ARMENIA IS UNIQUE BY ACCIDENT

Lragir, Armenia
Nov 1 2006

No small country had ever been reported to build a gas pipeline for its
market, stated Karen Karapetyan, CEO of ARG (Armrusgasard) October 31,
who told news reporters what will the fate of the Iran-Armenia gas
pipeline be. "The Republic of Armenia, its market, its volumes are,
unfortunately, so small that there is not a precedent when a small
country builds its own gas pipeline. The Republic of Armenia is unique
in this sense because it has assumed the whole burden, return of the
investments, and so on and so forth," stated Karen Karapetyan.

But his following words make it clear that the Republic of Armenia is
unique by accident. Karen Karapetyan says a transit gas pipeline would
be possible to consider in case there was a buyer. Karen Karapetyan
does not deny, of course, that Armenia can become a country of transit
of gas, but he does not know when it will happen.

"When the gas seller and the gas buyer arrange that the first sells
and the second buys, and in deciding the transit route via Armenia is
beneficial. It is not clear when this will happen. A transit pipeline
is three times more expensive. When the market, the buyer and the
seller, does not work, one has to compensate fot this money. In this
case, only our consumer compensates. If we built a transit pipeline,
and the tariffs were set to compensate, each of you would ask why do
you build the pipeline on my expense, if there is not a market for
it?" says the chief executive officer of ARG.

In this case, of course, Armenia remains unique because when the
possibility of transit occurs, we will have to build a new pipeline
because the one under construction, which will be operated in December
cannot supply the volume required for transit. Meanwhile, this shows
that the government does not have wish rather than market for transit,
or more exactly, courage. The point is that the Georgian prime minister
had proposed to Armenia to turn the Iran-Armenia gas pipeline into a
transit pipeline, but the Armenian government did not respond. And
now the Georgians are considering the possibility of transporting
gas via the territory of Azerbaijan.

On the other hand, it may be good that it is not a transit pipeline,
because Armenia is even unable to deal with the existing small one
independently. No Armenian official has stated so far what they are
negotiating with the Russians in connection with the Iran-Armenia gas
pipeline. Karen Karapetyan is not an exception. It only became clear
from his words that Gazprom is likely to buy it but Karapetyan does
not know whether the government will agree to sell it or not. The
chief executive officer of ARG only knows that the right thing to do
is to have ARG take up the management of the pipeline. "There are two
ways of giving the pipeline to ARG: combining the share capital, and
management. It depends on the decision of the Armenian government,"
says Karen Karapetyan.

He says even if a separate company is set up to manage the
Iran-Armenia gas pipeline, the engagement of ARG is inevitable in
supplying the demand in Armenia. The point is that the 40 km section
under construction can transport an annual 400 million cu m of gas,
whereas Armenia is likely to get about 2 billion cu m gas from Iran
annually. Therefore it is necessary that ARG expands its network and
boosts the capacity of the Iran-Armenia gas pipeline. "Independent
from who the investor is, it needs to reach agreement with ARG to
make investments in our gas transportation system," states Karen
Karapetyan. According to Karapetyan, it is preferable that the owner
of the company attends to this expansion rather than the new investor
because it will cost the consumer cheaper. The CEO of ARG states that
there is already agreement with Gazprom, the owner of ARG.

From: Emil Lazarian | Ararat NewsPress