Azerbaijan to supply Georgia with additional gas

Jul 11, 2006 02:00 AM

Finally the Georgian government has cut a deal to receive extra natural gas from Azerbaijan. The Azeri Minister of Industry and Energy, Natik Aliyev, said that his country was ready to deliver extra natural gas to Georgia, but added that this gas would be sold at the market rate.
The time when Caspian gas will reach the global market via the South Caucasus pipeline is drawing nearer. Georgia, looking to be less dependant on Russian energy supplies, has been seeking to receive more gas from the pipeline than the deal originally specified.

The government had been hoping -- perhaps naively -- that it would be able to purchase this extra gas at a knockdown price. It seems, however, that this was nothing but a pipe dream: Azerbaijan has put profits ahead of its strategic partnership with Georgia, and is demanding that market prices be paid. What market prices might actually be in the winter of 2006-7 is very difficult to say.
Today Georgia pays $ 110 for 1,000 cm of Russian natural gas. The price is to be increased next year.

Whether Russian gas will turn out to be more expensive than Azeri or not, it is vitally important for Georgia to diversify its supplies. Over the coldest period this winter, a “terrorist attack” on the trunk pipeline that supplies Georgia with Russian gas left the country shivering. The “terrorists” are widely believed to be in the employ of the Kremlin.
The current deal gives Georgia 5 % of the transited gas, and the possibility to purchase an extra 5 % for $ 55 per 1,000 cm, though this is not enough to totally satisfy Georgian consumers.

During the Georgian Prime Minister's visit to Baku, his Azeri opposite emphasized that Azerbaijan considers Georgia as its most important strategic partner, not just regionally but worldwide. Artur Rasizade, the Azeri prime minister, stated that in 2005 the Azeri-Georgian trade turnover increased by 72 %.
"The construction of the South Caucasus natural gas pipeline ushers in a new era in the relationship between the two countries." Rasizade said.

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