To mark the start of a six-page focus on the latest news and developments in the Black Sea, Barry Cross gives his take on the status quo in rising star Georgia
 Investment levels at both Poti and Batumi are sufficient to accommodate future traffic growth. |
Georgian ports are, to all intents and purposes, relatively well placed. Potential rivals such as Novorossiysk and Odessa are situated too far to the west to adequately serve markets in Azerbaijan, Armenia, Kazakhstan and Uzbekistan.
The Black Sea state of Georgia is served by three ports: Batumi, Poti and Supsa. In reality, the latter is a single-point mooring buoy at the end of a pipeline, which handles flows of Caspian light oil. The mooring point was built with limited loading capacity in mind and currently receives calls from a single tanker every Monday, which loads 80,000 tonnes-120,000 tonnes of oil. Operations are straightforward and highly efficient.
Traffic at Batumi is also very much hydrocarbonbased. Its tank farms handle incoming consignments of Caspian oil from Azerbaijan via the Supsa pipeline, from where it is moved overland by rail to the port. In addition, crude oil is brought in via other routes from Kazakhstan and Turkmenistan. Batumi Oil Terminal (BOT), which was privatised in 1999, assumed responsibility for Conoco’s LPG terminal project in 2001, thereby adding propane and butane to its portfolio. Batumi’s future role is very much to act as a transhipment centre for Caspian hydrocarbons. Potentially, up to 10 million tonnes annually could be handled there, given the ability to accommodate vessels of up to 130,000 dwt.
More than $100 million of investment was sunk into BOT during 2005 alone by owner Naftrans Ltd, in which the international investment company, the Greenoak Group, holds an 82.8% stake. Additional capital has recently been raised by Naftrans, whose parent company has also recently been awarded the concession to manage Batumi Sea Port itself. Poti, too, has privatised handling operations at most of its terminals; although the container terminal remains strictly a port authority-controlled operation. Most of the private sector groups now managing terminal operations in Poti are Georgian.
As part of the overall concession agreement, they are committed to major investment programmes to bring standards up to globally recognised norms. Most of the traffic handled by these facilities is imported, which includes various dry bulks and agribulks, while bauxite is also offloaded, then transported to an aluminium factory in neighbouring Azerbaijan. Various studies have been undertaken on the privatisation potential of the container terminal, where throughput has risen significantly in recent years. However, both current infrastructure and handling equipment need considerable upgrading and it is doubtful that a private sector company would be able to make a profit from the operation.
A local shipping agent notes: “Investment levels at both Poti and Batumi are sufficient to accommodate future traffic growth, while neither port suffers from any real congestion problem. Indeed, the privately run facilities in the ports work very well.” He adds that, with the exception of the Poti box terminal, the port authorities had ceded all operational activities to the private sector. Tugs and pilots, along with dredging and channel clearance, nevertheless remain within the competence of the authority.
The shipping agent also praised the local portrail networks, although noted that some investment was probably needed in new rolling stock. Foreign investors are also said to be linked to both future road and rail infrastructure upgrades. “Rail tariffs are pitched at a reasonable level, although there are moves afoot to reduce them in certain areas. They are competitive compared with other regional rail freight providers, so cargo does move by rail. However, price, while important, is not a main generator of rail freight per se, rather this depends on the opening of new production facilities that rely on the movement of goods from the port inland,” explains the agent.
Significantly, he identifies road haulage companies in Austria, Bulgaria and Turkey as the main competition to Georgia’s maritime trade with the Caucasus and Central Asia. “They can transport goods more cheaply than the shipping lines even over very long distances. It is much cheaper, for example, to send cargo from Istanbul to Georgia by road than it ever would be by sea,” he comments, noting that haulage rates out of Istanbul have been cheaper than is currently the case.
Big improvements have also been made in the last couple of years to the country’s customs service to bring cargo clearance in line with modern requirements. “It’s no longer quite as bad as it was, but it never did quite deserve the reputation it once had. It isn’t any easier here than anywhere else, but at the same time it’s not any more difficult than it is further east.” However, the shipping agent stresses that this does not impact directly on the shipping lines, whose decisions on whether to call or not are predicated on whether they can turn a profit or not.
Security has also improved over recent years, although the shipping agent says that it had never been as bad on the ground as some people had claimed. “Security issues do remain, but they are no better or worse than those found in other Black Sea states.”
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