Energy Policies Beyond IEA Countries : Caspian and Black Sea Regions 2015.

476 Pages·2015·8.521 MB·English

by  OECD

Eastern Europe,
Caucasus and
Central Asia
Please note that this PDF is subject to
specific restrictions that limit its use and
distribution. The terms and conditions are
available online at http://www.iea.org/t&c/
5
1
0
2
A, Energy Policies
E
D/I
C
E Beyond IEA Countries
O
©
INTERNATIONAL ENERGY AGENCY
The International Energy Agency (IEA), an autonomous agency, was established in November 1974.
Its primary mandate was – and is – two-fold: to promote energy security amongst its member
countries through collective response to physical disruptions in oil supply, and provide authoritative
research and analysis on ways to ensure reliable, affordable and clean energy for its 29 member
countries and beyond. The IEA carries out a comprehensive programme of energy co-operation among
its member countries, each of which is obliged to hold oil stocks equivalent to 90 days of its net imports.
The Agency’s aims include the following objectives:
n Secure member countries’ access to reliable and ample supplies of all forms of energy; in particular,
through maintaining effective emergency response capabilities in case of oil supply disruptions.
n Promote sustainable energy policies that spur economic growth and environmental protection
in a global context – particularly in terms of reducing greenhouse-gas emissions that contribute
to climate change.
n Improve transparency of international markets through collection and analysis of
energy data.
n Support global collaboration on energy technology to secure future energy supplies
and mitigate their environmental impact, including through improved energy
efficiency and development and deployment of low-carbon technologies.
n Find solutions to global energy challenges through engagement and
dialogue with non-member countries, industry, international
organisations and other stakeholders.
IEA member countries:
Australia
Austria
Belgium
Canada
Czech Republic
Denmark
Estonia
Finland
France
Germany
Greece
Hungary
Ireland
Italy Secure Sustainable Together
Japan
Korea
Luxembourg
Netherlands
New Zealand
Norway
Poland
Portugal
Slovak Republic
© OECD/IEA, 2015 Spain
International Energy Agency Sweden
9 rue de la Fédération Switzerland
75739 Paris Cedex 15, France
Turkey
www.iea.org 5
United Kingdom 1
0
2
Please note that this publication United States A,
E
is subject to specific restrictions The European Commission D/I
that limit its use and distribution. C
The terms and conditions are also participates in OE
available online at www.iea.org/t&c/ the work of the IEA. ©
Eastern Europe,
Caucasus and
Central Asia
5
1
0
2
A, Energy Policies
E
D/I
C
E Beyond IEA Countries
O
©
Foreword: International Energy Agency Executive Director

FOREWORD: INTERNATIONAL ENERGY AGENCY EXECUTIVE DIRECTOR
I am delighted to introduce this compendium of energy policy reviews for eleven countries of Eastern
Europe, the Caucasus and Central Asia.
Armenia, Azerbaijan, Belarus, Georgia, Moldova, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Ukraine
and Uzbekistan all declared independence over two decades ago and embarked on sovereign development
and growth based on their natural potential. Since gaining independence, however, political and economic
developments in these countries have been asymmetrical, with some countries maintaining regulated
structures and others designing more liberalised economies, depending on their political and economic
goals. Examples of these diverse developments include the Association Agreement with the European Union
signed by the governments of Georgia, Moldova and Ukraine in June 2014; the Eurasian Customs Union
formed by Kazakhstan and Belarus with the Russian Federation in January 2010, soon to be joined by
Armenia and possibly Kyrgyzstan and Tajikistan; and the declared permanent political neutrality maintained
by Turkmenistan.
Developments in these countries’ energy sectors have also been uneven. Endowed with abundant
hydrocarbon reserves, the region is emerging as an important contributor to global energy supplies and
therefore to world energy security. The producing countries in the Caspian Sea region have significantly
expanded their oil and gas outputs to international markets over the past two decades, while the region’s
substantial but largely untapped hydro, renewables and energy efficiency potential offers the possibility for
sustainable development and further growth. I therefore believe that the time is ripe to take stock of
developments to date and to review the aims of the medium- and long-term energy policies of the countries
in this important region.
This publication, the first regional review in the IEA series Energy Policies beyond IEA Countries, evaluates
energy policy developments in Eastern Europe, the Caucasus and Central Asia. This report focuses on key
policies related to energy security, market design, sustainable development and investment climate,
corresponding to the four pillars of the INOGATE framework, one of the oldest energy technical assistance
programmes funded by the European Union and promoting regional energy co-operation since 1996.
This report presents the results of the two IEA-led peer review cycles conducted with INOGATE partner
countries’ government designees and the INOGATE Technical Secretariat during 2013 and 2014 under the
INOGATE Programme. The peer reviews involved extensive meetings with relevant government authorities,
as well as with key public and private energy stakeholders in each country.
The International Energy Agency is most grateful to the European Union for the financial assistance provided
through the European Neighbourhood and Partnership Instrument that made this review and its publication
possible, as well as to the INOGATE Technical Secretariat and the governments of the INOGATE partner
countries for their constructive co-operation and participation in the peer review process.
This report is published under my authority as Executive Director of the IEA.

Maria van der Hoeven
Executive Director
International Energy Agency
5
1
0
2
A,
E
D/I
C
E
2 O
©
Foreword: European Commissioner for Neighbourhood and Enlargement Negotiations
FOREWORD: EUROPEAN COMMISSIONER FOR NEIGHBOURHOOD
AND ENLARGEMENT NEGOTIATIONS
Energy is at the core of sustainable development, and the European Union has been promoting the
development and implementation of energy security strategies worldwide. These strategies are aimed at
balancing economic development with environmental sustainability, while respecting social values.
This is particularly important for the neighbours of the European Union: Eastern Europe, the Caucasus and
Central Asia (EECCA). These countries are experiencing numerous challenges in the field of energy, such as
the need to modernise energy infrastructure, rising public debt, concerns about security of supply, a lack of
established strategies for energy efficiency, and the need for robust demand management. A well-developed
national policy framework, targeted investments, and improved energy management practices are needed
to satisfy the growing demand for energy in an environmentally sustainable way.
In the framework of the European Neighbourhood Policy and the Eastern Partnership (the joint initiative
launched in 2009 among the European Union, EU countries and the Eastern European partner countries), the
European Union has supported reforms aimed at strengthening energy security in the partner countries. The
activities under the Eastern Partnership platform on energy security have contributed to enhancing
framework conditions and solidarity, and to supporting infrastructure development, interconnections and
diversification of supply. Moreover, they helped to promote energy efficiency and the use of renewable
resources, and to link regulatory frameworks and energy policies.
This compendium publication provides highlights of the energy policy reviews of eleven countries in Eastern
Europe, the Caucasus and Central Asia, including an overview of the status of reforms in each of the
countries and key recommendations for energy policy makers. Energy policy reviews focus on each country’s
developments in improving overall energy security and promoting domestic and regional market
convergence, sustainable energy and attracting necessary investments.
The European Union has joined forces with the International Energy Agency and the INOGATE Technical Secretariat
to support the progress of Partner Countries in achieving energy reforms, thus the work presented in the
following pages is the product of fruitful and ambitious international co-operation. The INOGATE Programme has
been one of the main development and co-operation instruments used to deliver the goals set under the Baku
Initiative (2004) and the Astana Energy Roadmap (2006), which focused on security of supply, energy market
convergence, sustainable energy, and investment attraction. In addition, the European Union has been supporting
countries that signed the EU Energy Community Treaty (Ukraine and Moldova) to implement it, and candidate
countries (Georgia) to make the necessary reforms that would allow them to join the Energy Community.
Looking to the future, the European Union is committed to continuing its regional support to participating
countries by assisting them to define and implement sound, result-oriented energy policies. This support will
enhance the know-how needed to ensure that reforms have a real impact on the ground, improving the
well-being of local communities. This comprehensive status report will be crucial to shaping, driving, and
measuring this support in the long term.

Johannes Hahn
Commissioner for Neighbourhood and Enlargement Negotiations
European Commission
5
1
0
2
A,
E
D/I
C
E
O 3
©
5
1
0
2
A,
E
D/I
C
E
O
©
Table of contents
TABLE OF CONTENTS
FOREWORD: IEA EXECUTIVE DIRECTOR ...................................................................................................... 2
FOREWORD: EUROPEAN COMMISSIONER FOR NEIGHBOURHOOD AND ENLARGEMENT NEGOTIATIONS ... 3
EXECUTIVE SUMMARY ..........................................................................................................17
EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS ............................................................................ 19
Executive summary .................................................................................................................... 19
Key recommendations ............................................................................................................... 28
ARMENIA ..............................................................................................................................31
1.1. GENERAL ENERGY POLICY .................................................................................................................. 33
Country overview ....................................................................................................................... 33
Key energy data ......................................................................................................................... 34
Energy sector design .................................................................................................................. 38
Key policies ................................................................................................................................. 40
Investment ................................................................................................................................. 41
Assessment ................................................................................................................................ 42
Recommendations ..................................................................................................................... 43
1.2. ENERGY SECURITY .............................................................................................................................. 45
Resource endowment ................................................................................................................ 45
Energy security and diversification ............................................................................................ 45
Energy infrastructure and investment ....................................................................................... 46
Emergency response .................................................................................................................. 50
1.3. MARKET CONVERGENCE .................................................................................................................... 51
National market structure ......................................................................................................... 51
Regional markets and interconnections .................................................................................... 53
1.4. SUSTAINABLE DEVELOPMENT ............................................................................................................ 55
Renewable energy ..................................................................................................................... 55
Energy efficiency ........................................................................................................................ 56
Environmental protection .......................................................................................................... 57
Climate change ........................................................................................................................... 57
5
1
0
2
A,
E
D/I
C
E
O 5
©
Table of contents
1.5. INVESTMENT ATTRACTION ................................................................................................................. 59
Investment climate .................................................................................................................... 59
Investment framework .............................................................................................................. 60
Investment planning .................................................................................................................. 60
References ................................................................................................................................. 61
AZERBAIJAN..........................................................................................................................63
2.1. GENERAL ENERGY POLICY .................................................................................................................. 65
Country overview ....................................................................................................................... 65
Key energy data ......................................................................................................................... 66
Energy sector design .................................................................................................................. 70
Key policies ................................................................................................................................. 71
Investment ................................................................................................................................. 72
Assessment ................................................................................................................................ 73
Recommendations ..................................................................................................................... 74
2.2. ENERGY SECURITY .............................................................................................................................. 76
Resource endowment ................................................................................................................ 76
Energy security and diversification ............................................................................................ 76
Energy infrastructure and investment ....................................................................................... 77
Emergency response .................................................................................................................. 80
2.3. MARKET CONVERGENCE .................................................................................................................... 81
National market structure ......................................................................................................... 81
Regional markets and interconnections .................................................................................... 83
2.4. SUSTAINABLE DEVELOPMENT ............................................................................................................ 84
Renewable energy ..................................................................................................................... 84
Energy efficiency ........................................................................................................................ 85
Environmental protection .......................................................................................................... 85
Climate change ........................................................................................................................... 86
Gas flaring .................................................................................................................................. 86
2.5. INVESTMENT ATTRACTION ................................................................................................................. 87
Investment climate .................................................................................................................... 87
Investment framework .............................................................................................................. 87
Investment planning .................................................................................................................. 88
References ................................................................................................................................. 89

5
1
0
2
A,
E
D/I
C
E
6 O
©
Table of contents
BELARUS ...............................................................................................................................91
3.1. GENERAL ENERGY POLICY .................................................................................................................. 93
Country overview ....................................................................................................................... 93
Key energy data ......................................................................................................................... 94
Energy sector design .................................................................................................................. 98
Key policies ...............................................................................................................................100
Investment ...............................................................................................................................102
Assessment ..............................................................................................................................104
Recommendations ...................................................................................................................105
3.2. ENERGY SECURITY ............................................................................................................................106
Resource endowment ..............................................................................................................106
Energy security and diversification ..........................................................................................106
Energy infrastructure and investment .....................................................................................107
Emergency response ................................................................................................................113
3.3. MARKET CONVERGENCE ..................................................................................................................114
National market structure .......................................................................................................114
Regional markets and interconnections ..................................................................................118
3.4. SUSTAINABLE DEVELOPMENT ..........................................................................................................119
Renewable energy ...................................................................................................................119
Energy efficiency ......................................................................................................................120
Environmental protection ........................................................................................................121
Climate change .........................................................................................................................122
3.5. INVESTMENT ATTRACTION ...............................................................................................................123
Investment climate ..................................................................................................................123
Investment framework ............................................................................................................124
Investment planning ................................................................................................................125
References ...............................................................................................................................126
GEORGIA ............................................................................................................................ 127
4.1. GENERAL ENERGY POLICY ................................................................................................................129
Country overview .....................................................................................................................129
Key energy data .......................................................................................................................130
Energy sector design ................................................................................................................134
Key policies ...............................................................................................................................136
Investment ...............................................................................................................................138
Assessment ..............................................................................................................................139
Recommendations ...................................................................................................................141
5
1
0
2
A,
E
D/I
C
E
O 7
©
Table of contents
4.2. ENERGY SECURITY ............................................................................................................................142
Resource endowment ..............................................................................................................142
Energy security and diversification ..........................................................................................142
Energy infrastructure and investment .....................................................................................143
Emergency response ................................................................................................................147
4.3. MARKET CONVERGENCE ..................................................................................................................148
National market structure .......................................................................................................148
Regional markets and interconnections ..................................................................................152
4.4. SUSTAINABLE DEVELOPMENT ..........................................................................................................153
Renewable energy ...................................................................................................................153
Energy efficiency ......................................................................................................................153
Environmental protection ........................................................................................................154
Climate change .........................................................................................................................154
4.5. INVESTMENT ATTRACTION ...............................................................................................................156
Investment climate ..................................................................................................................156
Investment framework ............................................................................................................157
Investment planning ................................................................................................................158
References ...............................................................................................................................159
KAZAKHSTAN ...................................................................................................................... 161
5.1. GENERAL ENERGY POLICY ................................................................................................................163
Country overview .....................................................................................................................163
Key energy data .......................................................................................................................165
Energy sector design ................................................................................................................170
Key policies ...............................................................................................................................173
Investment ...............................................................................................................................175
Assessment ..............................................................................................................................177
Recommendations ...................................................................................................................178
5.2. ENERGY SECURITY ............................................................................................................................180
Resource endowment ..............................................................................................................180
Energy security and diversification ..........................................................................................183
Energy infrastructure and investment .....................................................................................184
Emergency response ................................................................................................................189
5.3. MARKET CONVERGENCE ..................................................................................................................191
National market structure .......................................................................................................191
Regional markets and interconnections ..................................................................................194 15
0
2
A,
E
D/I
C
E
8 O
©