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SOCAR Says No Need to Build LNG Terminal in Georgia

SOCAR doesn’t need to build a new LNG terminal on the Black Sea coast of Georgia in the near future.

This was noted by Vagif Aliyev, the Head of the Investment Department of Azerbaijan’s state energy company SOCAR, in an interview with local TV channel on January 7.

He said that gas consuming countries of the region are located close to gas exporting countries.

“Furthermore, there is not a major consumer of liquefied and compressed natural gas in the region, while the terminal is needed to store large volumes of gas. For this reason, investing in the construction of the terminal would not be practical now. SOCAR has a large oil terminal in Kulevi, which operates very efficiently, and the company has established relevant infrastructure. If any appropriate condition rises in the future, we will consider the possibility of building an LNG terminal,” he added.

SOCAR’s terminal in Kulevi was put into operation in 2008. The terminal’s capacity is 10 million tons of bulk oil cargoes annually. The capacity of the reservoir park of the terminal is 320,000 cubic meters with the possibility of increasing to 380,000 cubic meters.

Iran’s gas supply to Georgia to have political context

Touching upon Iran’s plans to export its natural gas to Georgia through a pipeline, potentially viewing Armenia as a transit country, Aliyev said that for Tehran, possible gas supplies to Georgia will have a political context, not an economic one.

He noted that while Georgia is a close neighbor and strategic ally of Azerbaijan, each state determines its own energy strategy.

“SOCAR has strong position in Georgia. Over the past five years, SOCAR has become the largest taxpayer in Georgia. Georgia and Azerbaijan signed an agreement on gas deliveries until 2030”, Aliyev said. “We are the main supplier of the natural gas to the country, in addition, another part of the volume Tbilisi receives as transit fee for transportation of Russian gas through its territory to Armenia.”

Azerbaijan is the main supplier of gas to Georgia with a share of 77.9 percent of total imports of this category. Azerbaijan exported 1.5 billion cubic meters of gas to Georgia in January-November 2015.

Gas from Azerbaijan to Georgia is delivered via the Baku-Tbilisi-Erzurum gas pipeline, which transports gas produced in the giant Shah Deniz gas condensate field in the Caspian’s Azerbaijani sector. SOCAR supplies its own gas to Georgia via a pipeline that passes through the Azerbaijan’s Gazakh region. Power flow of gas through this pipeline is about three billion cubic meters a year.

TANAP is progressing in line with plans

Trans-Anatolian gas pipeline project, which envisages the transportation of gas from Azerbaijan’s Shah Deniz field on the Georgian-Turkish border to the western borders of Turkey, is progressing in line with schedule.

“All preparation works are completed and the practical phase has started,” he said adding that approximately, 850 kilometers of pipes have already been produced for TANAP, they were tested and delivered to contractors.

A 600-kilometer land area has been prepared for pipe laying, and the welding works have already been carried out on 230-kilometer area, Aliyev noted.

TANAP’s initial capacity is expected to reach 16 billion cubic meters of gas per year. Some six billion cubic meters of this gas will be delivered to Turkey and the rest will go to Europe.

TANAP’s shareholder list will be as follows: SOCAR, 58 percent; Botas, 30 percent; and BP, 12 percent. The capital costs of the TANAP project are expected to stand at $9.5 billion. It is expected that the TANAP project will be implemented in time – in 2018, and possibly even earlier.

Commenting on the possibility of transportation of Iranian gas via TANAP, Aliyev said that this issue was discussed only at the political level, rather than commercial level.

Meanwhile, he didn’t rule out the possibility of supply of blue fuel from other possible sources via TANAP.

“In the first stage, its capacity will be 16 billion cubic meters of gas per year. But the pipeline is expandable up to 31 billion cubic meters for ensuring supplies from other possible sources. Technically, it will give an opportunity to deliver more gas to Turkey. However, the question of commercial deliveries of the Iranian gas via TANAP has not been discussed yet,” he added.

Commenting on the possibility of increasing deliveries of Azerbaijani gas to Turkey on the background of worsening relations between Ankara and Moscow, SOCAR official said that now Turkey does not have any problem with gas supply.

“Currently, there is not such a necessity. Nevertheless, we consider the opportunity to increase the supply, and the current system allows doing it. These questions will be addressed to the extent possible,” he stated.

Construction of new gas storage in Nakhchivan irrelevant

Aliyev went on to add that SOCAR considers the construction of underground gas storage in the Nakhchivan Autonomous Republic in the near future irrelevant.

“Despite the fact that Azerbaijan’s demand for gas is growing, its consumption in the Nakhchivan Autonomous Republic is at an average of 300 million cubic meters a year, so there is no need to build storage facilities there,” he said.

Azerbaijan has two underground gas storages facilities, Kalmaz and Garadagh, which are on the balance of SOCAR.

“They are constantly being upgraded, new wells are drilled there, and gas compressor stations have already been installed,” Aliyev said. “Currently, their capacity is up to 4.5 billion cubic meters, accounting for 30-35 percent of domestic consumption of gas in Azerbaijan. It’s sufficient to cover the gas demand.”