As BP invests in a new project that extends Georgia’s role in transporting oil and gas to Europe, BP Magazine heads to the country to find out what this means for the future.
Situated at the crossroads of Asia and Europe, Georgia is set to broaden its vital role in the transportation of hydrocarbons from the resource-rich Caspian Sea to markets farther west. A $2 billion project with BP and its co-venturers is helping to secure the country’s place as an important business hub in the region, as well as strengthen its ties with partners beyond.
When Georgians greet one another in their native Kartuli language, they express far more than a simple hello. As they utter “Gamarjoba” to friends or strangers, they wish them victory.
This single word reveals much about the nation’s history and its people’s resilience; it reflects centuries of turbulence across a territory that lies at the crossroads of Western Asia and Eastern Europe. The land has seen the rise and fall of empires, both ancient and modern. History books detail a long list of invaders and conquerors, who divided, annexed or dominated the kingdom.
Geography might be considered the root cause of Georgia’s struggles for many eras –bordered by four countries on three sides, with its west coast bounded by the Black Sea, intruders came from all angles. The 20th century proved to be no exception, with Georgia incorporated into the Soviet Union from 1921.
Nearly a quarter of a century after the fall of communism, an independent Georgia and its people have picked themselves up from the disarray of the Soviet collapse and are seizing the opportunities offered by their geographic location. Since 1999, Georgia has emerged as a crucial transit country for oil and gas from the resource-rich Caspian Sea.
Three BP-operated pipelines – two carrying oil and one gas, nearly 1,000 kilometres in total – traverse the landscape from east to west. They deliver millions of barrels of oil and billions of cubic metres of gas each year to their intended destinations for further export to global markets.
Nearly 250 kilometres of the giant 1,738-kilometre Baku-Tbilisi-Ceyhan (BTC) pipeline run through Georgia, climbing to an altitude of 2,800 metres in the Caucasus Mountains. Transporting gas, the South Caucasus Pipeline (SCP) was built in the same corridor of land. The third pipeline is the Western Route Export Pipeline, commonly known as the Baku-Supsa pipeline. It is the oldest of the three, carrying oil to a terminal on the Black Sea coast.
With all three pipelines buried underground, few facilities remain visible: pump stations in the east of the country, pressure-reducing facilities, metering stations at borders and off takes, the terminal at Supsa, and various block and check valves along the routes. Scarcely visible infrastructure does not equate to insignificant operations, though.
“By quietly, I mean the operations take place in a safe, environmentally responsible and compliant manner, with almost 100% reliability.
“Georgia has very much played its cards right in the region as far as attracting these pipeline developments. It is not a hydrocarbon-rich country itself. However, it is strategically positioned geopolitically and it has created and sustained the right business environment to encourage investments.”
New $2 billion project
These investments are by no means over yet. In addition to its current operations here that employ more than 570 staff, BP and its partners are now working on a new project that represents the single largest foreign investment in Georgia at $2 billion over the next three years.
Along with neighbouring Azerbaijan, Georgia is at the ‘top end’ – close to the hydrocarbon source – of the Southern Gas Corridor that will deliver vast quantities of Caspian gas to Turkey and on to Europe.
As well as expanding part of the existing SCP, the development means two new gas compressor stations for the country – facilities that will require new skills to operate new technology.
“The project needs to be ready by 2018 in Georgia,” says Schlueter, during a visit to a construction site close to Gardabani. “But the challenges don’t just lie in building the new pipeline loop and compressor stations on schedule, they come during start-up and operations. We will be entering the world of large-scale gas compression, with huge jet engines as part of our facilities; we need to operate those safely and efficiently from day one and our goal is to employ a fully nationalised technician workforce.”
Once those compressor stations are pumping gas, eyes will turn farther west to witness the eventual delivery of additional supplies through Turkey and on to the heart of Europe. Just as Georgia starts to play an even greater transit role for the energy industry, the country is also looking westwards in its vision of a secure economic and political future.
“The European Union is a natural partner for Georgia,” says Ambassador Zviad Chumburidze, secretary general of the EU-Georgia Business Council. Created in 2006, with BP as a founding member, the organisation aims to support the Georgian business community in establishing direct links with Europe. “We have excellent relationships with our neighbours in the region, but we also view the EU as a stable and predictable partner for the future.”
Closer to Europe
This partnership took a step forward in June 2014, with the signature of the EU Association Agreement, which includes a so-called ‘deep and comprehensive free trade area’– in other words, a chance for Georgian businesses to reach some 500 million potential customers. On the day of the pact, then European Council President Herman Van Rompuy declared: “The EU stands by your side, today more than ever before.”
Georgia saw the impact of the deal immediately: exports to the EU rose by 12% within six months. “We’re taking steps to become a small but distinctive contributor to the European market,” Chumburidze says. “For example, our agricultural sector has a promising export future. At the moment, we have a couple of dozen companies operating with a small turnover in the EU – we’re already selling blueberries in five countries and supplying kiwi fruits to a German supermarket chain.”
Over at the American Chamber of Commerce (AmCham) in Georgia, making inroads into Europe and beyond is also viewed positively, not necessarily for reasons of immediate economic benefit, but for what such developments represent on a broader level.
“The Association Agreement is significant in itself, of course, but it also requires Georgia to comply with a number of standards that prompt many changes in legislation,” says Sarah Williamson, AmCham in Georgia president. “For the Government to take responsibility for implementing those changes over a fixed time frame sends an important signal to potential investors that the country is serious about its aspirations to join Europe and the West.”
Both the European and American trade associations also actively promote Georgia as an important business hub in the region, with a strong banking sector (two Georgian institutions are listed on the London Stock Exchange), a multilingual population, and friendly political relations with its neighbours. “We play a role in getting US investors to come here and look at Georgia,” says Williamson. “There are plenty of investment opportunities in diverse sectors, from hydro power to offshore software development, agriculture to tourism.”
With spectacular scenery among the mountain ranges of the Caucasus, a diverse climate, as well as a rich artistic and cultural history, Georgians are fully aware of what their country has to offer visitors. And, they take great pride in their hospitality, intent on showing tourists a warm welcome. After all, in this predominantly Orthodox Christian nation, where hilltop monasteries are dotted across the landscape, a proverb says ‘every guest is God-sent’.
As with any capital city, Tbilisi, of course, has its many attractions. There’s the charm of winding alleyways and the dome-shaped sulphur baths that jut out like giant beehives in the old town, in contrast to the daring modern architecture on the banks of the Mtkvari River, with the glass Bridge of Peace and curious tubular design of the newest concert hall.
However, Tbilisi does have to vie for visitor attention with another destination, a five-hour drive west to the shores of the Black Sea. In the autonomous region of Adjara, the coastal resort of Batumi offers tourists at least one activity they can’t find elsewhere in the Caucasus: gambling. Batumi is a place of bright lights and global hotel brands, smart piazzas and apalm-fringed boardwalk or ‘bulvar’ along the waterfront. A flowerbed at the city limits greets visitors with the words ‘Batumi Miracle’ – a nod to the vast redevelopment that is restoring the metropolis to its former pre-communist glory.
“Even before Soviet times, Batumi and the surrounding region were known as a tourist destination,”says Giorgi Ermakov, mayor of the municipality. “We’re well-equipped to cater for a variety of tastes and demands; different climatic zones allow visitors to swim in the sea and go into the mountains to ski during the same trip.”
Weekend visitors fly into Batumi from Azerbaijan, Armenia and even Israel, or drive across the nearby border from Turkey to try their luck in the city’s casinos. Each summer, the annual Black Sea Jazz Festival boosts tourist numbers further, with big name, international stars on the bill.
But, the mayor recognises that Batumi cannot take anything for granted. Conscious of the need to attract future investment, ensure the sustainability of its growing tourism industry and improve the living standards of its increasing population, the city joined the EU Covenant of Mayors initiative in 2014.
“By signing the covenant, we commit to reducing our carbon dioxide emissions by 20% by 2020,” he says. “At city hall, we consider energy efficiency to be a cornerstone in the economic development of Batumi – it goes hand-in-hand with our tourism strategy, so we had to seize this opportunity for our community to become more sustainable.”
Improved waste management, greener public transport and infrastructure projects, and building reforms will all have their parts to play in helping Batumi reach its overall goal in five years’ time. BP and its oil and gas co-venturers are supporting this effort as part of a national $2.4 million renewable energy and energy efficiency programme, by introducing cleaner energy measures in municipal buildings.
Commitment to this European initiative is just another example of how Georgia is seeking closer engagement with the 28-nation union. Similarly, by embracing international investment – including that of the energy industry – the country is clearly looking to build a resilient future through partnership. Certainly, as long as oil and gas is produced in the region, the resources will need to be carried to customers.
As BP’s Schlueter concludes: “While often the ‘glitz’ and excitement of our industry is deemed to come from new discoveries, ultimately, the pipelines and transit operations deliver the revenue.
"The pipelines in this country are not simply for two or three-year operations – they are here for the long term, and we invest with the confidence that they are in the right place and will be carrying oil and gas for a long, long time.”
BP’s commitment to the countries in which it operates goes beyond delivering safe and reliable energy operations. BP Magazine visits a small village in eastern Georgia, where the community development initiative set up by the business is working closely with local people to help revive the prospects of a once-declining district.
The small village of Vakhtangisi is literally at the end of the road for eastern Georgia – it’s a matter of metres from the Azerbaijani border and the crossing seems to attract more attention than the community itself. A quick internet search even reveals a blogger choosing it as a destination for an eyebrow-raising ‘Nothing there tour’. Look closely, however, and nothing could be farther from the truth.
Villagers have responded to the challenges of recent years, when work and enterprise have been hard to come by since the closure of former Soviet factories in the nearby industrial town of Rustavi. There are now a number of new small businesses in the village and a thriving community-based organisation that is taking charge of small infrastructure improvements.
Due to its location within four kilometres of the SCP expansion, Vakhtangisi and its 820 households have been offered the opportunity to participate in the community development initiative created by BP and its co-venturers to support communities affected by the pipeline. The village is among 18 that have joined the programme since 2013, in a second wave of activity that complements the original initiative established to support those affected by construction and operation of the BTC and SCP pipelines.
A Georgian non-governmental organisation, the Centre for Training and Consultancy (CTC) runs the programme on BP’s behalf in the east of the country, with up to three components on offer in each village: improvement of agricultural practices through demonstration farming; supporting micro-entrepreneurship to provide additional income sources; and building skills among community groups to improve local infrastructure.
“We promote the programme and encourage locals to respond with their ideas and outline their own contributions to the initiative,” says Irina Khantadze, executive director for CTC. “We cannot work on people, we need to work with them, so there is a competitive element that allows us to see which individuals or groups are motivated. They also need to provide input into the programme, be it financial or practical.”
In Vakhtangisi, villagers elected nine of their neighbours to form a registered community organisation, which then asked locals the question: what is your main priority for improvements? Renovating the playing fields, or ‘stadium’ as it is called locally, came out top, along with reconnecting parts of the village that had been cut off by small waterways.
A football pitch and basketball and volleyball courts now sit on an old piece of village wasteland, after the group received around $6,000 funding, with 35% additional contribution from the community itself. This contribution is a vital constituent of the programme, creating community ownership and project sustainability in the longer term.