History. Investment
Obligations and Main Activity
SOCAR Georgia Gas is a subsidiary company of SOCAR Energy Georgia. Company was established in August 2007 with a vision of implementing a gasification program in the territory of Georgia. According to the Investment Agreement signed in 2008 between SOCAR and the Ministry of Economic Development of Georgia, 29 state-owned regional gas companies were transferred to SOCAR Georgia Gas. On its behalf, company undertook the obligations to provide gasification to the minimum of 150,000 subscribers.
In December 2014, new Agreement was signed between SOCAR Georgia Gas and the Ministry of Economy and Sustainable Development of Georgia. According to new terms, number of subscribers to be provided gasification has increased from 150,000 to 250,000 with total investment obligations of 250 million U.S. dollars. These investments were to be directed to the construction of gas distribution network in the regions of Georgia. At the end of 2017, all obligations were fulfilled.
As a licensee of gas distribution in Georgia, SOCAR Georgia Gas operates low and medium pressure pipeline network.
In general, current scope of work includes import, supply, distribution of natural gas, as well as the construction, rehabilitation and maintenance of gas network. As of April 2018, SOCAR Georgia Gas supplies natural gas to more than 620 thousand subscribers (both households and commercial) in all of territory of Georgia, and offers services through 36 service centers in regions of Georgia and headquarters in Tbilisi. Even though there is significant difference between household and commercial markets (97% and 3% of total), it should be underlined that commercial segment is very important to the overall consumption of natural gas provided by SOCAR Georgia Gas. Commercial market itself is divided on the wholesale and retail markets. Retail customers are connected to company’s distribution network, while the wholesale customers are connected to the transportation grid.
Main Problems. Solutions
One of the main issues with rural areas was low density of subscribers in the regions. In the beginning of our activities, 78 thousand customers were distributed over 50,000 sq km territory, and sales did not justify operational expenses. However, SOCAR Georgia Gas has optimized the costs through complex activities in administrative management, and introduced new technological solutions that led us to the operational efficiency.
In first 4-5 years of company’s operations, structural reorganization and unification of processes were underway. Through detailed planning and management, company has enhanced the processes, by unifying all regional companies into one structure. In addition to that, numerous technical standards in construction and maintenance of network have been developed.
For the optimization of business processes and data analysis, number of solutions in the field of information systems were introduced. These include new Billing system, Electronic Docflow, 1C ERP System, Geographic Information System (GIS), Customer Relationship Management (CRM) and Network Dispatching application.
Georgia’s demand for natural gas and SOCAR Georgia Gas role in distribution process
In March 2016 Agreement was signed between Georgia and Azerbaijan to seal long-term gas supply. According to the Agreement, Azerbaijan supplied 1.14 billion cubic meters of natural gas in 2016, and 1.38 billion cubic meters in 2017.
Each year, on average, more than 50,000 subscribers are connected to the distribution network of SOCAR Georgia Gas. This trend will remain till the end of 2019, and active customer number of the company will exceed 700,000.
Georgia’s gas market is expanding on both wholesale and retail levels. SOCAR Georgia Gas itself handles an increased volume, and also sells gas to various large suppliers in Georgia, including other gas distribution companies.
Current market conditions for the business and opportunities to further expansion and development
Distribution of natural gas is a regulated business in Georgia. Regulatory body GNERC has to issue the licenses for natural gas distribution and transportation. No licences are needed for natural gas supply. According to the customer numbers, there are two main gas supply and distribution companies in Georgia - SOCAR Georgia Gas with 52% market share, and Kaztransgaz with 39% market share (operates only in Tbilisi).
SOCAR Georgia Gas has achieved outstanding results during last 7 years: six-fold increase of subscribers, six-fold increase of gas sales and five-fold increase of operational network. According to our strategic development plan we are going to increase the size of our business for 20% more till the end of 2018.
Plans for the future
In 2016, SOCAR Georgia Gas has issued 5-year Strategic Plan of the company (2016-2020). In this document, among others, are outlined company’s goals in technical, commercial, financial, innovations and organizational development directions. In general perspective, company has following strategic objectives: increase of profitability and efficiency, improvement of operational efficiency, and preparation for the implementation of the requirements of the Third Energy Package.
As stated in strategic plan, the vision is to be a nationwide leading, highly innovative natural gas company with social responsibility towards community, employees and environment.
SOCAR Georgia Gas offers best competitive stance in the country, with top quality service and product. Company’s solutions are cost effective for the population and businesses of Georgia and it is ready to compete with other suppliers and strengthen the market position in the future.
