SOCAR Energy Georgia – the Azerbaijani state oil company’s subsidiary in Georgia – holds first place in Forbes Georgia’s list of the largest companies in the country.
With total assets of 1.17 billion GEL and income of 1.45 billion GEL,the company accounts for 6.4% of the total assets attributed to the 100 largest companies in Georgia and 8.3% of the total income.
Today, the Azerbaijani State Oil Company – SOCAR – is a global business, which employs 50,000 people. Since 1994, when the contract of the century was officially signed and the world’s leading oil companies created a consortium with SOCAR, the company has significantly diversified, and in 2006 entered the Georgian market.
SOCAR Energy Georgia’s founding was preceded by the Russian-Georgian energy crisis. In January 2006, because of two explosions on the gas pipeline during a cold winter; Russia stopped supplying Georgia with gas, and during this hard time it was Azerbaijan who supported Georgia.
As a result, SOCAR Energy Georgia is a very important company for Georgia’s energy security, diversification and access to resources. Apart from Georgia, SOCAR is currently represented in Turkey, Romania, Switzerland, Germany and Ukraine. SOCAR also has a strong trading relationship with Switzerland, Singapore and Nigeria.
SOCAR Energy Georgia formally established itself in the Georgian market in September 2006. As mentioned previously, SOCAR Energy Georgia is one of the largest companies operating in the country. It unites Georgia’s largest petrol stations and natural gas distribution networks (SOCAR Georgia Petroleum and SOCAR Georgia Gas). The group is owned by the Republic of Azerbaijan’s state oil company, which holds a 75.505% share of the company’s authorized capital.
SOCAR Energy Georgia and its subsidiary companies have a total of 4,265 employees; the company is one of the largest employers in Georgia.
“In Georgia, we are represented not only on main highways and in major cities, but also in high mountain regions like Stepantsminda and Mestia.” States Levan Giorgadze, SOCAR Georgia Petroleum’s CEO. “We are especially proud to have the modern multifunctional facility on the Gori highway and the petrol station in Batumi, which has received numerous architectural awards. Our customers are familiar with the petrol station in Batumi associated with McDonald’s restaurant. It is worth noting that we will continue implementing the same strategy in the future.” In this regard, the company’s plans in the near future are already clear and the next big complex should soon be opened in Terjola on the newly constructed highway.
Another project that makes the company extremely proud is the Sairme pilot project– essentially a virtual gas pipeline. “Technology helps when supplying gas to high mountainous and complex terrain regions, where it is practically impossible to construct a gas pipeline network.” Explains Levan Giorgadze. “Resultantly, gas will be transported to populated areas by special container rather than by a pipeline.” According to Giorgadze’s evaluation, the pilot project has succeeded and contributed to touristic business development in the region, which means that there will be some more similar projects in the future.
The company also has long-term plans for business in Georgia. Levan Giorgadze statesthat there are several reasons for that: “Georgia is one the fastest growing economies in the region. It is distinguished by small bureaucracy, which unequivocally promotes business development. It has huge potential to become a regional hub and great potential to act effectively as a corridor for transit energy as well as other resources.”
SOCAR Georgia Petroleum’s parent company SOCAR shares the same opinion. Georgia is Azerbaijan’s partner for almost all major transit projects. During 2018, the volume of natural gas transported through Georgia’s pipelines reached a historic high of 9.03 billion cubic meters. Growth is primarily connected to the opening of the Trans Anatolian pipeline (TANAP) on 12th of June 2018 and Georgia’s South Caucasus pipeline’s (SCP) newly constructed line that has already started operating. The upgraded pipeline can transport 20 billion cubic meters of natural gas annually. It will be able to run at full capacity in the coming years. With TANAP’s expansion project, the Trans Adriatic pipeline will soon transport Caspian natural gas to Italy and other EU countries.
According to the forecast, after the acquisition of the second phase of the Shah-Deniz field, the total volumes of “optional” and “additional” gas available to the country will increase significantly from 1.2 billion cubic meters annually up to 1.6 billion cubic meters annually. This increased volume of gas will satisfy the total demands of Georgia by the year 2026.
The share of natural gas supplied by SOCAR to Georgia during 2018, in terms of total volume of supplied gas, was 61.9%. Regarding natural gas, Levan Giorgadze emphasizes safety and consumer awareness: “State involvement, in general, is essential for ensuring a free and safe environment. For the gas industry, this involvement is even more crucial. Moreover, gas distribution is a regional business like in any developed country.”
SOCAR Georgia Petroleum’s CEO is satisfied with quality of communication with the government. He notes that with the help of close ties there is frequent dialogue between the private sector and the government. In many cases, business is given the opportunity to express its opinion regarding certain legislative initiatives, which Levan Giorgadze says is welcomed.
Apart from importing and selling gas, SOCAR Energy Georgia imports and sells fuel. “As for the fuel industry, the competition is very strong.” Says Levan Giorgadze. There are total 1,150 petrol stations in country and 115 areowned by SOCAR Georgia Petroleum. The company holds approximately a 14% market share. Levan Giorgadze states that: “Non-branded and small networks hold a 30% to35% market share. Apart from us, three out of four companies, which are the largest players in the market, are vertically entirely integrated and hold a major share of imports.” He goes on to say: “We pay special attention to fuel transportation and storage. Therefore, powerful labs, separate transport for petrol and diesel, cleaning reservoirs and other similar directions are our priorities.”
According to financial reports published by SOCAR Energy Georgia in 2017, the company’s total income was $1,455,470,000, which is 11.7% higher when compared to 2016 income. As for the company’s total assets, these are valued at1,178,857,000 GEL. Levan Giorgadze’s position is clear: “Georgia is a distinct, economically developed country in the region. Investors have the possibility to make long-term plans here. We have long way to go, but we should note the success thatwe have reached throughout the region.”
SOCAR Georgia Petroleum’s CEO also considers the Georgian tax system among the successes, which according to his evaluation, is one of the simplest and technologically developed. “After implementing the Estonian model, investing in Georgia became more attractive and interesting. The VAT automatic back-up system is also worth mentioning, which has already been implemented in Georgia.”
Since 2016 to the present day, SOCAR Energy Georgia has paid 1.4 billion GEL to Georgia’s budget and has invested an additional 1.1 billion GEL. During two consecutive years (2017 and 2018), the holding company was named as the largest investor in the fuel industry, the largest taxpayer and the company with the highest social responsibility.
Last year, the company created a long-term CSR strategy, which includes 5 main directions: environmental protection, youth support, safety, strengthening women, supporting the elderly and disabled people’s rights.
The company has put significant effort in all directions, but the main social responsibility clearly relates to fuel quality. “We are always ready for unexpected checks, because we know how important fuel quality is for us and our future generations.” Mentions Levan Giorgadze, and he also adds that the company started the long and hard process of acquiring the international certificate of quality. “Selling fuel is our main activity, however, we genuinely support using new types of energy. We see the need for increasing number of electric vehicles and hybrids cars, which is why you can see electric chargers at our stations.”
The company has the ambition to be the first in the market implementing the latest technology and trends, as well as to become the industry development leader through strengthening the value and position that the company holds globally and specifically in the Georgian market. ““Success in business is mainly measured by the growth of investor capital, however, we certainly take into consideration the business’ responsibility to the environment and society.” Concludes Levan Giorgadze.
SOCAR’s value is clear for Georgia, it is not just an ordinary private company; with its help Georgia has found a way to diversify and significantly weaken Russia’s influence on energy.