The Georgian Ministry of Energy has confirmed having talks with Iran over possible gas supplies via Armenia, but said no agreement has yet been reached.

The announcement about talks was first made by the state-owned National Iranian Gas Exports Company (NIGEC), whose head Ali-Reza Kameli was quoted by Iranian news agencies on January 4 that talks were about exporting to Georgia via Armenia about 8.5-14 million cubic meters of Iranian gas per day – the volume is higher than Georgia’s total consumption and also higher than the maximum capacity of Iran-Armenia gas pipeline.

“It was reported by the media sources that Iran is launching supply of gas to Georgia via Armenia in an amount of 8-15 million cubic meters per day to produce electricity. It should be noted in this regard, that at this stage there is no concrete agreement yet with the Iranian side; therefore, launch of supply of natural gas is not decided,” the Georgian Energy Ministry said in a statement released on January 4 after the Iranian side reported about negotiations with Georgia.

“It should be noted that Iran is one of the largest gas producers in the world and, naturally, negotiations will continue with all the potential gas suppliers in the region for the purpose of securing long-term stable and uninterrupted gas supplies to Georgia,” the Georgian Energy Ministry said without elaborating details.

Armenia imports about 500 million cubic meters of Iranian gas annually through the pipeline, which has maximum capacity of 2.3 billion cubic meters per year. Armenia uses this gas to fuel its power stations and in exchange exports electricity to Iran. Armenian section of the pipeline through which the country imports Iranian gas is controlled by Gazprom.

In early December chief executive of Russian gas monopoly Gazprom, Alexei Miller, met Georgia’s Energy Minister Kakha Kaladze in Luxembourg – it was their third meeting in less than three months.

Terms of ongoing transit of Russian gas to Armenia via Georgia and possible supply of additional volumes of Russian gas to Georgia were discussed.

Miller said at the time, according to the Russian news agencies, that he also discussed with the Georgian Energy Minister potential energy swap deals also involving Iran and Armenia; details were not elaborated.

Head of the Iran’s state-owned gas export company, Ali-Reza Kameli, was also quoted by the Iranian news agencies on January 4 that in case of agreement, Georgia would use imported Iranian gas for its gas-fired power stations to produce electricity. 

All the major thermal power plants in Georgia use cheaper Azerbaijani gas.

“At this stage, as far as I know, price [of the Iranian gas] is not competitive,” GD MP Zurab Tkemaladze, the chairman of the parliamentary committee for sector economy, told Rustavi 2 TV.

According to filings submitted last year to the energy regulatory agency by gPower, Mtkvari Energy and GIEC – companies which operate gas-fired power plants in Georgia, they were buying gas from Azerbaijani state-owned SOCAR for USD 143 per 1,000 cubic meters.

A new, 230MW combined cycle thermal power plant in Gardabani was launched in late September 2015. The power plant, which sells electricity to power distributor companies in Georgia, is co-owned by Georgian state investment fund, Partnership Fund, and the state-owned Georgian Oil and Gas Corporation (GOGC). According to the Partnership Fund the power plant buys gas from SOCAR for USD 143 per 1,000 cubic meters and it “is not considering” purchasing of the Iranian gas.

Chief executive of Azerbaijani state energy company SOCAR’s Georgian subsidiary, Mahir Mammadov, told Azerbaijani news agency, APA, on January 5 that Iranian gas can hardly compete with Azerbaijani supplies on Georgia’s “very small market”. He said that Azerbaijan has a long-term agreement with Georgia on supplies of gas to households with term of up until 2025. He said that SOCAR is also supplying gas to commercial entities in Georgia for a reasonable price.

On December 23 Energy Ministers of Armenia, Georgia and Iran, as well as head of Russia’s power distribution grids company, Rosseti, met in Yerevan and signed a memorandum to cooperate for possible synchronous operation of the four countries’ electricity transmission systems for boosting electricity trading in the region.