Georgian Energy Minister Alexander Khetaguri said that, with today’s price for crude oil, Tbilisi is looking not only at the Baku-Tbilisi, Baku-Tbilisi-Erzurum, and Baku-Supsa pipelines, but also new projects to transit much-need hydrocarbons to western markets. Khetaguri gave an exclusive interview to the New Europe correspondent Kulpash Konyrova during his visit to Astana, Kazakhstan..

What was the purpose of your visit to Astana?
This is my first visit to the capital of Kazakhstan in the capacity of the Minister of Energy. I had meetings first of all, with the leaders of the state holding company Samruk where we discussed Georgia’s electric energy industry. In particular, this sector of our economy is going through major transformations, including liberalisation of the market. And we have many projects that could be of interest to Kazakh investors.

Do you mean the beginning of implementation of the big project for construction of small and medium size hydro power stations?
Not only small and mediumsize, but also large power stations. A feasibility study has been prepared for Georgia for 23,000 megawatts, out of which power stations have been built for 1,700 megawatts. At this stage we have reviewed new power station projects for a total capacity of 5,000 megawatts, which means 87 potential hydro power stations that can be built. Liberalisation of the market is underway, and we have adjusted all of the new power stations that will be put into operation. They will be able to provide electric power at market prices. Recently, Georgia reached an agreement with Turkey regarding construction of new high voltage power transmission lines. The construction is scheduled to start in 2009 and to finish in 2011. This will enable us to sell up to 1,600 megawatts to Turkey. The Turkish market today is very big.

Does Georgia not need electric power itself?
Georgia has seen a lot of change over the last five years. For example, in 2004, we imported power, and all of Georgia was lit for only eight hours a day.Now we have an uninterrupted supply of electric power, and we have become a power exporter. As well, the peak demand in Georgia is only in the winter, while the peak demand in Turkey is in the summer, during the tourist season when a lot of power is used to air condition the hotels. So we can sell the surplus power in the summer. Such situation is very beneficial for investors, and a power transmission line project from Georgia to Turkey, and construction of hydro power stations, can be attractive for them. Also, since Kazakhstan is a friendly country for us, and since the Kazakh investors have long been present in the Georgian market, we believe that the attractiveness and profitability of these electric power projects can interest the Kazakh investors, too. We are planning to make legislative changes to achieve a full liberalisation of the market. That is what we discussed at our meetings in Astana.

Today in Azerbaijan and in Kazakhstan the interest is swinging from the Baku-Batumi to the Baku-Supsa, then to the second BTC oil pipeline. Which one of these is realistic?
Georgia is a transit country. Through our territory went the Great Silk Road. And we have confirmed our transit potential more than once. Through our territory go the BTC, the Baku-Tbilisi- Erzurum, and the Baku-Supsa pipelines. Not only liquid goods transit through Georgia, but also dry goods by railroad. However, apart from the existing oil and gas pipelines, there is a potential for new ones. But they will only be considered if the oil producing companies themselves become interested in them. With today’s price for crude oil, the attractiveness and profitability of the BTC and the Baku-Supsa are obvious. Therefore, with the growing production of hydrocarbons in Central Asia, and in the Caspian region, new oil pipelines will undoubtedly be profitable. Therefore I would like to emphasize that all of the proposed projects are viable and have prospects.

Can Georgia become a kind of a regional hub for transportation of large volumes of gas and oil through the Black Sea to Europe, in particular to Ukraine?
That is our plan. And all prerequisites are available for that. Today we transport gas and electric power from north to south and from east to west, with all the flows going through Georgia so this is a hub. As you know, the oil and gas corporation of Georgia, together with (Azeri state oil company) SOCAR, Ukrainian, Polish and Lithuanian colleagues, have created a company called Sarmatia to develop a route from Odessa to Brody and then further to Gdansk. This is another alternative direction that can be filled with Kazakh oil.

Yes, its true that with the problematic negotiations on the expansion of the CPC, there is more and more interest in the development of the Caucasus corridor... 
No doubt. In this context, we see a growing interest in the Baku- Supsa oil pipeline that provides access to the Black Sea. The interest is growing in the Georgian ports of Batumi and Kulevi, because the volumes of oil from the Caspian region are growing and they need to be delivered to Europe. Now that KazMunaiGas has purchased the Romanian concern Rompetrol, the Kazakh oil producers will benefit from transporting their oil to Romania and processing it at the Romanian refineries that belong to Rompetrol. At this time, there is no alternative route to deliver oil through Georgia to the Black Sea and to Romania. The Black Sea route through Georgia will become more and more popular in time. And I think that in the future we will need to expand the capacity of this corridor.

There is talk about some sort of competition between the Baku- Supsa and the BTC... 
I believe that in general it is good to have competition in the market – everybody wants market relations. The law of the market is such that he who pays more for the oil will determine where it will go. With the growing oil resources, the Caucasus direction will be increasingly used. As far as internal competition between the Baku-Supsa and the BTC is concerned, everything will depend on whose oil will be pumped through the pipeline. If the oil producing companies or the traders are going to sell crude in the ports of the Black Sea, then they will be interested in the former pipeline. And if they wish to sell their crude in the Mediterranean Sea, then they will be interested in the Baku-Tbilisi-Ceyhan.

It has become known that Kazakhstan is going to increase the tr ansit volumes through Batumi in the nearest future. How has the issue with the transit tariffs been resolved, especially through Azerbaijan?
I do not know about the relations between Kazakhstan and Azerbaijan, but in our territory, all tariffs are the same for everyone, and there are no problems with transit through Georgia. And I believe that there should be no problems whatsoever between Kazakhstan and Azerbaijan either.

There is talk about transferring the management of the 100-percent Kazakh-owned terminal in Batumi to Rompetrol, which is 75 percentowned by the Kazakhstan national company KazMunaiGas. What does Georgia think about it?
We have no problem here whatsoever. We are liberal. The owner of the facility has every right to transfer the management thereof to whomever it sees fit. The Georgian government does not interfere in the management of property in its territory. That is exactly why we had a liberalisation of the state property, to ensure that the development follows the rules of the market. So if it is good for the owner, let it be.

Recently, the Ministers of Energy of Azerbaijan and Iran met in Baku to discuss the creation of a ring (synchronous) system of power supply. Azerbaijan, Iran, Russia, Turkey and Georgia are expected to participate in the project. How does Georgia evaluate its participation in this project? 
There are many technical issues here. So far we have not been successful in paralleling Russia, Georgia and Azerbaijan. And if now we start talking about the other countries, it will be difficult to resolve everything at the same time. We should act step-by-step. First, we should ring Russia, Georgia and Azerbaijan and see how the system works. Then we can think about the other countries. Second, theoretically it is next to impossible to synchronise with Turkey because our systems are so different. True that Georgia and Turkey are planning to build a new power transmission line, but it will be based on direct current, that is the electric power will cross flow without synchronisation. We already have cross flows with Russia and Azerbaijan. At this stage of the project we should first implement the Russia- Georgia-Azerbaijan part before we can think of the future steps, because if the Georgia-Azerbaijan ring proves impossible, the whole project will be impossible.

What can you say about your relations with the RAO Unified Energy System of Russia? 
We cooperate very closely with them. We have cross flows with Russia. They buy electric power from Georgia. We exc - hange electric power on a kilowatt- for-kilowatt basis. They export from Georgia to Russia and want to transit to Turkey. So things are okay here.

Have you approached Russia with a proposal to build hydro power stations in Georgia? 
We have proposed the hydro power station projects to absolutely everybody. InterRAO Unified Energy System of Russia is present in Georgia. They own a distribution system in Tbilisi and three power stations (one thermal and two hydro). And if they show interest, we will be glad to welcome all investors.

How does Georgia evaluate its energy cooperation with Azerbaijan, in particular with respect to the construction of an oil terminal in Kulevi, gas stations, as well as the oil products retail activity by the State Oil Company of Azerbaijan in Georgia? 
Very positively. We welcome all investors in Georgia. The development of our economy depends on their development. We welcome Kazakh, Russian, Azerbaijan, and any other investments and we welcome everyone who wishes to build something he - re and to receive profits, contri - buting to the development of Ge - o rgian economy. For us, everyone is a good partner. Our economy grows approximately eight to nine percent each year and we have achieved this rate of growth exactly because we have liberalised everything and do not mix politics and economy. Politics are politics, and the economic development of the country is a totally different matter. We try to attract everyone, so let the market develop by its own rules. And let the investors compete by the market rules and not by political considerations.