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Gazprom to supply of 1.1 bln cu m of gas to Georgia in 2007

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MOSCOW, December 22 (RIA Novosti) - Russia's natural gas monopoly Gazprom [RTS: GAZP] signed three contracts Friday on supplies of 1.1 billion cubic meters of gas to Georgia in 2007 at $235 per 1,000 cubic meters, the head of Gazprom's export arm, Gazexport, said.

Alexander Medvedev said the contracts have been clinched with three companies on condition that 2006 supplies total 1.8 billion cubic meters, with two of them for supplies throughout 2007, and one for January-March, as Kavtransgaz-Tbilisi has confirmed supply volumes for just this period, and is likely to prolong its contract later.

The statement came amid a price row between Georgia and state-run Gazprom, which has doubled the current gas price for Tbilisi as of 2007.

Gazprom has set the price of natural gas for Georgia at $235 per 1,000 cubic meters and asked Georgia to stipulate the amount of gas it needs, and to then sign a corresponding contract, or otherwise gas that could have been bought by Georgia would be sold elsewhere.

Georgian Prime Minister Zurab Nogaideli said Wednesday that Azerbaijan will be Georgia's main natural gas supplier from 2007, adding that by the end of the week Baku will begin supplying gas from its Shah Deniz field in the Caspian Sea to Georgia.

Tbilisi wants to receive 800 million cubic meters of Turkey's quota for natural gas pumped via the South Caucasus (Baku-Tblisi-Erzerum) pipeline from the Shah Deniz deposit.

But Georgian President Mikheil Saakashvili has reportedly failed to secure extra gas supplies during his three-day negotiations in Turkey.

CNN-Turk TV channel cited a Turkish Foreign Ministry source Friday as saying Saakashvili "has returned home empty-handed."

Turkey's energy minister agreed earlier in the month to transfer part of his country's quota of 3 billion cubic meters of gas produced at the Shah Deniz field to Georgia and Azerbaijan. He said Friday talks with his Georgian counterpart, currently in Istanbul, will continue regardless of Saakashvili's departure.

Saakashvili said in mid-November that his country will not buy Russian natural gas at the new rate because it is not a fair market price at a time when some of Georgia's neighbors are paying $65 and $110 per 1,000 cubic meters in real terms.

The president said the price was politically motivated and that the move amounts to an economic blockade of Georgia.

But Gazprom said the new price reflects the company's strategy to apply market mechanisms to pricing gas in its trade with the Commonwealth of Independent States (CIS), a loose confederation of former Soviet republics.

Gazprom is currently carrying out measures to gradually bring gas prices for CIS states up to the European level, taking into account the distance of deliveries.

Gas prices for former Soviet republics must cover gas production, preparation and transportation expenses, and also yield profit commensurate with revenues received from gas sales on Western European markets, the energy giant said.

CIS countries currently pay not more than $110 per 1,000 cubic meters of gas, compared with an average rate of $230 charged by Gazprom for its exports to Europe. Gazprom has already proposed to CIS states that they pay more than $200 per 1,000 cubic meters from next year.

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