Journal of Commerce / July 6, 2016
By Larry Luxner
TBILISI, Georgia — By July 31, the Georgian government expects to choose a terminal operator among the six bidders it has shortlisted for a $2.5 billion deepwater container port at Anaklia, on the Black Sea.
The finalists include two companies from Singapore and one each from China, Saudi Arabia, Turkey and the Netherlands, said Levan Akhviediani, CEO of Anaklia Development Consortium, a 50-50 venture between Tbilisi-based TBC Holding and Conti International LLC of Edison, N.J.
Akhviediani said the partnership’s proposed container terminal will be able to accommodate ships of up to 10,000 TEUs, compared to vessels of only 1,500 TEUs for Batumi, which along with Poti currently handles all of Georgia’s Black Sea shipping.
Construction should start in the second quarter of 2017, with operations set to begin in 2020. The project — the largest single foreign investment in Georgian history — aims to establish a new maritime corridor between China and Europe, and restoring the fabled Silk Road to ensure Georgia’s continued economic prosperity.
Even so, says Akhviediani, “our financial model does not take into account any cargo coming through the Silk Road; this is just an upside for us. Our primary market is enough to justify this project. The Silk Road still needs to prove itself and depends on many factors. If this route becomes efficient and reliable for high-value goods, we might see a constant flow of cargo, but this is very hard to quantify.”
Anaklia is located only five kilometers south of the de facto border that separates Georgia from the breakaway republic of Abkhazia, which Russian troops have occupied — along with South Ossetia — ever since Russia’s 2008 war with Georgia.
Among other things, the new port, boasting a draft of 16 meters, promises to give Azerbaijan and Central Asia’s “stans” a direct transit route to the Black Sea — thereby offering them an alternative to trucking their goods through Russia.
“This was the previous government’s initiative. It is hard to convince people that you need a deep-sea port,” said Akhviediani, whose TBC investment group is worth about $1 billion and includes the country’s second-largest bank as well as medical exports, wines and consumer goods. “They had doubts about it, but I don’t think they doubt it anymore. The current prime minister [Giorgi Kvirikashvili] has been an integral supporter; without his support, this would not have gone through.”
In all, the project consists of nine phases worth a total $2.5 billion. “But we’re not obligated to develop all nine phases,” Akhviediani explained during an interview last week in Tbilisi. “Our obligation to the government is to develop a 40 million-ton port, which is five out of the nine phases in 30 years.”
Currently, the busiest Black Sea port is Russia’s Novorossiysk, which has a draft of 15.4 meters and can accommodate ships of up to 10,000 TEUs. Last year, it handled 70 million tons of cargo, followed by Romania’s Constanza, with 40 million.
Georgia currently accounts for 18 percent of all non-Turkish container traffic on the Black Sea. Half the region’s cargo now arrives directly by mother vessels coming directly from the Far East through the Suez Canal; feeder vessels from Greece or Turkey deliver the other half. Georgian ports currently cannot accept those larger container ships; if they could, it would represent a savings of about $160 per TEU, said Akhviediani.
Besides the port itself, he said, the Georgian government is investing $110 million to improve rail and road connections from the central highway and rail network. Anaklia is located 418 kilometers west of Tbilisi, the capital and home to more than a third of Georgia’s 3.9 million inhabitants.
“The government wanted us to design the new port for up to 100 million tons of cargo. Obviously that’s a large number for Georgia, but it’s a phased approach,” he said.
Phase I, valued at $600 million, foresees traffic of 800,000 TEUs. Georgia’s two existing Black Sea ports, Batumi and Poti, together handle about 400,000 TEUs annually. Their combined capacity of 550,000 TEUs is likely to be reached by 2022, said Akhviediani, adding that they so outdated they can accept only 30 to 35 percent of the vessels that call on other Black Sea ports.
“Poti was never designed as a container terminal. It’s over 100 years old, and infrastructure there is really inefficient,” he told JOC. “Currently, Poti can accept only feeder vessels with 1,700 TEUs maximum, so all cargo destined for Georgia is feedered in from Istanbul.”
Further limiting Poti is its depth of only 8.5 meters, the lack of a turning basin, and the fact that it is closed 90 days a year, he noted. “There are real difficulties. Even the smallest weather can disrupt port operations.”
Batumi is deeper than Poti but cannot accept long vessels. About 60 percent of all container traffic going through the two ports is destined for local consumption, another 27 percent for Azerbaijan, 8 percent for Armenia and the remaining 5 percent for Central Asia, mainly Kazakhstan.
Mediterranean Shipping Co. Ltd. (MSC) dominates Georgia’s container traffic, with a 45 percent share, followed by Maersk Line, with just under 30 percent, said Akhviediani. Other key players in the Georgia trade are Taiwan’s Evergreen Line and French-based CMA CGM Group.
Sarah Williamson, president of the American Chamber of Commerce in Georgia, said she’s glad the project will be implemented in phases.
“If the Chinese are really interested in using Georgia as a transit point as part of this new Silk Road, then I think this project will be huge. If they’re not, then I’d be more concerned,” she said, adding that the port would become far more significant if it’s used to get cargo to and from Georgia’s two Caucasus neighbors, Armenia and Azerbaijan.