Georgia’s joining Energy Community to affect SOCAR activities in country

Business Materials 30 April 2016 16:22 (UTC +04:00)

Baku, Azerbaijan, Apr. 30

By Elena Kosolapova - Trend:

Georgia's accession to the Energy Community will affect activities of the State Oil Company of Azerbaijan (SOCAR) in Georgia, the country's Deputy Energy Minister Mariam Valishvili told Trend.

Valishvili said that Georgia is currently holds talks regarding accession to the Energy Community, and in case of success the country must fulfill a number of requirements adopted within the framework of this organization. In particular, according to the rules of the Energy Community, gas suppliers cannot be majority shareholders of gas distribution facilities.

The Energy Community is an international organization dealing with energy policy. The organization was established by an international treaty in October 2005 in Athens, Greece. The Treaty entered into force in July 2006. The Treaty establishing the Energy Community brings together the European Union, on one hand, and countries from the South East Europe and Black Sea region. Georgia is a candidate country to join the community.

The deputy minister reminded that nowadays SOCAR is the main gas supplier on the Georgian market and at the same time is a distributor of gas. Therefore, in case of Georgia's joining the Energy Community, a restructuring will be needed for SOCAR subsidiaries engaged in gas distribution in Georgia, which has already begun, Valishvili said.

Also, Georgia's accession to the Energy Community will mean that SOCAR won't be able to claim a controlling stake in the new gas storage facility planned to be built in this country, Valishvili said. Earlier, a source in SOCAR told Trend that the company clearly intended to buy a stake in the gas storage, because the company considers it a strategic asset.

The beginning of construction of underground gas storage is planned for 2016. It will be possible to store 230-250 million cubic meters (mcm) of natural gas, accounting for 15 percent of the annual gas consumption in Georgia, after the completion of construction of the underground gas storage facility.

Valishvili went on to add that restrictions within the framework of the Energy Community suggest that a company, which is the monopoly supplier on the market, cannot have absolute control over the gas storage facility. At the same time, SOCAR can be a minority owner of the facility without any restrictions, she said.

Valishvili added that the question regarding the management format of the gas storage facility hasn't been resolved yet. She said that an option, which suggests that the gas storage facility will be a part of the infrastructure that provides transportation of natural gas on the territory of Georgia, is being considered. In this case, the gas storage facility will be controlled by the state.

Other option under consideration suggests that the gas storage facility will be a separate entity under the control of an independent corporation. In both cases, SOCAR can become a minority shareholder of the facility.

The gas storage facility is a monopolist on the market, because at the moment, there are no other gas storage facilities in Georgia, Valishvili said.

The deputy minister went on to add that Georgia hopes that the issue of the country's accession to the Energy Community by October will be submitted for consideration of the council of ministers of this organization, and in case of success, ratification of the protocols will start.

Valishvili also said that Georgia expects to get certain preferences and exemptions in general when joining the organization, as the country is not the EU member, has no borders with any of the EU countries and its market is isolated.


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