Speech of Mariam Valishvili, First Deputy Minister of Energy, Georgia

Honorable guests, Ladies and Gentlemen, friends and colleagues: good afternoon.
I would like to extend appreciation for invitation to speak to such a distinguished audience – it is both privilege and pleasure to talk about wide-range possibilities of energy cooperation in the Black Sea Basin, an emerging region with a growing geo-strategic importance.

This Forum justly serves as an illustration to an apparent fact that Energy is a key area of cooperation in the backdrop of the 21^st century within which the world’s economic regions are interdependent for ensuring security and stable economic conditions. Indeed, once again, we speak about stability and sustainability, and to us, Georgians, these words for the duration of recent months have grown in their meaning and value even more. Acquiring sustainable, competitive and secure energy is essential when world energy consumption is expected to rise and energy supply theme is meant to dominate as a foreign policy tool in the hands of some of the large states. It is foreseen that in about 30 years around 70% of European Union’s energy requirements, compared to 50% of today, will be met by imported products – some from regions, as we witnessed quite recently, threatened by instability.

European energy security is facing a set of serious challenges connected to Europe’s dependence on definite source of energy and the need for diversifying energy supply sources. The problematic aspects of European dependence on Russian energy turned into no-secret during the Ukrainian gas crisis in January 2006, and have been subsequently reconfirmed by Russian energy diplomacy against other independent countries. In this regard, the considerable oil and gas resources in the Caspian region, primarily in Azerbaijan, Kazakhstan, and Turkmenistan, constitute the most accessible alternative energy supplies for Europe. With current World economic crisis, it becomes more obvious that Russia as a dominant supplier is less likely to fill future European demand due to a lack of domestic investment in new energy projects and infrastructure. The EU needs to develop an active strategy for securing access to the energy resources of the Caspian region, and handling existing competition for these.

Georgia at present hosts three new independent oil and gas pipeline outlets from the Caspian Basin: the Baku-Supsa and Baku-Tbilisi-Ceyhan crude oil pipelines, and the South Caucasus – Baku-Tbilisi-Erzurum natural gas pipeline.

The Baku-Tbilisi-Ceyhan (BTC) oil pipeline currently transports around 1 million barrels per day and comprises more than 1 percent of the world’s total crude oil supply. Baku-Supsa pipeline is in a fully functional state and together with Georgian Railway is ready to contribute to the development of a Black Sea Basin’s Midstream Capacity. It should be noted that both BTC and Baku-Supsa pipelines are comfortably available for significant throughput upgrade in a short term.

The South Caucasus Pipeline takes on output from Giant Shah Deniz field. Additional compression can boost pipeline throughput considerably to 20 billion cubic meters per year to accommodate the second generation investment plans for Shah Deniz. Gas from lower gas horizons in the Azeri Chirag Guneshli oil field and other Caspian oil and gas fields that are currently in their development phase will increase the gas volumes through the Southern Caucasian corridor and relieve upward price pressure in downstream markets.

Associated gas volumes from the giant Kashagan offshore field of Kazakhstan that is operated by a consortium of international oil majors lead by ENI, and Block 1 offshore of Turkmenistan being developed by the National Oil and Gas Company Petronaz of Malaysia could well justify further midstream investment in a Southern gas corridor to forge the link between significant Caspian gas volumes and downstream markets in Central and Eastern Europe.

Un-doubtfully, Georgia’s location can accommodate gas imports through its territory onward to South Eastern Europe or across the Black Sea to the Ukrainian market and further downstream to Central Europe.

As part of the European Union Neighborhood Policy Energy Cooperation Project, Georgia participates in the study on the “Feasibility aspects of a Trans-Caspian-Black sea gas corridor”. The goal of this project is to investigate opportunities for gas transit from Kazakhstan and, possibly, Turkmenistan across the Caspian Sea to Azerbaijan and Georgia and through the Black Sea region to EU consumer countries. The meeting of beneficiary countries and representatives of European commission was held in the fall 2007 in Brussels. Meeting was convened to discuss study results and to adopt future steps of cooperation in this direction for 2008-2009.

In order to strengthen the energy security of the region, Georgia is also involved in the “Euro-Asian Oil Transportation Corridor” project (EAOTC). The EAOTC project is of high importance in increasing and strengthening the energy security of the participating countries through the establishment of a reliable route for the transportation of hydrocarbon resources from the Caspian region to international markets via the territories of Azerbaijan, Georgia, Lithuania, Poland and Ukraine.

We hope that future development of the project shall result in the successful establishment of the Corridor for the transportation of the hydrocarbon resources from the Caspian Sea region to the International and European energy markets through the territory of Georgia and the participant states.

Georgia, in cooperation with the countries of Caspian-Black Sea-Central Asia region has the best opportunities on the way of creating the Common Energy ring with the EU countries and with other countries of the World Community.

Another important project is White Stream project to transport Caspian gas via Georgia and the seabed of the Black Sea to Europe. This pipeline project could encourage investments in Caspian gas field development by diversifying export options and transport routes directly to European Union territory. The proposed pipeline would branch off from the Baku-Tbilisi-Erzurum main pipeline, once the second and third phases of field development are reached at Azerbaijan’s Shah-Deniz field. Initially named GUEU (Georgia-Ukraine-European Union), this project envisaged a seabed pipeline from Georgia to Ukraine, with options to continue towards EU territory.

Also, in a little bit longer perspective, Georgia will be part of the NABUCCO pipeline serving as a host country to transport natural gas from Caspian region to Turkey and onward to Austria, via Bulgaria, Romania, and Hungary. NABUCCO Natural Gas Pipeline project will certainly contribute to the energy security of Europe as it is expected to meet 10% of the EU demand in 2015 with its full capacity reaching 31 bcm per annum. But the EU has to show its determination for NABUCCO Pipeline initiative, prospects of which are being currently undermined by the interference of existent suppliers. It is our assurance that NABUCCO will serve as a guarantee for affordable, secure and uninterrupted flow of hydrocarbon resources into European market. Although capacity of the pipeline is far from meeting the EU's overall energy need, - the mere existence of it as an alternative route could give the EU leverage it needs in its negotiations with traditional suppliers and help create a more competitive energy market. EU’s determined and well-defined support to NABUCCO will also add to the stability of transit states of Caucasus already in a short term, as it will bring to end speculations about the sustainability concerns of the region.

Georgia is strengthening Power interconnections with its neighboring countries as well. Considering that Turkey is expected to become the primary export market for Georgian electricity, for both local consumption and transit to Europe, new transmission line projects are being planned with the aim to expand the transit potential of our country.

In 2009-2011 Georgia plans to construct a new 500-400 kW high voltage power transmission line to Turkey in order to expand the country’s transit and export capacity. MOU between the government of Georgia and Turkey on construction of a 500-400 kV power transmission line connecting Georgia and Turkey was signed. In the first half of 2008, several agreements were signed between the state energy companies of Georgia, Turkey and Azerbaijan on the implementation of the project’s technical and financial parameters. KFW, EBRD та EIB are financing the project. Also NIF (Neighborhood Investment Fund) has assigned 8 million EUR to it.

I believe workshops at this Forum will serve as an effective platform for reemphasizing that the EU has to show its determination and leadership for the realization of the projects mentioned in my speech. As for the political realm – the EU should speak with a single, consolidated voice to show support to the states of Black Sea and a Caspian Sea Basins. Their adherence to the Western principles and their overall economic and political stability is crucial for the sustainable future of the whole continent. Diversified hydrocarbon supply sources and diverse supply routes of transportation simply serve as a vehicle to achieve this goal. My country gives its full support to regional transit initiatives and declares readiness to serve as an open platform for all projects that contribute to the overall security of the Region.
Georgia has lived through August 2008 events. Its statehood survived, course of action and adherence to western democratic principles was sustained despite fears by many, and implementation of governing policy geared towards bringing our country closer to European Community continues ever more rigorously. We believe that full benefits of the realization of our aspirations can only be attained with strong and unwavering support from the EU and wider International Community. Political Stability and Economic Security are the key values that will serve as two main pillars in the process of Integration of our regions in the large European family, eventually marking a new era of cooperation in Tomorrow’s World.

Thank you for your attention.

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