Caspian Energy (CE): Mr. Kaladze, are you satisfied with the level of energy security of Georgia?
Kakha Kaladze, Minister of Energy of Georgia: Currently, energy mix dependency of Georgia on external sources is around 75%-80%. It also possesses significant potential for developing hydro resources. Due to its high dependence on imports for hydrocarbons, the government’s efforts are targeted on import diversification and maximum utilization of existing renewable energy sources.
On the one hand Georgia is challenged due to the dependence on a single supplier - Azerbaijan. The majority of the imported gas is being provided from Azerbaijan (90%), which gradually replaced Russian share since 2007 on Georgian gas market. On the other hand, a strategic interrelationship developed between two countries in terms of politics and economy is one of the key aspects of the energy security of the country.
However, Georgia will need additional capacities as demand and consumption of gas in Georgia is increasing. The gas supply structure is expected to change, when additional volumes will appear after completion of Shah-Deniz 2nd phase after 2019. This enables Georgia to construct an Underground Gas Storage. The construction works are planned to be launched this year. The storage can play a crucial role in emergency situation and regulation of seasonal supply/demand misbalance and potential price differences. Also, increased gas flows from Shah Deniz II provide Georgia with an opportunity to start adding thermal capacities to the energy system by constructing TPPs with high efficiency. In this respect, the Combined Cycle Power Plant (CCPP) with the total installed capacity of 230 MW in Gardabani has already been put into commissioning. In addition, the development of another combined cycle power plant with the capacity of 500M is in progress. To diversify the generation sources within the country coal production in Georgia can be used for power generation as well and at this stage first 135 MW coal power plant project is under development in Tkibuli.
At the same time, Georgia is actively engaged in the discussions of alternative projects (AGRI, White Stream, Trans Caspian Pipeline and etc.) in the scope of Southern Gas Corridor, targeted at delivering Caspian and Central Asian energy resources.
In the long run additional nearest resource base can be also Iran. Iran is an important country in the region with hydrocarbon resources and discussions for development of regional trade for energy goods is an interesting area for multilateral cooperation which become especially promising due to the lift of international sanctions. Beyond import diversification the Government of Georgia’s target is to promote development of domestic resources, in order to reduce dependence on imported energy carriers. Utilization of untapped renewable resources (mainly hydro) is a priority direction of the energy policy. Besides developing small and medium sized HPPs, the country plans to construct large HPPs with reservoirs targeted to meet seasonal misbalance and peak demand in a most efficient way.
To sum up, there is a considerable progress already achieved by the government but a lot has to be done in future as well. I hope that we will realize our ambitious plan with the support of international energy projects, rehabilitation/expansion of strategic and other important energy infrastructure including the largest Enguri/Vardnili HPP, expanding interconnections with neighboring countries, exploitation of domestic resources (hydro, wind and etc.) and exploration and extraction works on potential and active oil and gas fields.
CE: Georgia is located in the zone of intersection of energy and transport routes of the EEU (Eurasian Economic Union) as well as Azerbaijan, Turkey and EU. What are the advantages of such geographic location for the energy industry of Georgia?
Kakha Kaladze: One of the main directions of the state policy in energy sector of Georgia is to strengthen Georgia’s role as a transit route in the region. Georgia is a connecting corridor between Europe and Asia and has a potential to enhance its role in implementationof East-West and North-South transit projects. Effective utilization of itsgeopolitical location, contributes to country’s energy security and economicdevelopment. Georgia is already an important transit country in the region.
Due to its favorable geographical location as a connecting bridge for the East-West andNorth-South energy routes in the Caucasus, Georgia is the only country which has electricityinterconnections with all South Caucasus states, as wellas Russia and Turkey. Despite the fact that northern and southern neighbors are EEU members while Georgia is a signatory of the Association Agreement with the EU and is aspiring to become an Energy Community contracting party, the development of energy cooperation in all directions across the region does not lose its value and pace.
Estimated large potential hydropower potential of Georgia is a promising source of supply for the neighboring countries. Georgia’s hydro potential can be used to offset part of the growing demand in Turkey, also provide with clean energy other markets.
The already existing transmission interconnections with its neighbors Georgia has a great potential to become a regional transmission ‘hub’ for power trade in the region.
Moreover, Georgia is a significant transit country for transportation of Caspian hydrocarbons between Western Europe and Central Asia in the scope of Southern Corridor. Currently all export volumes of gas from the Caspian region are transported through SCP passing the territory of Georgia. After the operation of the Shah Deniz II field increased supply volumes will be transported through extended pipeline - SCPX. At the Georgia-Turkish border the pipeline will link to TANAP and further downstream to the TAP pipelines. The successful realization of the above mentioned “Southern Gas Corridor” projects will strengthen Georgia’s transit role in the region with the additional opportunity of diversifying supply sources (after completion of Shah-Deniz 2nd phase) and receiving USD 2 bln direct investments (within the framework of SCPX).
I hope that the process developed after the signing of Ashgabad Declaration in May, 2015 among the EU, Turkmenistan, Turkey and Azerbaijan will deliver fruitful outcomes in terms of expanding Southern Gas Corridor even further and attaching natural gas resources from Turkmenistan. If so, Georgia’s position will logically be fostered to a larger extent.
CE: How do you assess the cooperation with SOCAR and recent agreements about increase of gas supply to Georgia?
Kakha Kaladze: Considering that natural gas consumption is increasing in domestic market (in 2015 natural gas consumption has increased by 19%), in the short run there will be need for additional capacities before gas will appear after completion of Shah-Deniz 2nd phase and underground gas storage project after 2019.
SOCAR is well aware of growing gas demand in Georgia and reaffirmed its commitment expand technical capacities of the pipelines necessary for the delivery of additional volumes from Azerbaijan to Georgia. However, as long as the seasonal misbalance and technical limitation of pipelines running from Azerbaijan is a hurdle we consider that short term solutions for meeting our market demand can be found during negotiations with Russia (for the last 5 years share of Russian gas in Georgian gas market was around 10-12 %) . Even though, this should not be understood as a threat to a strategic relationship with Azerbaijan. We continue working with SOCAR by establishing a joint working group to optimize supply volumes.
CE: How is AGRI project developing in Georgia? What hopes does Georgia rest on this project?
Kakha Kaladze: For Georgia AGRI is one of the most important projects. AGRI LNG project on the Black Sea allows direct access for Azerbaijani and potentially Turkmen and Iran gas to the EU market through a new entry points in Romania complements to the South Corridor Initiative objectives. It is a well-structured project incorporating producer, consumer and transit countries equally, instrumental for diversifying gas supplies sources of Eastern European countries. Also it is the shortest route between the production and consumption areas, opens a new field of LNG business development in the Black Sea basin and provides an opportunity for gas producers to gain an access to international gas market through swap arrangements. Another value of the project is that it is scalable and can be realized with different technical parameters.
It is essential to note that the project’s feasibility study has been delivered to AGRI LNG developing company, which was reviewed and approved by the Board of Directors of partner countries (Azerbaijan, Georgia, Romania and Hungary). At this stage, the participants are working on conditions to advance the project further.
CE: Construction of TANAP will start this year. What operations are currently held in Georgia on this project?
Kakha Kaladze: After the operation of Shakh Deniz II field expected to start after 2019, increased supply volumes under the Southern Corridor will be transported through SCPX. The extension works on SCP is currently underway and envisages construction of a new parallel pipeline to the existing line across Azerbaijan and Georgia, as well as two new compressor stations in Georgia. The annual volumes throughput capacity of the SCP pipeline will be increased from 6,5 (current capacity) to 22 BCM. At Georgia-Turkish border the pipeline will link to TANAP and further downstream to the TAP pipelines.
CE: Does Georgia support implementation of the Trans-Caspian gas pipeline?
Kakha Kaladze: It has been a long time that the works have been carried out for the realization of “Trans-Caspian Gas pipeline”, which has a potential for supplying the region with additional gas resources from Turkmenistan.
Currently, energy mix dependency of Georgia on external sources is around 75%-80%. Due to its high dependence on imports for hydrocarbons, the government’s efforts are targeted on import diversification. Therefore, Georgia is actively engaged in the discussions of alternative energy transportation projects such as Trans-Caspian pipeline in the frame of Ashgabat Declaration. As I have already noted above, this project will create additional resource base from new sites in central Asia, through the Caspian Sea, South Caucasus and the Black Sea and increase the delivery of supply from there to markets in Europe. Thus, this is an advantage and opportunity for Georgia to grow in its importance, strengthen its energy security and push economic development within the country.
CE: What is your vision about the future of alternative energy Georgia?
Kakha Kaladze: About cooperation with EEU I already answered above. As for the second part of the question as I mentioned the country prioritizes the development of Renewable energy resource as the most promising direction of the country to reduce the dependence on imported energy. Especially realization of hydropower projects are most welcomed due to considerable amount of hydro resources and economic feasibility. Also, wind, solar, biomass and geothermal potential should be taken into account.
“To achieve this goal”, government’s efforts are focused on the improvement of investment climate through the creation of stable, transparent and nondiscriminatory legal basis; through deepening strong and stable trading relations with neighbouring countries’ energy markets; developing corresponding domestic and cross-border infrastructure and enhancing gradual approximation of Georgia’s legislation with that of the EU.
Currently, there are 114 ongoing renewable projects. The total estimated installed capacity is about 4006 MW and annual generation up to 16.2 TWh. The approximated investment amount is 6.4 bln. USD. At this stage, in terms of electricity export the most favorable destination for Georgia is Turkey. However, our long term target is to provide European markets with clean power and thus contribute to EU climate change goals as well.
Companies of various origins are actively involved in the development of renewable energy projects: Georgia, Turkey, India, Norway, South Korea, USA, Austria, Bulgaria, Estonia and others. At this moment, 28 HPPs are on construction and licensing stage. Since 2012, 12 new HPPs with total installed capacity 171 MW have been commenced. Several projects are expected to be launched by the end of 2016, where one of them will be Dariali HPP (108 MW).
At this stage, 67 potential HPP projects ranging from 1 to 48 MW are offered to potential investors for further development. Memorandum of Understanding has been signed between the companies and Government of Georgia on 16 projects. There are ongoing negotiations on terms and conditions of Memorandum of Understanding with the rest announced winners.
The Ministry of Energy of Georgia together with the Georgian Energy Development Fund (GEDF) are jointly developing first pilot wind project “Kartli” with the installed capacity of 20 MW. Currently, the project is on licensing stage and according to the schedule the construction will be launched in the first quarter of 2016.
It is also important that GDEF is studying four major basins in Georgia. At this stage 48 projects have been identified to be feasible. The total installed capacity of these projects amounts to 460 MW. It is expected that they will be added to potential project list of the Ministry.
Interview made by Eldar Maqsumov and Emil Mammadov