Caspian Energy (CE): How would you assess the results of the energy sector operation through 2013? What could you tell about the plans of the ministry for 2014?
Kakha Kaladze, Vice Prime Minister and Minister of Energy of Georgia: 2013 was a year of several crucial developments, first of all with regard to the agreements reached between the Ministry of Energy, Inter RAO UES and Energo Pro Georgia. According to this agreement, Tbilisi and the rest of the country (except for Kakheti) will see a decrease in the electrical energy tariffs. Following the monthly usage of electrical energy by the customers, the tariff for 1 kw/hr will decrease by GEL 0.035 and GEL 0.04 respectively. Additionally, after the negotiations with natural gas distribution companies, the tariff for household natural gas will decrease by GEL 0.05.
Another important factor is that the energy sector is the leading sector with the volume of foreign direct investments for the past 9 months. Foreign direct investment for the 2013 year exceeded USD 141 million.
The 400 kV connecting line to Turkey and the 500/400/220 kV sub-station Akhaltsikhe started operating recently. Three new hydropower stations started operating – Shildahess, Bakhvihess 3 and Larsihess. After re-gaining independence, this is the first year that marked the influx of such a large volume of energy sources- approximately 45 megawatts, which is another step forward into the development of the Georgian energy sector.
As for the plans of 2014, the plans remain the same. In particular, we will continue developing the existing projects, which includes building hydropower plants and tight cooperation with investors.
In the current year it is planned to finalize the Energy policy and Strategy Defining document. On the international arena, this is a year when we started joining the Energy Community and we are hopeful that these negotiations will conclude in 2014 and future priorities and plans will be defined. Moreover, the development of high priority energy infrastructure will continue this year.
An agreement was made about Shah - Deniz pipeline expansion in the 2nd phase of funding. Also Georgia and Azerbaijan signed an agreement about buying and selling the natural gas. The most important phase of full-scale construction work will begin this year. The project foresees the expansion of the South Caucasus Pipeline, to provide Turkey annually, with 16 billion cubic meters of gas. Simultaneously it is planned to construct another pipeline – covering Azerbaijan with 387 km and Georgia with 55 km of the area. Two additional compressor stations, pressure regulating and metering station is to install in Georgia. According to the agreement, Georgia is capable to purchase 5% of natural gas which is transited at a reduced price, which is the maximum load in the case of gas per year, in addition to more than a billion cubic meters of gas. Also for constructing the parallel pipelines ports and railroads of Georgia will be used to transport approximately 350 000 tons of building material.
Within the project of Shah - Deniz the 2nd phase 400-700 million dollars will be invested in Georgia. While building, the amount of working place will reach around 2000. It should be mentioned that during exploitation around 130 new permanent jobs will be created.
Emphasis will be on improving the quality of electricity. The Ministry works closely with the National Energy and Water Regulatory Commission to implement the international standards of service quality and make it binding, which in turn provides a stable power supply system and reduce accidents.
CE: How would you evaluate the present level of the energy security of Georgia? Which projects does the energy security underlie and what are their further perspectives?
Kakha Kaladze: From the viewpoint of energy security our present condition leaves us wishing for the better – 70% of the energy used by the country is dependent on the import of energy carriers. Needless to say, compensation of this situation largely depends on the projects implemented by us. First of all, it is construction of hydropower plants in order to create a local resource which will substitute the electrical power imported over the winter period and decrease the dependence on the imported resources. From this point of view, all the projects involved in construction of hydropower plants hold high importance. In the current year construction of a 230 MW sustained capacity thermal power plant. Coefficient of efficiency of Gardabani combined cycle thermal power plant, if compared to other thermal power plants within Georgia using natural gas for their operation, is promising to be almost twice as high and providing more economy. A project of this scope in the field of energy is being implemented for the first time over the history of the existence of independent Georgia, what gives it an utmost level of importance. The electricity power produced by Gardabani thermal power plant is going to be the most reliable reserve in the energy system and will raise the level of energy security of the country.
CE: Which hydro-power engineering projects are planned to be realized in near future? To what extent will the construction of 26 power plants improve the electricity supply in Georgia?
Kakha Kaladze: At present 13 hydropower plants with the total energy sustained capacity of 515 MW are progressing in their construction around Georgia. The new hydropower plants will gradually enter into operation over a period of two-three years. We are engaged in the continuous intensive work toward further increasing the volume of the investments made in the energy sector. New projects are being developed and offered to investors. 2013 was fruitful to that point: 700 MW capacity new memoranda have been signed and executed, tenders announced for 300 MW capacity projects have been finalized as well and at the moment, the ministry has responses concerning the construction of 400 MW capacity cascade on the river Tskhenistskali from the interested bodies against its announced. I want to hereby add that implementation of such projects is of vital importance for the regions, as they also create new work places and increase the revenues feeding the local budget. Construction of new power plants will turn the electricity power production on the grow too, what will facilitate the country’s development into a power exporter state.
CE: What could you tell about the plans of electricity export to Europe? Are the substations and electricity transmission lines in Akhaltsikhe one of the paths leading to Europe?
Kakha Kaladze: Development of energy infrastructure is a precondition for gradual development of market. Turkey is a market having a significant deficit that holds a potential to fully utilize our energy resources. The electricity power traders will focus on exporting the existing power in Turkey in the very first place before heading to Europe. I have already mentioned it above that a new 400 KWT transmission line with 700 MW transmitting capacity was commissioned last year. The energy infrastructure of Georgia is in the state of readiness to start serving development of regional trade without obstructions. From the interim perspective, this service provision will be unequivocally oriented on Turkey, while we hold long-term plans as well and are going to further the trade relationships with the European Union.
CE: Will Georgia change its investment policy in the field of renewable energy sources? Which renewable energy related projects will Georgia realize?
Kakha Kaladze: As for consumption of renewable energy sources, this is our priority taking its roots from the resource owned by the state. Naturally, this priority shall remain a long-term one and its revisiting is not an issue on the agenda. We are speaking about the accents of today having shifted it onto hydropower engineering which is the most competitive renewable energy source, and, in addition, wind power plants. At present, the Energy Development Fund is engaged in working on these issues. We do retain hope that in the nearest future we will have a pilot wind power plant as well as solar energy.
CE: Are there plans to keep developing the project of LNG export (AGRI) to EU?
Kakha Kaladze: In connection to the AGRI project, Georgia, as a transit country, is naturally interested in its implementation. It is also significant that the direct supplier and European Union make an arrangement since the infrastructure which is going to be developed, will be loaded and the supplier party – Azerbaijan, will take certain liabilities in connection thereto. Upon the completion of the commercial segment of the negotiations, implementation of the AGRI project will be considered reasonable and as we see it, the governments of the states involved in the project will further express their interest in it and the project will successfully progress to its end.
CE: What could you tell about the results of exploration in the Black Sea shelf of Georgia? Is it planned to activate exploration in the Georgian sector of the Black Sea?
Kakha Kaladze: Speaking of the Black Sea, nowadays this implies free license blocks. We presume that thorough study of the Black Sea offshore area carbohydrates potential and putting it to usage will be a huge step made forward to reaching energy security by Georgia. Giving consideration to the specifics of offshore works, the ministry is planning to start searching for powerful investors to attract for engagement into these works. The terms and conditions are being developed at this stage and conclusions will be made in this direction in the nearest future.
Thank you for the interview
