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The Minister of Energy and Natural Resources of Georgia, Kakha Kaladze, on air on Rustavi 2 declared: "In 2015 alone, approximately USD 640 million will be invested in Georgia’s energy field."

FactCheck

took interest in the Minister’s statement and sought to verify the amount of investments expected in the field of energy for 2015.

According to the information of the Ministry of Energy and Natural Resources of Georgia, USD 300 million in investments are expected as a part of the framework of the expansion of the South Caucasus pipeline system throughout 2015.

The South Caucasus pipeline ensures the transportation of natural gas from the Shah-Deniz natural gas field from the Azerbaijani sector of the Caspian Sea through the territory of Georgia to the Georgia-Turkey border. As a part of the framework of Shah-Deniz Stage II, the expansion of the South Caucasus pipeline is being planned. The South Caucasus pipeline expansion project establishes the first link of a chain of pipelines which constitutesthe New Southern Gas Corridor and which will ensure the transportation of Caspian natural gas to Europe. The project is expected to be completed by 2018.

British Petroleum operates the pipelines on Georgia’s territory, including the South Caucasus pipeline. According to the company’s information, approximately USD 2 billion will be invested in Georgia as a part of the framework of Shah-Deniz Stage II. Of that amount, 20% will be spent to purchase goods and services from local suppliers. Additionally, Georgia will receive 5% of the total amount of transited natural gas free-of-charge.

According to the information published on the website of the Ministry of Energy and Natural Resources of Georgia, Shah-Deniz Stage II will see USD 2 billion invested in Georgia whilst goods and services in the amount of USD 400 million will be purchased in the country. According to the information published on the website of the Ministry of Energy and Natural Resources of Georgia in December 2014, the Government of Georgia was expecting USD 400-700 million in investments as a part of the framework of Shah-Deniz Stage II.

At the same time, experts assert that investments in the amount of USD 2 billion; that is, USD 500 million in new investments coming annually for the next four years is unrealistic. At the end of this year, FactCheck

will reinvestigate this topic in order to verify the real volume of investments made in 2015 as a part of the framework of the South Caucasus pipeline expansion project.

In 2015, an additional GEL 755 million (approximately USD 335 million) in investments are expected. However, at the present moment the share of foreign direct investments in the total amount of investments is unknown.

Detailed information about the GEL 755 million in investments expected by the Ministry of Energy and Natural Resources of Georgia is given in the table below (Note:  The majority of the HPP projects started before 2015).

Project Expenditures in 2015 (GEL million) Responsible Stakeholder
Metering process, network rehabilitation, HPP rehabilitation 45 Energy Pro-Georgia
Network rehabilitation 18 Telasi
Network rehabilitation 1 Kakheti Energy Distribution
Rehabilitation of central pipeline and natural gas stations, oil headquarters, Gardabani combined cycle plant 140 Georgian Oil and Gas Corporation
Gasification work 31 Gas Transportation Company
Gasification and network rehabilitation, switching on new customers 35 SOCAR Georgia Gas
Rehabilitation of network and metering process 3.5 KazTrans Gas
Rehabilitation of Vardnili and Inguri HPPs 25 LTD Inguri HPP
Regional electricity transmitter development project, Georgia’s electricity transmitter development project, development of electricity transmission infrastructure 95 Georgia’s State Electricity System
Rehabilitation of transmission lines (Kavkasioni, Imereti, Kartli-2, Kartli-1) 4.2 SakRusEnergo
Research on the potential of the water collectingbasin of the Rioni River. Preparatory work for wind electricity station and Namakhvan HPP 10.5 Georgia’s Energy Development Fund
Kirnati HPP, Khelvachauri HPP 1 40 Achar Energy 2007
Dariali HPP 60 Dariali Energy
Khobi HPP 1 5 Georgian Investment Group Energy
Mtkvari HPP 1 15 Mtkvari HPP
Lukhuni HPP 3.5 Rusmentali
Nabeghlavi HPP 0.7 AE_SGI Energy
Kvintrisha HPP 5 Hydro Development
Skhalta and Shuakhev HPPs 155 Clean Energy
Debed and Pshavela HPPs 7 Hydrolea
Observatory and research work for oil and natural gas fields 55
Total Amount 754.4 (GEL million)

The highest amount of foreign direct investments in the period of 2011-2013 was invested in the field of energy. The previous year was unsuccessful in this regard. According to the data of the National Statistics Office of Georgia, a total of USD 99 million was invested in the field of energy throughout 2014 which is 60% less than the number registered in 2013. The number for 2014 also significantly lags behind the numbers registered both in 2011 and in 2012.

Graph 1: 

Foreign Direct Investments in the Field of Energy (USD million)

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Of particular note is that the real production in the electricity and natural gas production and distribution sector decreased by 2.8% (GE 15 million). The amount of decrease in this sector parallels only that of the number registered in 2004.

Conclusion

According to the official information of the Ministry of Energy and Natural Resources of Georgia, USD 300 million will be invested in Georgia as a part of the framework of the South Caucasus pipeline expansion project. USD 335 million in investments are planned to be made in different sorts of projects. The share of foreign direct investments in the total amount of investments is currently unknown.

The year 2014 was one of the least successful years as compared to others in regard to the energy field with the volume of foreign direct investments having dropped by 60%. Additionally, the real volume of production also dropped (2.8%).

The expected amount of total investments in the field of energy for 2015 almost matches the number given by the Minister of Energy and Natural Resources of Georgia. Taking into consideration the fact that Kakha Kaladze’s statement is a prognosis, FactCheck will reinvestigate this topic at the end of 2015. At the present moment, FactCheck concludes that Kakha Kaladze’s statement is TRUE.