations with SOCAR are very important. We are ready to consider further development and broadening of cooperation. Azerbaijan is our friend, strategic partner,” PM Kvirikashvili said.

“Nothing else matters. In this spirit we are ready to discuss with you our future relations and to solve all the problems that may exist. I think that no technical problems whatsoever should serve as an obstacle for further development of our relations,” the Georgian PM said.