GEO/01/006
Total budget: USD 8,120,000
UNDP Sector: Energy planning and conservation
Starting Date: July, 2001
Duration: 4 years

The GIOC was created in November 1995 by a Presidential Decree, and entrusted with the power to represent the State of Georgia in matters related to the oil industry, mainly to construct and reconstruct means of oil transportation, including pipelines, and other and related infrastructure on the territory of Georgia. A special representative of the President of Georgia was appointed as President of GIOC and Commissioner Extraordinary of Georgia’s President, representing the State of Georgia in GIOC. Consequently, in March 1996, the GIOC was appointed as the Georgian Representative to the Pipeline Construction and Operating Agreement (PCOA) with the Azerbaijan International Operating Company (AIOC). The Government has agreed to transfer from the state enterprises through the Ministry of State Property Management the assets, needed by the GIOC to fulfil its duties and consisting of industrial facilities and buildings. Due to insufficient maintenance, these assets were in a desolate condition which resulted in an immediate UNDP-supported emergency program for the rehabilitation of the Gachiani Rail Tank Loading Station and in plans for further rehabilitation works on the transferred assets. Pursuing this strategy and acknowledging GIOC's past performance, new Presidential Decrees transferred additional rights and obligations to the GIOC in 1998 and 1999, while entrusting the GIOC with the responsibility for negotiating agreements with foreign governmental authorities, oil companies, pipeline companies and investors regarding major oil pipeline projects through Georgia and also while requesting the GIOC to establish plans of land use concerning the necessary right of way for the establishment of pipelines in Georgia. As a result, the project has been further expanded to include a large programme of capacity-building for the GIOC. UNDP and GIOC have decided to base the financing of specific GIOC activities on a Cost-Sharing Agreement whereas the UNDP financed 20% and GIOC 80% of the GIOC costs. During the implementation of the first phase of the project in 1997-2001: GIOC premises were rehabilitated, office equipment and training was provided, an administrative and environmental and technical work force was established, negotiations with the involved countries and international oil companies were launched, allowing GIOC to manage its businesses in a successful way.

Objective

The objective of this Project is to provide technical assistance to the senior management and staff of the GIOC in order to enable them to strengthen their professional knowledge and skills, and, as a result, give them a stronger backup for a sustainable employment. Increased knowledge and skills, gained in the framework of this Project, will enable the GIOC to responsively, effectively and independently run the company on a sustainable and economically profitable basis and to cope with the increased responsibilities vested into GIOC by the government. The advisory assistance provided by this Project will also increase the ability of GIOC’s staff to independently and competently assess the feasibility of much-needed development projects, while the efficiency of investment promotion schemes will, in turn, encourage domestic and international investors to become involved in such projects.

1. To establish a work force performing the GIOC businesses in the areas of its Charter To rehabilitate and further modernize the Gachiani Rail Tank Loading

2. To organise training programme in general administration- and management-related issues including an 'on-the-job-training'

3. To provide the environmental groundwork to ensure that GIOC will meet its obligations under the PCOA, the MEP, the Major Gas Export Pipeline and other pipeline and energy projects in regard to the protection of the environment.

4. To assist Technical Working Group of GIOC in working out of technical proposals of GPC

5. To enable the GIOC to participate in the preparation of a Design and Engineering Report and construction work of the MEP

6. To repair and reconstruct the buildings which the Government has transferred to GIOC in order provide office space to GIOC and to improve the asset base of the GIOC

7. To participate in the governmental efforts to improve the energy supply for Georgia

8. To conduct a series of feasibility studies conceived as a basis to design and promote energy and industrial sustainable investment projects

9. To find domestic and foreign companies to establish joint ventures with the GIOC and to make most needed investments in Georgia in the field of the oil industry

10. To assist governmental authorities in regard of energy, energy related and environmental issues, and hydrocarbon transportation security

11. To assist the participants of the Gas Pipeline Project – an obligation of the government as defined in the IGA and HGA - during the implementation of the Gas Pipeline Project

12. To implement the established principles for privatisation of GIOC and its subsidiaries

At the end of this Project it is expected that:

a) The senior management, staff and technicians of the GIOC parent corporation and of its subsidiaries will have increased their professional knowledge and know how. Subsequently, the GIOC will be fully established as a model company with special subsidiaries capable of performing their businesses on a sustainable and profitable basis, notably in the fields of

i) logistic, ii) transportation, iii) pipeline and Gachiani, iv) trading, v) oil processing and planning of petro-chemical industrial projects, vi) bitumen, vii) construction, viii) terminal, ix) storage, x) energy and xi) environment.

Moreover, the Environmental Working Group will have been suitably trained, also by having implemented the planned environmental projects together with a suitable partner.

Also, the above mentioned training activities will have enabled the GIOC to carry out additional services e.g. in the fields of energy and construction projects and of environment protection, as well as in assisting governmental authorities in an advisory function for energy and environmental issues.

b) The Gachiani Facility will have been completely rehabilitated and upgraded and will be operational in full compliance with the Georgian environmental regulations to coincide with the implementation of a Georgian pipeline project. Thus, the GIOC will be in a better position to ensure safe operations, keep on improving the Gachiani Facility and work on developing the terminal into a multiple loading and unloading facility for crude oil and petroleum products, such as gasoline, diesel oil and kerosene.

c) GIOC will have finalised the negotiations for the construction of a Major Oil Export Pipeline (MEP) and a Major Gas Export Pipeline.

d) GIOC will have participated in, examined and approved the engineering and construction activities of the contractor(s) of the MEP investor group in regard of the construction of the MEP from Baku to Ceyhan in Turkey via Tbilisi; it will have repaired and reconstructed the properties which the Government has transferred to GIOC in order to improve the asset base of GIOC including the Gachiani facilities; and GIOC will have identified and designed the construction work needed as an in-kind contribution of its share for its participation in potential joint venture projects.

e) It is further expected that at the end of this project, the GIOC will have continued to study the feasibility of the described projects and that a relevant investment promotion strategy will have been defined and worked out, with the aim to implement one or two of these projects. In addition, the GIOC will have continued to give assistance to the GIOC subsidiaries with the purpose of helping them to participate in the implementation of projects in the fields of energy, environmental and other industrial projects.

f) Also, the GIOC will have established itself as a competent company to professionally assist governmental authorities in the field of oil pipelines, terminals, refinery, environment protection and related areas.

g) Finally, the GIOC will have given assistance to the governmental authorities in regard of improving the legal and fiscal framework for badly needed investments in the energy and energy related industry.