Gazprom and the Government of the Republic of Armenia have inked a 25-year Agreement identifying the strategic principles of cooperation in the gas & energy sector of the Republic of Armenia.

The Agreement stipulates ArmRosgazprom acquiring from the Armenian Government a 40 km long stretch of the Iran –Armenia gas pipeline and the fifth power generating unit of the Razdan CHP (Razdan-5). Additionally, the Armenian Government is committed to authorizing ArmRosgazprom to become the construction customer for the second 197 km long link of the Iran –Armenia pipeline.

Provisional purchase and sale agreements are to be sealed before April 14, 2006, with network ownership rights to be transferred before January 1, 2007.

To ensure effective natural gas-fired power generation, the parties will join efforts in rehabilitating and creating the integrated network complex Razdan-5 to be managed via a single center, as well as in constructing an up to 140 MW gas-powered turbine unit. Further operation of said facilities will help reduce power generation-related fuel costs. The Agreement also provides for the opportunity of exporting electricity to be produced at Razdan-5.

The deal execution will result in Gazprom taking a qualified majority in ArmRosgazprom.

In accordance with the Agreement, until January 1, 2009 the price of Russian natural gas for the Republic of Armenia is 110 US dollars per 1,000 cubic meters.

Reference:

Armenia does not produce natural gas and the country’s power generation sector is totally reliant on gas imports.

Gazprom resumed natural gas deliveries to Armenia in June 2003 and, at present, is the only supplier of gas to the Republic. Gazexport, a Gazprom 100% subsidiary, delivers gas to the Armenian-Russian border, where gas is purchased by ArmRosgazprom. Over 2005 Gazprom provided Armenian consumers with 1.7 bcm of natural gas.

The ArmRosgazprom company was incorporated in December 1997. Gazprom, the Armenian Energy Ministry and ITERA own 45%, 45% and 10% of ArmRosgazprom’s stake, respectively.

ArmRosgazprom’s major business is natural gas supply to the Armenian market. In addition, the company transmits, stores, processes, distributes and sells natural gas as well as upgrades and expands Armenian gas transmission & underground gas storage systems.

By constructing the Iran-Armenia gas line, the Armenian Government strives to ensure the national energy security through the gas supply source diversification.

The Razdan CHP is the largest power plant in Armenia and has a capacity of 1,100 MW, of which up to 800 MW is used to shave winter peak demand.

In 2003 the CHP was handed over to the Russian Federation as settlement of Armenia’s national debt. To raise funds for the Armenian power generation sector upgrading, Armenia’s Government declared in 2004 its intentions to sell off the uncompleted fifth 300 MW power generating unit of the Razdan CHP.