Slide 1 - Partnerships

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							Georgian National Energy and Water Supply Regulatory
                    Commission




           Natural gas sector




                      Dimitri Namgaladze
                   Department of Natural Gas
                     27 June -3 July, 2008

                                                       1
            Regulation of the natural gas sector



   Regulation of the natural gas sector in Georgia started in summer of
    1999, when a change was made to the Law of Georgia on
    Electroenergetics. During the same period, the Department of Natural
    Gas was established within the Commission.
   As of today, 1 transportation and 66 licensees are operating in Georgia.
   Previously, there were also natural gas supply licensees, but at the end
    of 2005, after entry of changes and amendments to the Law – they
    were invalidated, i.e. this domain was deregulated.
   Tariff on supply of the natural gas was deregulated correspondingly.




                                                                           2
                         Licensing process


   A licensee presents to the Commission the following documentation
    specified by Law, and in particular:
   1. Application;
   2. Charter of an organization;
   3. Record from the Register of entrepreneurs;
   4. Record from the Public Register and cadastral plan;
   6. A letter from Technical Gas Inspection on the state of the network;
   7. Technical conditions of connection to the network;
   8. Audit report on property evaluation;
   9. A Certificate on qualification of the support staff (certificate of
    training centers).
   After examination of documentation submitted to the natural gas,
    tariffs and price formation departments, the case is considered at the
    Commission session at which decisions are made.


                                                                             3
By 2007 the transportation system of Georgia has transmitted 3738
million m³ of natural gas, including transit.

Armenia was supplied 2054 million m³ , Georgia - 1684 million m³




        - Natural gas supply in Georgia;
                     - Natural gas supply in Armenia;
                    - Natural gas losses.




                                                                    4
After launching of the South Caucasian Ppipeline (SCP), Georgia is supplied optional (5% of
the transit volume) and additional gas (200500 million m3, by years). Transit of gas to Turkey
was 2 billion m3 the first year of operation (in 2007), and in 4 years it is expected to reach 6,6
billion m3. Hence, in 2007, Georgia received 250 million m3. In the years to come, the situation
is expected to be as follows:

                                                Natural gas
                          Year                  (million m3)
                          2008                       400
                          2009                       450
                          2010                       550
                          2011                       660
                          2012                       830


     Optional gas means a transit fee paid to Georgia in the amount of US 2,5 dollars per 1000
m3 transmitted gas, which is approximately 5% of the transmitted volume. Georgia may
either receive this sum in full, or receive part of it and another part in the form of natural gas
(US 50 dollars per each 1000 cubic meters). All the referred sums are increased monthly by
2%. Thus, the price of gas is practically not dependent on the global prices for gas.


                                                                                                5
According to the volume of natural gas supplied to Georgia in 2000-2007, the
situation is as follows:



     Quantity of           2000
     the natural           1800
     gas, million          1600
     m3                    1400
                           1200
                           1000
                            800
                            600
                            400
                            200
                             0
                                   1     2      3     4     5      6        7   8

                                  2000 2001 2002 2003 2004 2005 2006 2007
                                                       years



                                                                                    6
7
8
9
Natural gas is imported to Georgia through gas-main pipeline (system of
transportation) having the following technical specification:

Designed productivity: 20 billion m3 per year

Actual quantity of the transported gas per year
Max – 6.9 billion m3 in 1992
Min – 1.9 billion m3 in 2002

Designed working pressure: 5.5 mpa

Total length: 1832.18 km.

Line part: 1452.6 km.
Branches: 366.71 km.
Connections: 12.87 km.



                                                                          10
The highest mark of the pipeline – 2400 m;

Max. variation between altitudes – 2400 m;

The pipelines cross more than 2000 artificial and natural obstacles, 118 large and
medium size rivers;

6.013 km of the pipeline passes through specially constructed 12 tunnels;
Active el.chemical protection of the gas pipeline was provided by means of 200
cathodic and 40 el.drainage systems, 3500 protectors; From 1991-1992, they are no
longer operating;

Out of 1940 km of the pipelines, 19% have been operating for more than 30 years;
76% - for up to 10-30 years; 5% - for less than 10 years;

Age of the gas pipelines, complexity of relief and climatic conditions account for
special requirements towards their operation.




                                                                                     11
                       General specifications of gas-main pipelines


N   Title                                 Diameter     Length, km     Year of
                                            mm                        construction

1   Northern Caucasia-TransCaucasia         1200         133.65       1988-1994


2   Kazakh-Saguramo                         1000          90.7          1980

3   Karadagh-Tbilisi                    800-700- 500     110.26       1959-1968


4   Vladikavkaz-Tbilisi                     700          239.91       1963-1966

5   Saguramo-Kutaisi                      700-500        360.74       1967-1975

6   Kutaisi-Sukhumi                       700-500        344.95       1986-1989

7   Rustavi-Telavi-Zhinvali              500-300-200     344.69       1969-1975

8   Tsiteli Khidi – Tsalka-Alastani       500-300        179.8        1978-1990

9   Gomi-Khashuri-Bakuriani               500-300        58.98        1972-1989


                                                                                     12
                                       Infrastructure:
       Gas distribution stations
       Georgian Gas Transportation Company operates 133 gas distribution stations
        of which 78 stations are on the balance of the Georgian International Gas
        Corporation.
       Measuring units of the gas distribution stations are brought into compliance
        with the contemporary standards.

    N       Type of gas distribution      Quantity   Designed pressure   Max. productivity
                station                                  (mpa)                  (m3/sT)



        1              aggs 1/3               10             55                1000
        2               aggs 3                13             “-”               3000
        3              aggs 10                21             “-”              10000
        4              aggs 30                12             “-”              30000
        5              energia I               4             “-”              50000
        6              aggs 80                 6             “-”              80000
        7              aggs 150                3             “-”              150000
        8             ggs tr 645               4             “-”              100000
        9             ggs tr 885               5             “-”              200000

                                                                                         13
                     Measuring units
   Volume of the transported gas is measured by
    means of 7 measuring units.
   A measuring unit of Tsiteli Khidi has a
    commercial status.
   A commercial measuring unit is on the Russian
    side of the Georgian-Russian border, and a
    control unit is on the Georgian side.
   As of today, actual loading of the gas-main
    pipelines is 18 %. Natural gas suppliers are:
    ”Gazpromeqsport”, Itera company, German
    company ”ЗМБ ГмбХ”, industrial amelgamation
    of Azerbaijan ”Azerigazniegl”.


                                                    14
                   “KazTransGaz-Tbilisi” Ltd.

   “KazTransGaz-Tbilisi” Ltd., which has purchased movable and immovable property of
    jsc “Tbilgaz”, in 2006 was issued a gas distribution license from GNERC and
    started to supply gas to its customers in Tbilisi city.

                 2007 technical data of “KazTransGaz-Tbilisi” Ltd.

   Total length of pipelines 2420 km
   High pressure gas pipelines - 232 km
   Medium pressure gas pipelines - 811 km
   Low pressure gas pipelines - 1377 km
   643 gas regulating ponts and case installations
   Number of subscribers – 307638
   301511 - apartments
   6039 – industrial and communal consumers
   88 – Other consumers (Embassy and etc.)
   Yearly consumption - 454,8 million m3
   Loss - 35,6%


                                                                                15
   Gas supply system of Tbilisi city requires capital repair, as
    gas pipelines and their infrastructure are in emergency
    state. A number of subscribers are installed obsolete, unfit
    and non-standard gas-meters, which need to be replaced.

   Investor – jsc “yaztrangazma” paid US 12 million dollars
    for the purchase and restoration of gas supply systems of
    Tbilisi city and intends to invest another US 79 million
    dollars into further restoration of gas supply systems.




                                                                16
                          Quality of gas

   The Commission is regularly submitted Certificates of
    Compliance for gas from Georgian Oil and Gas Corporation
    and Kaztransgaz-Tbilisi laboratories. None of the other
    licensees has a gas quality examination laboratory.

   Certificates of compliance of gas imported over the years show
    that the quality of gas imported into Georgia satisfy standards.




                                                                 17
     Administration of disputes and complaints
(The Commission considers disputes between licensees and
between licensees and consumers. Often it has to stand out as
mediator in these disputes). The procedure of administration
of disputes and complaints is as follows:
 1. A submitted complaint is delivered to the other party.
 2. After a response is received, the case is considered at a
    working meeting with participation of both parties.
 3. If necessary, on-the-spot investigations are carried out;
 4. In case of arriving at a consensus, a dispute is considered to
    be settled.
 5. If the parties fail to arrive at a consensus, the case is
    considered at the session of the Commission, which takes a
    decision obligatory to both parties.
 6. Both parties have a right to appeal against the decision
    taken by the Commission in court.
                                                              18
Revision of observance of the conditions of licenses

   In accordance with the Law of Georgia on Electric
    Power and Natural Gas, regulation of the natural
    gas licensees includes carrying out of their
    permanent monitoring.
   Every year, the licensees have to present to the
    Commission yearly reports, both technical and
    financial. On the basis of these reports, the
    Commission makes certain recommendations.
   In disputable and questionable cases, on the spot
    revisions are carried out.


                                                       19
     Prospects of development of the natural gas sector of
                          Georgia:

   New technological facilities;
   Replacement of steel pipes by polyethylene pipes;
   Increasing safety of operation;
   Measuring of natural gas and improvement of the system
    of settlements with subscribers;
   Expanding monitoring of licensees by the Commission.




                                                             20
    There are following problems with licensing and
                       licensees:
   Collection of the sum of tariffs from subscribers and illegal use of
    natural gas;
   There is high incidence of violation by the licensees of the Rules of
    Consumption of Natural Gas established by the Commission, and in
    particularly with contracted subscribers;
   Applicants for licenses experience difficulties with obtaining of
    cadastral plans from the Public Register as it is related to certian
    payment;
   Sometimes licensees delay, or fail to present information requested by
    the Commission;
   Problem of minor licensees.




                                                                         21
Thank you for attention




                          22

						
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