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26.07.2012

“IT IS NECESSARY TO RAISE ENERGY EFFICIENCY”, - says the deputy head of the Center for Political Studies of “Noravank” Foundation Sergei SARGSYAN in his interview to “Golos Armenii”

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- Mr. Sargsyan, how do you assess the condition of the energy security of Armenia? What is the role of “Armrosgazprom” in its ensuring?

- Energy security as a component of the national security of Armenia claims constant and careful attention. High dynamics of changes of the military and political situation in our region and in the world, growth of instability in the energy carrier exporter countries make us take this issue seriously. Currently there are no serious threats to this aspect of national security. Nevertheless, everything possible is done for both diversification of energy carriers’ supply to Armenia and development of nuclear and hydropower energy as the least vulnerable to the influence of external economic and military-political factors. Natural gas supply from Russia to Armenia is carried out through the territory of Georgia and “Armrosgazprom” found mechanisms to provide stability of gas pipeline operation despite political climate in the region.

- What is the role of “Armrosgazprom” in ensuring of the energy security of Armenia?

- “Armrosgazprom” undoubtedly plays considerable role as the company provides the supply of the most important energy resource to Armenia, without which functioning of neither economic, nor energy system is possible. To supply industrial and population needs of Armenia in natural gas in 2011, the volume of gas supply from Russia has increased at 11.73% and reached 1.6 billion m3. Only for recent several years the direct investments of the company into the economy of Armenia have reached $820 million and $450 of them have been invested into the building of the biggest 5th power generating unit of Hrazdan Thermal Power Plant.

Besides, “Armrosgasprom” is the biggest institutional company in Armenia which proved to be not only a reliable gas supplier but also the biggest employing company – there are about 7 thousand employees in “Armrusgasprom” today. According to the National Statistical Service this company is the major tax payer either. The payments to the budget of Armenia for the first quarter of 2012 “Armrusgasprom” were 12 billion drams. Though factually “Armrosgasprom” is a natural monopoly, it has a status of one of the most transparent companies in Armenia and in the region.

-What is the world gas price surge tendency for the final consumer?

- The price surge can be observed in the countries which either subsidized gas prices for the final consumer, or, possessing considerable natural gas reserves, sold it on their domestic market at non-market prices. E.g. since July 1, 2012 “Gazprom” – the biggest gas producer in the world – has raised prices on the domestic market at 15%. This tendency will continue till domestic prices approach world prices, of course, after deduction of transportation and other duties.

Generally a shift of the relations of Russia with the countries consuming its energy carriers to the market relations is taking place. Though, despite the fact that no usage of the so-called shock therapy should be expected in this issue, the rate of equation of gas prices for the European consumers and the CIS countries, including Armenia, will condition the dynamics of the rise in tariffs.

As for Europe, it is all clear: there has always been market gas prices so there will be no considerable variation in prices in Europe. At the average, 1000m3 of gas cost for individuals about 550 Euros, i.e. about 280000 drums. As you can see the Armenian price – 132000 drums – is far from the European, but we should be prepared that it will not remain at the same level and it will slowly but invariably increase.

- And is Iranian gas cheaper than the Russian?

- It is very interesting though complicated question. It is connected with how we determine the cost of 1kW per hour of electricity produced by Armenia. As you know we pay for the Iranian gas by the electricity – 3kW per hour for 1m3 of gas. And here a question of how much 1 kW per hour electricity in Armenia costs comes forward. And its cost varies. E.g. electricity produced by Vorotan Hydroelectric Power Plant and Metsamor Nuclear Power Plant is very cheap because these capacities were inherited by Armenia from the USSR. They do not demand return on investments. As for new capacities, the picture here is different. Small hydroelectric power plants, new thermal power generating capacities are created by the investments and they demand the return on the investments and besides provision of investor’s profit. It means that the electricity produced by new capacities is much more expensive than the one produced by the old ones. Taking into consideration the fact that sooner or later the old capacities will be put out of commission, one may say that the electricity price in Armenia will increase, which means that the cost of the Iranian gas for which we pay by electricity will raise either.

What impact will the gas prices increase have on the final consumer?

We will undoubtedly feel it. But it is rather difficult to predict the level of the effect it will have as it rather depends on the active social policy of the state and social and economic situation in Armenia than on the gas prices increase. As you know the differentiated tariffs for the industrial gas consumers and population are set. Besides the Armenian government has been subsidizing gas cost for under-privileged people.

Besides the gas tariffs are also conditioned by the dollar rate. Armenia pays for the gas to Russia in dollars and sells it to the population for drams. So the dollar rate fluctuation has already created ground for increasing of the tariffs despite the fact of how much the Russian gas price will increase. But in the end everything depends on the improvement of the economic situation in the country. The population will not feel the gas price surge when it earns more.

- You said that definite and stable surge of world prices for the energy carriers can be observed. What can Armenia do in this situation?

- Gas prices surge for Armenia should undoubtedly cause rising of the energy efficiency of the Armenian economy. Over the last 10 years when the gas price for Armenia was low, the Armenia business did almost nothing to reduce the energy carriers’ cost. Most of the Armenian enterprises, if not all of them, are inefficient in energy aspect (e.g. greenhouse facilities). Consider this for a moment – in Turkey where the gas price is higher than in Armenia, greenhouse facilities produce agricultural goods which are imported in Armenia and a lot of money is paid for transportation and custom expenses. But the price for those products is lower than for the goods produced by the Armenian agriculture and at the same time Turks contrive to make a profit. In Turkey they partially subsidize agriculture but this is not the point. Turkish greenhouse facilities consume far less gas for the production of a unit of output than the Armenian ones. That is why the Armenian greenhouse facilities need modernization in the aspect of energy efficiency in order to survive the gas prices increase. I brought an example of greenhouse facilities but such a situation is characteristic for all the areas.

And of course, Armenia has to develop alternative energy sources by which we for some reason understand exclusively small hydropower energy, which is inefficient and which often negatively affects fragile ecosystem. But there are other capabilities either...

Vladimir DARBINYAN

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