Georgia must rely on imports for most of its energy needs. Its limited oil reserves were estimated at about 35 million barrels in 2002. The country produced 2,000 barrels per day in 2001, much less than its 25,000 barrels per day of oil consumption. However, oil exploration is actively being carried out both on land and along the Black Sea coast. Oil comes primarily from Azerbaijan, natural gas and electricity from Russia. Georgia has had difficulty paying for shipments of natural gas, while electricity supplies have been cut by fighting on numerous occasions. Natural gas reserves at the beginning of 2002 were 8.5 billion cu m (300 billion cu ft).
Georgia has two oil refineries, a 106,000-barrel per day facility at Batumi and a smaller refinery at Sartichala. Georgia plans on utilizing its Black Sea ports to become a significant transshipment point for oil produced by Azerbaijan (and the other republics of central Asia). On 8 March 1996, Georgia and Azerbaijan signed a 30-year agreement to pump a portion of the oil produced in the Azeri waters of the Caspian Sea to the Georgian port of Suspa. From there, the oil will be shipped across the Black Sea to western markets via Turkey. The pipeline along this route became operational in April 1999 following substantial upgrades. Additionally, improved ties with Iran will reduce dependence on energy imports from Russia, from which Georgia is trying to distance itself economically.
Deteriorating plants and equipment prevent Georgia's power sector from operating at full capacity, and power outages are common in many areas of the country. As with its imports of natural gas, Georgia is in arrears in paying for the electricity it has been obliged to import from Armenia, Azerbaijan, and Russia. The country has substantial untapped hydroelectric potential, however, and is planning to build two new hydroelectric plants on the Rioni River and a third, the 40-MW Minadze station, on the Kura River. In 2000, electricity production amounted to 7.2 billion kWh, of which 79% was from hydropower and 21% was from fossil fuel. Installed capacity in 2001 was 4,492 million kW. The two major power plants are a thermal plant at T'bilisi (with a capacity of 1,280,000 kW) and the Enguri hydroelectric plant (with a 1,325,000 kW capacity). Consumption of electricity in 2000 totaled 7.9 billion kWh.
Georgia is one of the 12 former Soviet republics to found the Intergovernmental Council on Oil and Gas (ICOG), which stresses international cooperation in the oil and natural gas industry and will entitle members to receive Russian energy resources in exchange for investment in Russia's oil and natural gas industries.