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21.03.2011

ON DILETTANTISM, PATRIOTISM AND GAS PRICES IN ARMENIA AND EUROPE

   

Sevak Sarukhanyan

On February 16 Armenian “Zhamanak” daily issued an article by a certain Hrayr Manukyan on, in his opinion, shameful situation with gas prices in Armenia. In the article it is particularly mentioned that in 17 European countries chosen on random gas is 11 times cheaper than in Armenia. After presenting such, as it seems, obvious facts, which detract Armenian-Russian partnership in the sphere of energy and “Armrusgazprom”, the author comes to rather expected conclusion: “the authorities believe that besides them nobody sees or understands anything”.

The article by Hrayr Manukyan was re-published by many resources. I found it out thanks to the link in Facebook with the comment the main message of which was: “it’s time to throw Russians out neck and crop and buy gas in Iran”. Not attaching importance to the article based on an obvious incompetence in the issue of the European gas prices (we will refer to this issue below), I, as it turned out, made a mistake: the topic was taken up by dozens of politicians and experts on various issues and the creation of the interim parliamentary commission on studying mechanisms of the gas prices formation in Armenia now may turn simple journalistic (an not only journalistic) dilettantism into a farce of the republican scale.

So, after the article of “Zhamanak”, which was re-issued several times and which stated in black and white that the gas in Europe costs cheaper than in Armenia, the similar statements were made by Armenian political figures, a part of whom, at least due to some biographical facts, must know such simple things as low or high gas prices on energy carriers. In particular, former chairman of the Central Bank of Armenia Bagrat Asatryan in his interview to Lragir.am on February 25 stated: “it is a tall tale that gas in Armenia is cheap; today people in Eastern and even Western Europe pay much lower price for gas than in Armenia”. Unfortunately, one should state that the former chairman of the Central Bank of Armenia relies on the article of “Zhamanak” daily (he read it for sure, especially, taking into consideration the fact that Asatryan represents the interests of the same political camp as the newspaper). There is no other explanation how a person who had headed the main bank of Armenia for many years, while comparing the prices on gas in Europe with the ones in Armenia, came to a conclusion that gas in Europe is cheaper.

“Dashnaktsutyun” party also joined the discussion of the issues connected with, as many think, high prices on gas in Armenia; it has initiated creation of the interim parliamentary commission to study the mechanism of the gas price formation in Armenia. Thus, the leader of the “Dashnaktsutyun” parliamentary group Vahan Hovhannisyan said: “Why, for example, Moldova, which covers almost the same territory as Armenia, and has analogous length of the gas pipeline and the same population, gets Russian gas at the price of $233 and sells it to the population at the price of $312. Why does Moldova manage to do this and we not? That is the question to answer for the interim parliamentary commission” (March 1, 2011 News.am).

The paradox is that there is nothing to answer for the interim parliamentary commission and the reason is as follows...

Gas prices in Europe from Hrayr Manukyan or what the confusion was caused by...

Honestly speaking, I, as a person who wrote many articles on the energy security, was most of all surprised by the fact that while comparing the gas prices in Armenia and Europe author referred to the source I know and respect - Europe's Energy Portal (http://www.energy.eu/#Domestic), and he presents rather suspicious data while alluding to it. Europe's Energy Portal is a resource which has definite advantages and the most important is that the prices on this British resource are shown in linkage to the prices for the electricity. A bit later I shall describe how it is done and with what purpose, and meanwhile, I shall tell you that there is no information about the gas prices in cubic meters. That was the point Hrayr Manukyan and those who rushed towards Europe's Energy Portal or just believed on his bare word did not know. According to the numbers about the fantastically low prices for the natural gas in Europe, which were published by “Zhamanak”, Hrayr Manukyan confused the price for 1kWh with the price for 1 cubic meter. So, let us clarify: how does the unit of energy (kWh – kilowatt hour) refer to gas? If you live in Britain and your gas meter records your gas consumption in hundreds of cubic meters, your energy company is required to bill you in terms of kilowatt hours (kWh). This seems to be an unnecessary complication, that is, until you need to consider how you might compare your gas charges with your electricity charges (which have always been billed in kWh). Thus, when you consider an electric fire that will consume, say, 2 Kilowatts in an hour, against a gas fire that may consume 1.5 kilowatts an hour you can see which one has the lowest running cost. If you visit Europe’s Energy Portal’s web site you will see that near the column with the prices for kWh for gas there is a column with the prices for kWh for electricity: it is made so that is easy to compare the prices and to chose, e.g., which fire you would like to buy – the one working on gas or on electricity. This fact was not known by “Zhamanak” newspaper and due to this reason they just confused the price for cubic meter with the price for kWh. One would like to believe that it was not made with an evil intent. Though the dilettantism, as life comes to prove, may return in guise of no less evil.

So, what is the price for the gas in Europe and where exactly it is cheap? In order to answer this question without getting into the history of the contracts between suppliers and consumers for all the countries, we need to refer to Eurostat, the data of which is the most full and professional. The gas prices in Europstat are presented not in cubic meters but in gigajoules (GJ) with the same purpose as in Britain gas price is presented in kWh. GJ is a unit used to measure the volume of energy. In other words Eurostat writes how much the unit of energy produced from gas will cost for the European physical persons taking into consideration all the rates and taxes. Let us mention that for the production of 1GJ of energy 26.2-27 cubic meters of natural gas should be used (dependent on the quality of the gas), so it is not very difficult to calculate the average price for 1 cubic meter of natural gas, sold to the final European consumers (only physical persons are taken into consideration) (Source: http://appsso.eurostat.ec.europa.eu). We shall intentionally take 27 cubic meters to receive maximum lowest price for the natural gas, and in order to calculate the price we shall use the Dram Euro exchange rate 1/492 for February 15, which was used by Hrayr Manukyan. In the last column the numbers presented by “Zhamanak” newspaper are brought.

Gas prices in Europe


Let us remind that gas in Armenia for physical persons costs 132 000 drams for 1000 cubic meters (according to the exchange rate for 15/02/2011 to which the reference is made by “Zhamanak” = 267 Euro) and taking as a ground the aforementioned table it is easy to make a conclusion that gas in Armenia is cheaper as compared to ALL THE COUNTRIES OF EASTERN AND WESTERN EUROPE. It should be mentioned that Romania, where the gas price is the lowest in Europe, produces up to 10 billion cubic meters of gas annually and this provides comparatively low price for the energy carrier!

And now about Moldova!

If the gas prices in Moldova are a key issue for creation of the interim commission in the Armenia parliament then the facts brought in our article may serve as a ground for not creating that commission and wasting paper instead of paying attention of the citizens of Armenia to other burning questions such as corruption in the spheres of education and health.

So what is the price of gas in Moldova? We have more reliable and comparatively fresher information than “Dashnaktsutyun”. So, in 2011 the National Energy Regulatory Agency of Moldova approved gas rates including those for the physical persons. Here are the new rates: if the consumer consumes less than 30 cubic meters per month he pays 4777 Moldavian leus ($403 at the exchange rate for 12/032011) for 1000 cubic meters and if he consumes more than 30 cubic meters per month (and there is a majority of those who does it) he pays 5146 leus ($435) (http://www.kp.ru/daily/25628.4/793481/). Let us be honest, this is far from $312 Dashnaktsutyun spoke about. Even more, it is much higher than in Armenia.

As for the once lower gas prices in Moldova: one should rather compare the landscape of Armenia and Moldova than their territories – in the first case, as we know, it is mountainous and in the second case, it is mostly plain. Secondly, we would like to unlock a secret: Russian Gazprom transports through the territory of Moldova 20 billion cubic meters of natural gas annually and pays to “Moldovgaz” $2.5 (since 2011 – $3) for the transition of 1000 cubic meters for every 100km. Those are huge profits of “Moldovgaz” which have been used for backing gas prices for the consumers in Moldova. And even in case when there are such big profits, since January, gas in Moldova has cost $435: that is where the interim commissions should be formed and hearings held!

Instead of conclusion

I always say to my students that the Armenian Nuclear Power Plant is an exclusive one. It is the only plant in the world which was restarted after shutting down and the only plant which was closed without any real economic and technological reasons, just out of emotions, which were mostly provoked by flag wavers, who stated that the Soviets robbed us and we could live perfectly by selling “Jermuk” and brandy. Few know how much the Armenian gas transition system lost over the first years of the independence: there was no gas pipe welder in Armenia during the construction of gas pipeline from Iran, meanwhile, there were times when Armenian construction gangs built the most difficult mountainous section of the Carpathians-Uzhgorod gas pipeline, which today provides the entire Europe with Russian and Central Asian gas. This sector had simply died in the early 1990s. The projects of building of the 5th power generating unit of Hrazdan Thermal-Power Plant, construction of the Armenian sector of the Iran-Armenia gas pipeline and increase in capacity of the Abovian gas storage, which were carried out due to Russian investments, has increased the energy security of Armenia repeatedly.

And, to be honest, I would not like the sector, which had been created in Armenia from the scratch, to suffer from dilettantism, demagogy and sometimes just from undisguised bestial Russophobia and political speculations.


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