Cheap Azeri gas with a string attached

The Azeri State Oil Company will sell Georgia about one billion cubic metres of natural gas at a cheap price over the next 5 years, Georgian Energy Minister Alexander Khetaguri has stated, adding that Georgia will receive any additional gas at market prices.

However, according to the Head of Azeri State Oil Investments Department, Vagif Aliyev, the agreement envisages that Azerbaijan takes control of the distribution of Georgian natural gas resources. Georgia transits gas to Armenia from Russia on one hand, and Azerbaijan to Turkey on the other. The Georgian Oil and Gas Corporation must hand over all this gas to a special company created by the Azeri State Oil Company for a fixed price.

Georgia consumes about 1.8 billion cubic metres of natural gas a year. The Azeri State Oil Company will supply Georgia with about 1 billion cubic metres of gas. The price of this will be USD 167 per 1,000 cubic metres for domestic consumers and USD 143 per 1,000 cubic metres for electricity plants. Some major gas consumers are currently buying gas from Gazprom for USD 280-290. The Azeri State Oil Company will take over the functions of the Georgian Oil and Gas Company which used to supply imported gas to major Georgian consumers for wholesale prices.