White Stream: Georgia's Ticket to the Pipeline Big Time?

The White Stream gas project could prove the Georgian government's trump card as it focuses on maintaining Georgia's business-friendly image among foreign investors, some energy analysts believe.

With negotiations with Turkey over the Nabucco transit fee still at a standstill -- Ankara asks that 15 percent of transported gas remain in Turkey -- gas producers and consumers are starting to think of routes that pass through fewer transit countries.

That leaves two options, according to Tbilisi-based energy expert Liana Jervalidze: ""the Russian South Stream [pipeline], crossing Russian territory and connecting with Bulgaria via a subterranean pipeline through neutral waters, and the White Stream."

White Stream -- also known as the Georgian-Ukrainian-European Union (GUEU) gas transportation project -- pledges to send up to 32 billion cubic meters (bcm) of gas per year from Azerbaijan via Georgia and the Black Sea on to Ukraine, Romania and Western European markets. By comparison, the much-touted Nabucco project estimates a maximum annual delivery load of 31 bcm.

White Stream will use the existing South Caucasus Pipeline to the Georgian town of Supsa, and then be developed in three phases extending its capacity from 8 bcm per year to 16 bcm per year and, finally, 32 bcm per year.

"The project was not touted much before as both Washington and Brussels wanted to ensure the breakthrough of Nabucco first," commented Giorgi Vashakmadze, director of development for the GUEU-White Stream Pipeline Company, Ltd. "But the approach changed lately after the need for a more diversified gas supply became more urgent to the EU."

In announcing the Georgian government's decision to join the project on April 3, Deputy Foreign Minister David Jalagania hyped Georgia as a "credible" energy transit country.

After the 2008 war with Russia, stability in Georgia, though, could prove the key to maintaining that image, noted John M. Roberts, an energy security specialist with Platts, an American energy information service. European consumers are not interested in the international politics behind gas shut-offs, but in simply getting their gas, he added.

"If Georgia really wants to make progress and everyone hopes it does, then it has simply to be the best governed country in the entire region, the most transparent, most open and, most specifically, the most peace-oriented," Roberts underlined.

As opposition protests for President Mikheil Saakashvili's resignation have unwound in Tbilisi, the government, including Gilauri, have repeatedly emphasized the impact such demonstrations could have on foreign investment.

President Saakashvili has noted that several investors have delayed trips to Georgia as a result of the demonstrations. An agreement for a $3.28 billion free industrial zone in the Georgian city of Kutaisi was signed with the Egyptian firm Fresh Electric three days before the protests, however.

Aside from banking on Georgian stability, securing the gas to make White Stream works has become the second challenge.

Caspian region countries may be looking toward the EU, and its hopes to get 60-120 bcm of gas via a South Caucasus Corridor, but gas from Azerbaijan's prized Shah Deniz field "will be sold to the markets and through the routes offering the best commercial terms," commented Olav Skalmeraas, vice-president of the Norwegian firm StatoilHydro, which holds a 25.5-percent stake in the Azerbaijani Shah Deniz field. White Stream developers look to the field to provide at least the initial gas supplies for their project.

The eastern markets of China and India are no further from the Caspian region than the EU, Skalmeraas added.

With that prospect in mind, Georgian Prime Minister Nika Gilauri, who formerly served as Georgia's energy minister, will travel to Turkmenistan on April 23 to discuss gas supplies for both White Stream and Nabucco, the Azerbaijani news agency Trend reported, citing an unnamed Georgian government source.

The GUEU-White Stream Pipeline Company's Vashakmadze underlined that White Stream and Nabucco are not rivals, but "friendly projects able to create a multiplier effect to reduce gas transportation risks."