Levan Davitashvili: “Oil and gas extraction has doubled in recent years.”

Verdict: FactCheck concludes that Levan Davitashvili’s statement is MOSTLY FALSE.

In 2022, some 39,000 tonnes of oil were extracted in Georgia which is not twice as high even as compared to the lowest extraction volume of the past years (27,000 tonnes in 2017) and growth amounts to 39% whilst oil extraction has even decreased as compared to earlier years. For instance, extraction in 2022 is 23% lower as compared to extraction in 2013 whilst it is also lower as compared to the figures for every year from 2009-2015. Therefore, the part of the claim in regard to the doubling of oil extraction is untrue. At the same time, the total volume of extracted oil is insignificant and speaking about changes in volumes is meaningless.

In regard to natural gas, its extraction in 2009-2022 period peaked in 2021, amounting to 16 million cubic metres. In 2022, extraction dropped to 14 million cubic metres whilst it was fluctuating within the margins of 5-11 million cubic metres in 2009-2020. Therefore, in this case, Levan Davitashvili’s statement provides a more or less accurate description of the trend, although the volume is also miniscule in terms of natural gas and so any discussion of changes is further meaningless.

Based on strictly statistical data, Levan Davitashvili’s statement is false in regard to oil aspect and contains only elements of truth about natural gas. However, in both cases, it disregards the fact the extraction volumes are insignificant. In particular, Georgia consumes 1.4 million tonnes of oil annually whilst local extraction is less than 3% of the total demand and it should be kept in mind that it is crude oil that is extracted. In the case of natural gas, the demand is over 2.5 billion cubic metres. In this case, local extraction does not even meet 1% of the demand.

Therefore, FactCheck concludes that Levan Davitashvili’s statement is MOSTLY FALSE.

Analysis

On 4 October 2023, in his speech before the Parliament of Georgia, the Minister of Economy, Levan Davitashvili, stated (from 00:27): “Oil extraction has doubled in recent years, in the last year. In addition, gas extraction increased by 111%.”

As reported by the Georgian Oil and Gas Corporation, some 39,000 tonnes of oil were extracted in Georgia in 2023 which is 11% and 30% more as compared to 2021 and 2020, respectively. In 2009-2022, it was 2017 when the extraction volume was the lowest at 28,000 tonnes. Levan Davitashvili did not specify, but if we compare 2022’s figure to that of 2017 – the lowest extraction figure of the past years – the growth rate will be 39% which is 2.5 times less as compared to the growth rate that the Minister mentioned. At the same time, it is also lower as compared to any period taken separately from 2009-2015.

Graph 1: Crude Oil Extraction in Georgia (Thousand Tonnes)

Source: Georgia Oil and Gas Corporation

Although the 39% growth rate is generally not bad, 2022’s figure was still not equal to the extraction figures in 2009-2015. As reported by the National Statistics Office of Georgia, oil consumption was 1.4 million tonnes in 2021 which means that local extraction is merely 2.8% of the total consumption. However, there is another problem here – crude oil is not consumed without refining and this small amount of locally extracted oil is fully exported as raw material due to the absence of an oil refining plant. Petroleum, diesel, aviation oil, heavy fuel oil and other final petroleum products are 100% imported.

The situation is almost similar vis-à-vis natural gas. In 2021-2021, extraction doubled as compared to 2016-2017 but there was a slight decreased in 2022 as compared to 2021. The main problem also in this case is the share of local extraction in the total consumption. Despite a general growth dynamic, local extraction is less than 1% of the demand.

Graph 2: Natural Gas Extracted in Georgia (Million Cubic Metres)

Source: Georgian Oil and Gas Corporation

As reported by the National Statistics Office of Georgia, the demand for natural gas reached 2.8 billion cubic metres in 2021. Therefore, local extraction met only 0.6% of the demand whilst the remaining 99.4% was imported from Azerbaijan and Russia.

Unlike oil, the volume of natural gas that passes through Georgia as transit has been steadily increasing since 2013. If in 2012 the Shah Deniz gas pipeline transported 3.2 billion cubic meters of gas, the transit volume increased six-fold to 19.8 billion cubic meters in 2022 of which 5% will be bought by Georgia at a special discount. In fact, purchase volumes from Shah Deniz are more (in the balance of 2022, the share of Shah Deniz gas was 1155 million cubic meters out of the 19.8 billion cubic meters which passed as transit, or 5.8%). The share of Shah Deniz in the balance of natural gas was 34%. It was 42% in 2022 and forecasted to reach 45% in the forecasted balance for 2023. Against the background of the increase in the prices of energy carriers, it was possible to maintain a relatively low tariff for natural gas in Georgia in the recent period thanks to transit and not through local extraction.

In recent years, news about the "discovery of a new deposit" in Georgia has been disseminated several times. In reality, nothing has changed, production is still at a minimum and consumption is on the rise. Both oil and gas production fluctuate, growth is followed by decline and vice versa whilst the consumption growth rate is characterised by more stability.

In the case of natural gas, the statement of the Minister of Economy is only partially accurate whilst it is false in case of oil it is false. Most importantly, the context is also distorted. Both “doubling” and a “111% growth” lead to an impression of massive growth whilst such growth has not caused substantial changes in the consumption structure – tariffs have not been cut, energy dependency on other countries has not been curbed and revenues from extraction have not become significant.


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