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98.03 - Monitoring of Exceptional Assistance for Gas Supplies to Azerbaijan - Feasibility Studies for the Improvement of Safety in Gas Transport to Azerbaijan

Title of Project: "Monitoring of Exceptional Assistance for Gas Supplies to Azerbaijan - Feasibility Studies for the Improvement of Safety in Gas Transport to Azerbaijan"

Project Number: 98.03

Reference Number: EAZ 9803_02

Beneficiary Countries: Azerbaijan

Contractor:

SOFREGAZ

Total budget of project: EUR 300 000

Start date of project: October 17, 2000

End date of project: August 17, 2002

Project objective:
To assist the Government of Azerbaijan and "Azerigaz" NJSC in the implementation of the Project "INOGATE Exceptional Assistance for Gas Supplies to Azerbaijan for Winter 2000"

Project brief description of activities/approaches:

To restore the international gas trade and following the signature of the "Implementation Agreement" in September 2000 between the European Commission and the Government of Azerbaijan, the EC allocated € 2.000.000 for the rehabilitation of two fiscal gas metering stations at the borders with Russia (Shirvanovka) and Georgia (Kazakh) under the "INOGATE Exceptional Assistance for Gas Supplies to Azerbaijan for Winter 2000" Project.

The Shirvanovka gas metering station at the Azeri-Russian border should ensure a flow metering capacity of 3 to 4 BCM per year and the Kazakh metering station at the Azeri-Georgian border should be fully rehabilitated to ensure a flow metering capacity of 8 BCM per year (in a first phase). Furthermore, the rehabilitation of a 12-km part of the pipeline connecting the Kalmas UGS to the main gas transmission network is required to ensure efficient gas transmission system operability complying with the international gas trade requirements.

The Contractor undertook the following activities:

assisted the beneficiary in designing the specifications for each project;
assisted and monitored the preparation and evaluation of local open tenders in line with international standards;
assisted and monitored the awarding of supply contracts;
monitored and supervised the implementation of the projects according to the agreed specification and certified the completed works;
prepared all relevant documents for external audit;
assisted the Beneficiary in maintaining an accounting system for sub-contracted works and supplies including management of invoices.

Intended results and conclusions:

A new metering station in Shirvanovka would allow for a better control on the gas quality and volumes, avoiding unnecessary commercial disputes between Russia and Azerbaijan.

With regard to the construction of the Kazakh metering station, benefits will appear in a longer term. The exports project to Turkey is still in the preparation phase and faces strong competition. Exports, even limited to Georgia in a first phase, however, look likely in the short term, as additional volumes of gas are available for exports in Azerbaijan.

As a matter of fact, Georgia has asked for importing 1 bcm of natural gas from Azerbaijan. Without an accurate metering station, the potential losses would amount to 40 million cubic meters per year and the payback period for such an export volume is less than 5 months (not including operating expenses) which is very attractive.

As a conclusion, the rehabilitation of these metering stations will constitute a valuable asset and reinforce the position of the Azerbaijan Government during the discussions with the Georgian and Turkish parties since the metering station is a compulsory component of any export and transit project.