Socar to Sell Gas to Georgia at Subsidised Price

Socar, the Azeri state oil firm, will sell gas to Georgia over the next five years at a subsidised cost well below regional market prices, Georgia's Energy Minister Alexander Khetaguri told Reuters on Wednesday.

The move comes as a blow to Russian gas export monopoly Gazprom, which already sells gas to large consumers in the ex-Soviet state and is trying to create a bigger presence in the Caucasus region.

Relations between Russia and Georgia deteriorated after their brief but intense war in August.

Azerbaijan's Socar will now be responsible for all imports of oil and gas into Georgia, which consumes 1.8 billion cubic metres (bcm) of gas annually. Previously a Georgian firm bought wholesale all oil and gas.

Around 1 bcm of Azeri gas will be sent to neighbouring Georgia every year at $167 for every thousand cubic metres (tcm), Khetaguri said in an interview, around $100 less than Gazprom charges. Gas for power will be sold at $143 per tcm.

'We won't increase the tariffs on buying gas over the next five years, but they could go down a bit if world oil prices fall,' he said.

Azerbaijan hosts some of the world's biggest oil and gas developments. Most of its gas comes from the Shakh-Deniz Caspian Sea offshore gas deposit, co-led by BP and StatoilHydro.

Author: Jo Amey