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Can bilateral relations between Georgia and Kazakhstan benefit oil and gas ties?

In recent months, the relationship between Georgia and Kazakhstan has been slowly strengthening as the two countries seek to unite to face mutual challenges and utilise each others' resources.

November represented the clearest indication yet that the two are forming a union that will overcome some of the problems that have been affecting sectors in both countries, with some initial outcomes set to benefit the respective nations' oil and gas industries both in the short term and in the long run.

During their recent talks, Mr Massimov and Mr Garibashvili discussed a wide range of issues affecting both trade, investment and the wider economy, with the Kazakhstani Prime Minister emphasising that the key issue on the agenda is easing transit between the nations and lifting barriers.

In response, Mr Garibashvili said that Kazakhstan is now the "major partner" of Georgia in Central Asia, and reiterated the Georgian Government's willingness to develop and deepen Kazakh-Georgian relations.

Key developments

The first key development emanating from the talks and new bilateral relations is that Kazakhstan’s gas transportation company, KazTransGas, is to regain control of its subsidiary in Georgia, the KazTransGas-Tbilisi LLC.

Five years ago, a special manager was appointed to the KazTransGas-Tbilisi due to an 80 million GEL debt ($45 million), which led to an initial settlement agreement writing off $10 million in penalties and interest rates.

Another important step has now been to agree to restructure KazTransGas-Tbilisi’s remaining $34 million debt to the Georgian Finance Ministry - something welcomed by KazTransGas.

In a statement, the organisation stated: "Kazakhstan’s national gas and gas supply operator, KazTransGas, believes that the agreements show the common interest of the parties in further development of constructive partnership, and pave the way for realisation of strategic business direction in Georgia’s gas sector."

The impact of the move will be significant, as the total length of the Tbilisi gas distribution system is in excess of 2,400 km, with KazTransGas-Tbilisi servicing over 300,000 gas users across both residential and commercial premises, as well as 500 large industrial enterprises.

Further effects

There has also been speculation regarding new developments on the oil front, as Kazakhstan has a terminal at Georgia’s Black Sea port of Batumi, but for now it appears that the country has no plans to build or purchase terminals for oil transhipment at seaports abroad.

For the past two years, the oil production in Kazakhstan has stood at around 80 million metric tonnes, and although there has been no major growth, there has been an increase in supplies of oil to the domestic market.

For now, it appears Kazakhstan and Georgia are focusing on the gas market as the fruits of the bilateral relations become evident, though with Kazakhstan continuing to eye expansion in the oil industry, the two will be working closely in the months and years ahead for their mutual benefit.

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