“Armenia's Energy Sector Issues: Parallels with Georgia”
08.12.2017
13:00
One of the most pressing issues in the Armenian energy system is the non-transparent and illogical formation of the gas price for the consumer. Officially, Russia sells gas to Armenia at $ 150 per 1,000 cubic meters but the final consumer pays almost twice more - $ 290.

Ara Marjanyan, UN National Expert on Energy Issues, said this during the discussion entitled “Armenia's Energy Sector Issues: Parallels with Georgia” held at Media Center jointly with JAMnews.

Officially, the Russian gas giant, Gazprom, sells gas to Armenia at a “very low price” - $ 150 per 1,000 cubic meters. Recently, Russian Prime Minister Medvedev announced in Yerevan that the “special price” for Armenia will be maintained in 2018. The reality, however, is different. Although the contract has been signed with the Armenian government, Gazprom sells “blue fuel” at that price to its daughter company Gazprom Armenia on Armenia's border. This company adds a 100% margin to the tariff and gas becomes available for the Armenian citizens twice more expensive.

In Georgia, for example, where gas is imported almost totally from Azerbaijan, consumers get it for $235 per 1,000 cubic meters. Georgia has two advantages. Unlike Armenia, it does not pay for transit since Azerbaijan is a borderline country. Secondly, despite Azerbaijan is the only gas supplier for Georgia, competition was created in the domestic market.

Three companies are engaged in gas supply, and tariffs range from $190 to $240. The same gas tariff in Tbilisi costs $190 per 1000 cubic meters.

There is another problem in Georgia. Gas is more expensive at gas stations in Georgia than in Armenia. That is why drivers of Yerevan-Javakhq or Yerevan-Tbilisi routes or taxis fill the cars in Armenia.

The story of Ukraine is more interesting. It is in fact a war with Russia and by the end of 2015 Russia has stopped importing Russian gas. That country receives the same Russian gas from the rings, from Europe. That is, the same gas goes to Europe through Ukraine and comes back to Ukraine. Even in this case, the gas price in that country is lower ($ 260 per 1000 cubic meters) than in Armenia.

“This situation is a consequence of a non-transparent system of tariffs operating in Armenia, which directly affects the Armenian economy's competitiveness. It is simply necessary to change this system, to open it and create a competition,” Marjanyan said, adding that Armenia should reduce its dependence on gas and develop other sources, nuclear power plant and new hydro cascades.

“Although Armenia does not have so rich hydropower resources as Georgia, Armenia has a unique system - the cascade of Sevan-Hrazdan hydroelectric power plant (HPP). This complex structure is unique throughout the region. Only the Debed and Araks hydro potentials have remained unused in terms of resources. However, it is a great pleasure for us to take joint steps with our American counterparts in the development of the Debed hydro potential and the construction of the Shnogh HPP,” said the expert. 

On the other hand, it is unacceptable to delay the construction of the Meghri HPP on the Arax River jointly with Iran. As for small hydropower plants, there is potential in this sphere, but usage is approaching its maximum.

According to him, the issue of TPPs is connected with the import of gas, that is, with geopolitics. “We do not know what will happen tomorrow with the gas tariff, how it will be supplied and so on. Therefore, it is necessary to understand that the atomic and hydrogen component raises the energy independence and security of each country,” he said, adding that after completing the termination of the Metsamor NPP modernization unit (up to 2026), Armenia should replace it with a new one.

Economist Vahagn Khachatryan noted that high gas tariffs in Armenia are conditioned by the structure of the energy system. “All of our infrastructures have been built during the Soviet era with the logic that we are part of a large country that uses all these infrastructures, and energy is considered part of a single network. We did not have Energy Ministry, we had "Hayenergo", which was subordinate to the Government of Armenia and to the Ministry of Energy of the Soviet Union,” Khachatryan said, adding that Armenia made a mistake that gasification of the whole country was made under the conditions of this system.

“Now we have that system, we have not been relieved of that system, the whole energy system has been built with that logic. When talking about tariffs, they say they have fixed costs. We have to go through many principled, serious reforms, realizing that we are a different country, we are a separate country, there is no Soviet Union, and we have to build all our infrastructures in that logic. In this system, the main gas consumption, about 40 per cent, is conducted by the population, more than 30 per cent is consumed by gas stations. This is still the ordinary population. It turns about 75 percent, which is abnormal. That is why the utility costs in Armenia make up 14 per cent of the average population expenditure, and health or education costs around 5 per cent. About ten years ago, the volume of utility bills was 5-7%. It means that it has grown twice, but the health and education costs have been reduced,” concluded Vahagn Khachatryan.

To watch the video, follow the link.  

Arshaluys Mghdesyan, editor/events coordinator at “Media Center”

To contact the author please send an email toarshaluysmghdesyan@pjc.am.

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