prepa Blacksea 30/05/00 17:50 Page 1 I N T E R N A T I O N A L E N E R G Y A G E N C Y BLACK SEA ENERGY SURVEY I N C O - O P E R A T I O N W I T H T H E E N E R G Y C H A R T E R S E C R E T A R I A T 2027en.fm Page 1 Wednesday, June 21, 2000 10:30 AM © OECD, 2000. © Software: 1987-1996, Acrobat is a trademark of ADOBE. All rights reserved. OECD grants you the right to use one copy of this Program for your personal use only. Unauthorised reproduction, lending, hiring, transmission or distribution of any data or software is prohibited. You must treat the Program and associated materials and any elements thereof like any other copyrighted material. All requests should be made to: Head of Publications Division Public Affairs and Communication Directorate 2, rue André-Pascal, 75775 Paris Cedex 16, France. I N T E R N A T I O N A L E N E R G Y A G E N C Y BLACK SEA ENERGY SURVEY I N C O - O P E R A T I O N W I T H THE ENERGY CHARTER SECRETARIAT INTERNATIONAL ORGANISATION FOR ENERGY AGENCY ECONOMIC CO-OPERATION 9, rue de la Fédération, AND DEVELOPMENT 75739 Paris, cedex 15, France The International Energy Agency (IEA) is an Pursuant to Article 1 of the Convention signed in autonomous body which was established in Paris on 14th December 1960, and which came into November 1974 within the framework of the force on 30th September 1961, the Organisation for Organisation for Economic Co-operation and Economic Co-operation and Development (OECD) Development (OECD) to implement an international shall promote policies designed: energy programme. • To achieve the highest sustainable economic It carries out a comprehensive programme of growth and employment and a rising standard of energy co-operation among twenty-four* of the living in Member countries, while maintaining OECD’s twenty-nine Member countries. The basic financial stability, and thus to contribute to the aims of the IEA are: development of the world economy; • To contribute to sound economic expansion in • To maintain and improve systems for coping with Member as well as non-member countries in the oil supply disruptions; process of economic development; and • To promote rational energy policies in a global • To contribute to the expansion of world trade on context through co-operative relations with non- a multilateral, non-discriminatory basis in member countries, industry and international accordance with international obligations. organisations; • To operate a permanent information system on The original Member countries of the OECD are the international oil market; Austria, Belgium, Canada, Denmark, France, • To improve the world’s energy supply and Germany, Greece, Iceland, Ireland, Italy, demand structure by developing alternative Luxembourg, the Netherlands, Norway, Portugal, energy sources and increasing the efficiency of Spain, Sweden, Switzerland, Turkey, the United energy use; Kingdom and the United States. The following •To assist in the integration of environmental and countries became Members subsequently through energy policies. accession at the datesindicated hereafter: Japan (28th April 1964), Finland (28th January 1969), Australia (7th June 1971), New Zealand (29th May 1973), Mexico (18th May 1994), the Czech Republic (21st December 1995), Hungary (7th May 1996), Poland (22nd November 1996) and the Republic of Korea *IEA Member countries: Australia, Austria, Belgium, (12th December 1996). The Commission of the Canada, Denmark, Finland, France, Germany, Greece, European Communities takes part in the work of Hungary, Ireland, Italy, Japan, Luxembourg, the the OECD (Article 13 of the OECD Convention). Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom, the United States. The European Commission also takes part in the work of the IEA. © OECD/IEA, 2000 Applications for permission to reproduce or translate all or part of this publication should be made to: Head of Publications Service, OECD 2, rue André-Pascal, 75775 Paris cedex 16, France. FOREWORD - 3 FOREWORD In 1998, the International Energy Agency published Caspian Oil and Gas, highlighting the Caspian Sea’s potential as a main energy source for both Europe and Asia. We follow that study now with this Black Sea Energy Study, for the key to moving Caspian oil and gas to market in Europe is the politics and economics of the complex Black Sea region. World oil demand is expected to continue to grow, with prosperity and the relentless spread of motor and air transport. The Caspian Sea region is one of the great potential reserves of petroleum – not nearly so vast as the Middle East’s pool, but comparable to North Sea reserves. How the riparian states resolve the problem of energy through and along the coast of the Black Sea will be of high importance to Europe and the world over the next two decades. This study describes the extreme variety of conditions in the states involved – from rapidly- growing and gas-hungry Turkey to oil-rich Azerbaijan. Bulgaria and Romania, together with three republics of the Former Soviet Union, are still undergoing the difficult transition from Communism to a market economy. All need foreign investment to support the expensive energy projects before them. Several have yet to create the stable and predictable investment climate needed to attract such investment. In the current volume, the IEA seeks to render a service to the countries of the region as well as to future investors and clients. Facing up to the political, economic and geographic problems of the region, we offer some proposals on how they may be met. Among the key issues dealt with is, of course, that of alternative transit routes that will safely deliver oil and gas while avoiding congestion in the Turkish Straits. Robert Priddle Executive Director ACKNOWLEDGEMENTS - 5 ACKNOWLEDGEMENTS The IEA wishes to acknowledge the very helpful co-operation of the Energy Charter Secretariat, the OECD Nuclear Energy Agency, and Hagler-Bailly Services Inc. Thanks are due to the following experts for their valuable comments: Emmanuel Bergasse of the Tacis Energy Efficiency Centre in Tbilisi; Slavtcho Neykov at the Bulgarian State Commission for Energy Regulation; Doina Caloianu and Lulin Radulov of the Black Sea Regional Energy Centre. Special thanks is given to the following IEA staff: Pierre-Marie Cussaguet and John Paffenbarger, country desk officers respectively for Turkey and Greece, Yukimi Shimura and Sohbet Karbuz for preparing the statistical data, Bertrand Sadin for the preparation of the maps, and Benjamin Parameswaran for the preparatory work. INTRODUCTION - 7 INTRODUCTION The IEA, in co-operation with the Energy Charter Secretariat, conducted a study of the energy sectors and policies of Armenia, Azerbaijan, Bulgaria, Georgia and Romania in late 1998 and early 1999. The resulting publication, Black Sea Energy Survey, is an independent review of the major issues facing energy developments in these countries and energy transport in the Black Sea. To round off the regional picture, brief overviews of the IEA Members Greece and Turkey have been added, drawing on the IEA’s Energy Policy reviews of these countries. Ukraine and Russia, which have been studied in detail in previous IEA surveys, are not covered by specific chapters in this study. In preparing this report, missions were undertaken in late 1998 to Armenia, Bulgaria, Georgia and Romania to meet with key energy figures in government and industry, both local and foreign, as well as representatives of multilateral institutions active in the region. The study team was composed of experts from the IEA Secretariat and from the Energy Charter Secretariat. Hans Kausch(team leader) IEA, Head of Non-Member Countries Division for Europe, Middle East and Africa Erich Unterwurzacher IEA, Administrator, Non-Member Countries Division Jean-Christophe Fueg IEA, Administrator, Non-Member Countries Division Nina Kouznetsoff Energy Statistician, IEA Ian Brown Phare energy advisor at the Romanian Ministry of Industry and Trade John Fahy ERAS Ltd Sydney Fremantle Energy Charter Secretariat Gianni Frescura OECD Nuclear Energy Agency Jeff Pierson Altec Jacques Royen OECD Nuclear Energy Agency Lise Weis Energy Charter Secretariat TABLE OF CONTENTS - 9 TABLE OF CONTENTS FOREWORD 3 ACKNOWLEDGEMENTS 5 INTRODUCTION 7 I. OVERVIEW 17 Economic Performance and Outlook 19 The Energy Landscape: Some Common Threads 20 State Ownership and Privatisation 20 Structural Reform 21 Regulatory and Legal Reform 22 Integration of Electricity Markets 22 Investment Climate 23 II. REGIONAL ENERGY TRADE AND TRANSIT 25 Oil Trade and Transport 25 Current Oil Transport 25 Medium-Term Oil Transport (2003-2005) 26 Southeast Europe 30 Longer-Term Oil Transport (2005-2010) 31 Summing Up 33 Natural Gas Trade and Transport 35 Current Gas Trade 36 The Turkish Market 36 Southeast European Markets 38 Ukraine 40 Summing Up 40 III. AZERBAIJAN 41 Economic and Political Overview 42 Recent Economic Developments 42 Privatisation and Foreign Investment 43 10- TABLE OF CONTENTS The Energy Sector 44 Energy Overview 44 Energy Sector Structure 46 The Status of the Caspian Sea 46 Energy Prices and Tariffs 47 Energy Legislation 47 The Oil Sector 48 Oil Reserves 48 Oil Production 48 Oil Production Projections 49 Recent Drilling Results 50 Oil Prices 51 Oil Refining 51 Foreign Investment 52 Oil Distribution and Consumption 55 Oil Transportation and Trade 56 Natural Gas Sector 58 Gas Reserves and Production 58 Gas Transmission and Distribution 60 LPG 62 Gas Consumption 62 Gas Pricing 63 Gas Trade and Transit 63 Electricity 64 Electricity Industry Overview 64 Electricity Generation 64 Electricity Production and Consumption 65 Electricity Transmission 65 Future Developments 66 IV. ARMENIA 67 Political and Economic Overview 67 Recent Economic Developments 67 Privatisation and Restructuring 69 The Energy Sector 70 Energy Overview 70 Energy Policy and Legislation 72 The Oil Sector 75 Exploration 75 Oil Distribution 75 Oil Consumption 76 Oil Trade and Transit 76 TABLE OF CONTENTS - 11 The Gas Sector 77 Gas Industry Structure 77 Legal Framework and Pricing 77 Gas Distribution and Consumption 78 Future Gas Demand 79 The Gas Network 79 Gas Trade and Transit 80 Coal 81 Electricity 81 Structure of the Electricity Industry 81 Privatisation 83 Electricity Generation 84 Electricity Production and Consumption, Outlook 87 Electricity Network and Interconnections, Trade and Transit 88 Electricity Prices 89 Nuclear Power 90 Structure of Nuclear Utility 90 Operation of Medzamor NPP 91 Nuclear Safety Aspects 91 V. GEORGIA 93 Political and Economic Overview 93 Recent Economic Developments 93 Privatisation and Restructuring 95 The Energy Sector 95 Energy Overview 95 Energy Policy and Legislation 98 Energy Projections 101 Investment Framework 102 The Oil Sector 103 Oil and Gas Policy 103 Oil and Gas Exploration and Production 104 Refining 105 Oil Transit Infrastructure 105 Oil Consumption 106 Oil Pricing 107 Natural Gas 107 Natural Gas Policy 107 Gas Industry Restructuring 107 Gas Infrastructure and Transit 109 Gas Pricing 109 Gas Consumption 109