AZERBAIJAN: ACG CONSORTIUM GAS FOR GEORGIA IF

C O N F I D E N T I A L BAKU 001339

SIPDIS

SIPDIS

DEPARTMENT OF ENERGY PASS TO A/S KAREN HARBERT, DAS ALAN
HEGBURG, OFFICE OF RUSSIA/EURASIAN AFFAIRS DIRECTOR LANA
EKIMOFF

E.O. 12958: DECL: 11/02/2017
TAGS: PGOV PREL ENRG AJ GA
SUBJECT: AZERBAIJAN: ACG CONSORTIUM GAS FOR GEORGIA IF
"HUMANITARIAN CRISIS"

REF: BAKU 1238

Classified By: Ambassador Anne E. Derse, Reasons 1.4 (b,d)


1. (C) SUMMARY: BP Azerbaijan President Bill Schrader told
EUR DAS Bryza and the Ambassador that the ACG Consortium was
not going to increase the amount of extra associated gas it
was providing to Azerbaijan in response to Georgian winter
gas needs unless the GOAJ asked it to do so in response to a
"humanitarian crisis" in Georgia. END SUMMARY.


2. (C) BACKGROUND: Georgia's contract to buy gas from
Azerbaijan expired on October 12. According to Azerbaijani
press, Azerigas has said that "future supply will depend on
the decision that will be made an at inter-governmental
level." Matters were complicated in mid-September when the
ACG Consortium (the consortium responsible for developing
Azerbaijan's major oil field, the ACG field)decreased the
amount of associated gas it was giving the State Oil Company
of Azerbaijan (SOCAR) from approximately 8.5 million cubic
meters per day(mcm/d) to approximately four mcm/d, due to a
commercial dispute with SOCAR and the need to reinject this
gas into the ACG field (reftel). In a subsequent
conversation with the Ambassador, SOCAR President Abdullayev
said that if BP had continued to give this gas, Azerbaijan
would have been able to meet "all of Georgia's gas needs."
However, with this diminished amount being received from the
Consortium, Azerbaijan would not be able to do so. However,
Baku-based gas marketing experts who have spoken to the
Embassy have said that regardless of how much gas Azerbaijan
sells Georgia, technical limitations on the pipeline to
Georgia limit the amount that Azerbaijan can send to Georgia
to at most three mcm/d, less than half of the estimated seven
to eight mcm/d that Georgia will need this winter (NOTE: The
Georgian Ambassador to Azerbaijan has told the Ambassador
that the pipeline capacity from Azerbaijan to Georgia will be
five mcm/d, due to improvements being made). END BACKGROUND.


3. (C) In an October 26 meeting with DAS Bryza and the
Ambassador, BP Azerbaijan President Bill Schrader said that
whatever state-to-state promises the Government of Azerbaijan
has made to the Government of Georgia concerning provision of
gas for the winter is "not the business" of the ACG
Consortium, who decreased the amount of associated ACG gas it
was giving tiin mid-September. Schrader said that in
addition to Azerbaijan, the Georgian government should be
talking with Turkey to see if Turkey would be willing to
re-direct any of the gas it is receiving from the Shah Deniz
field, to help Georgia with its gas needs for the coming
winter. Additionally, it should be keeping its lines open to
Russia, since regardless of how much gas Azerbaijan sells
them, Georgia will need Russian gas this winter.
Indeed,according to BP calculations, Schrader said Georgia
would need to buy gas from Russia until at least 2015. DAS
Bryza told Schrader that the good news was that in a recent
Foreign Minister's conference in Istanbul, a Russian Deputy
Foreign Minister had told him that Russia would be seeking to
"de-escalate" its problems in Georgia. Schrader said that
part of the reason was no doubt the large Russian investment
in Georgia, which would suffer in any business downturn.


4. (C) Schrader said that "if SOCAR pays us for the gas" it
would be willing to sell additional amounts of ACG associated
gas to Azerbaijan, which it in turn could sell to Georgia.
DAS Bryza said that Russia was going to be short on gas this
winter, which might negatively impact its ability t sell gas
to Georgia. In response to Bryza's coments that a Georgian
winter gas shortage could lad to serious political
instability, Schrader sad that "if there were a humanitarian
crisis in Gorgia" and if the GOAJ asked the Consortium for
elp, it would do so. However, the ACG Consortium partners
were not going to get "suckered" into providing free gas to
Azerbaijan just so Azerbaijan could sell it to Georgia to
make a profit.

5.(U) This cable has been cleared by DAS Bryza.
DERSE