Tamaz Somkhishvili, British Investor: An Entrepreneur’s Story

Born in 1957, the second son of Valerian Somkhishvili and Lili Melikishvili, Tamaz Somkhishvili can trace his family back generations in Georgia. In 1935, his grandfather Amiran built the family home in Tbilisi, but as the family grew in number, Amiran decided to move to a larger home to make room for Valerian and his siblings. In the beginning, the family circumstances were  challenging, but as Tamaz’s father had married, his grandfather managed to accommodate him in two rooms, while his brothers shared one room with his parents and sister in another. Tamaz noted that the home only acquired running water when he was 6, which was not unusual in those days.

Tamaz’s father found work in both Ukraine and Russia as a shoemaker, which made his absence hard for the family. Nonetheless, Valerian provided  for the family and came for visits during holidays at New Year’s and in May, while the children managed to see their father in Russia and Ukraine in summer holidays when they had time to travel.

From this early time growing up under such tough conditions, Tamaz acquired the most fundamental principles of his young life: faithfulness and honesty to family and friends.  From his father, he also stated, he inherited  loving kindness for his family and from his mother, taking people’s word seriously.

Education

Tamaz’s first degree was a bachelor’s  in culinary arts which he completed at an accelerated pace after being interrupted by his military service. The knowledge of nutrition and the aesthetic aspects of cuisine would come in handy later in his entrepreneurial career. Tamaz continued with studies in physics and math in the Tobolsk Pedagogical Institute, but later transferred to the faculty of finance in Tyumen State University. The knowledge gained would provide another key element in his later business development after he completed his PhD on “The Conditions and Sources of Financing Investment for the Development of the Oil Industry”, which he successfully defended in 2002 at the National Academy of Economics and Public administration under the President of the Russian Federation in Moscow.

Compulsory Military Service

In 1975, while still at culinary school, Tamaz was called up for his military service. Luckily for him, he was able to serve with his older brother Jemal with whom he completed basic training at an artillery bootcamp in Chernovtsy, Ukraine; however, being skilled in the martial art sambo, in which he had won competitions, Tamaz found himself assigned to the sports company of his unit. Tamaz, however, chose to stay with his brother and the two later traveled to Czechoslovakia, where he led a squad under his brother’s platoon command. Due to his background in cooking, however, the commanding officer offered Tamaz a job in the officers’ mess which he adamantly rejected since it was his sole intention to serve in only a military function, stating “ I’m here to serve in the army, not to cook”. He finished his military service at a training facility and gained some local recognition through newspaper coverage of some of the shooting activities he participated in. After two years in the military, Tamaz had acquired many new skills and developed into a self-confident, independent person which would serve him well in business.

Early Career

Following the suggestion of the director of the culinary college where he had graduated, Tamaz decided to participate in a Komsomol building project in the Tyumen region of Siberia where he was responsible for procuring essential supplies such as food and clothing,  etc. for the workers on the gas pipeline project Urengoy-Pomary-Uzhgorod, better known as the Trans-Siberian pipeline. In 1978, Tamaz’s next career challenge was an assignment in the remote taiga forest of Tyumen, at the Demyanskoe station, working on the construction of the pipeline to Chebutan, where he had gone along with a former classmate Givi Guishvili. There, Tamaz served as labor recruitment officer, but was assigned the director in short order. At this time, due to the difficulty in procuring supplies in the remote region, he had to fly by helicopter on a weekly basis to Tobolsk to locate and purchase materials for the pipeline crews as well as building equipment and hardware, etc. This experience allowed Tamaz to establish important supply networks which would help him equip future larger projects with materials, men  and logistics. The trans-Siberian project, in the heart of Siberia, experienced extreme weather, especially in winter, with temperatures dropping below minus 40 at times. After surviving such harsh environmental conditions for some time, he and his friend, Beridko Tavshavadze, ended up being the only 2 people remaining on the project from the original team. Eventually, the two moved on to Tobolsk for better opportunities. Tamaz, was fortunate to find such an opening working as manager of a local restaurant which led to further useful connections to people such as Alexander Sheller, the manager of a famous restaurant named Vstrecha. Later in 1981, Tamaz and Alexander opened a drinking establishment which ultimately led to Tamaz moving on to manage a famous restaurant known as, Druzhba.

1980: Olympic Shirts

It was still challenging to make money in the late Soviet era, but Tamaz’s entrepreneurial sense helped him perceive another opportunity for a money-making enterprise with the approach of the Moscow Olympics. Before the opening of the games, the Soviet Union was filled with promotional images and Olympic symbols as enthusiasm for the games grew. With his keen  aesthetic sense for eye-catching fashion, Tamaz hit on the idea of producing T-shirts emblazoned with the Olympic emblem. However, there was a problem: prior to setting up production, he needed to obtain a patent for the production process. Making use of a friend whose father had been in the second world war, Tamaz was able to have him  apply for the patent. After receiving the patent, Tamaz went on to hire tailors, sewers and designers, and install overlock sewing machines, then he commissioned the stylish cloth needed from Moscow. In the end, the project was enormously popular, thus earning a healthy return on investment for Tamaz at the time.

Motor Vehicle Collision

Though Tamaz was a skilled driver and car-lover, he was involved in an unfortunate car accident while driving back from a visit with his father in Tyumen in 1984. While speeding around a corner in the rain, Tamaz’s brand new Zhiguli hit a large pothole, sending it straight into an on-coming truck. The collision left him with several injured cervical vertebrae forcing him to spend time to recuperate in hospital; however, as Tamaz was physically fit and naturally athletic, he recovered faster than expected.

Late Soviet Era restructuring: more opportunities

By the late 80s, the Soviet economic policy had brought in reforms allowing for the establishment of cooperative businesses. After being invited by the Tobolsk City Executive to set up a cooperative, Tamaz established the Kolkhida trading and restaurant business. With his understanding of cuisine as well as financing, Tamaz went to work hiring a fleet of trucks and managing the logistics for fresh produce delivery from producing regions such as Siberia and the Central Asian republics. In Tyumen he had opened the famous Druzhba restaurant which he maintained very well-stocked with produce. It was a huge  success as a dining establishment. But Tamaz was not satisfied with the return on his investment and, seeing the limits of the restaurant business, he decided to convert Druzhba into a pastry production facility and retail shop, producing the region’s popular pastry, ‘Ptichye Moloko” (Bird’s Milk) cake. Believing this type of business would be more profitable, he set out to  purchase the raw materials for large-scale production: basic foods such as sugar, butter, eggs, all needed in large quantities, but in short supply during the Soviet period. Keeping his family in mind, he recruited his brother Anzor to manage the facility.

A large bakery would require a large supply of sugar which was not easy to find or purchase at that time. Tamaz knew he had to deal with a number of sugar factories across Ukraine, but found he would need permission from the Tyumen Trade Administration to approve the enterprise. After negotiating and receiving the required permissions, Tamaz proceeded to locate and purchase the quantity of 5000 tons of sugar from across Ukraine, which then had to be transported to Tyumen. With these efforts and his keen business sense for how and where to locate required materials for a large business, Tamaz developed the Druzhba cooperative Ptichye Moloko production facility into a popular shop which brought in a healthy profit for his efforts.

Oil Sector

Throughout the late Soviet era, oil production infrastructure was still being developed and in 1991, after a meeting with Viktor Dolgov, Deputy President of Lukoil Company, an opportunity arose in Tyumen with the arrival of a branch of Lukoil, a company engaged in oil refining and retail gas outlets. Thus, Tamaz registered  a joint venture project – CJSC ‘Lukoil S’ (Lukoil Service) with several mobile petrol stations. Tamaz was both part owner and director of the company which, in addition to several gas stations, owned the Perm Oil Refinery. This successful enterprise spun off into another business called ‘Lukoil Market” which supplied the region’s cities such as Langepas, Uray, and Kogalym with petroleum products as well as merchandise and foods imported from western European countries such as France and Germany.

Refineries and Export

By 1994, a new business opening became available for Tamaz with the company Rosnefteexport CJSC in which he acquired a15% stake with Rosneft holding 50% and Lukoil the remaining 35%. Rosnefteexport, as its name suggests, was a refining and exporting company with crude oil refineries in Mozyr and Novopolotsk in Belarus. The resulting petroleum products were sold in both the Russian and other European markets via the trading firms Vitol and Glencore. Within a year or so as director of Rosnefteexport CJSC, it became apparent to Tamaz that Rosneft, owner of a 50% stake, was not contributing as expected, so he proceeded to acquire its share, thus ending up controlling an 85% stake in the company which had expanded to include refineries in Omsk, Perm and other locations in Belarus.

Oil for Debt: Rosnefteexport as Debt Instrument

As Rosnfteexport boomed, Tamaz seized on a solution to a problem that had resulted from the difficult years of the early post-soviet economy. Capital investments were inadequate while revenues were insufficient to cover many companies’ debt load, so many small and large enterprises, in the energy, gas, and transport sectors for instance, began to accummulate largely unpayable debts. Understanding the source of the problem from his finance background, Tamaz conceived the solution of a debt-purchase arrangement which would be very popular among many cash-strapped businesses. Thus, he proceeded to acquire the debts of oil producers owed to energy producers, at a considerable discount of up to18%. He began with large companies, for example, Lukoil, and moved on to Nizhnevartovskneftegaz’s energy debts owed to Tyumenenergo, then proceeded to purchase the debts of Tyumenenergo owed for gas consumed to Surgut GRES.

Thus, Lukoil’s electricity costs were reimbursed through oil installments of up to a quarter million tons per month.

With the success of this scheme, and the substantial profits earned, Tamaz continued to acquire large stakes in the Odessa Oil Refining Plant from the owner of Synthesis Company. So again, Tamaz’s oil refineries were exporting more and more to both the domestic and foreign markets.

From Oil Refining to Oil Production

With the refining and export businesses thriving, by the end of the 1990s, Tamaz decided to expand his oil sector interests to exploration and production. This was a new field for Tamaz, but a potentially more lucrative, though perhaps more challenging than his past business activities . Having developed a wide network of contacts in the oil industry, Tamaz gathered a team of experts – geologists, mechanics, engineers, etc.- to begin a new business venture. But the technical challenges of the new project would require more extensive alliances, so Tamaz brought in specialists from an American joint venture: Polar Dawn, a director of Megionneftegaz and a number of experienced technical people from Toblosk Oil and Chemical to help with infrastructure construction, exploration and extraction of oil reserves located in Siberia. Success came fairly quickly, first from the Tomsk region, with the discovery of 16m tons of oil and 11bcm of gas by Tomsk Oil. This project required a huge investment in ground facilities and pipeline technologies in the remote taiga forest in Siberia, with 17 wells, a power station, a 70 km pipeline, etc. Transporting the physical materials for such a huge undertaking required the seasonal use of barges on the Ob river. Though it was a complex and tough oil extraction project in a far off location, with cooperation  and dedication, the 50-odd workers created an effective exploration and production team.

Exploration Beyond Tomsk

Tamaz next set his sights on finding new oil fields to develop with surveys in the Nenets Autonomous district of Arkhangelsk on lands licensed to Danao Engineering. Here, a major discovery of reserves with a 5-7  times faster flow-rate than the Tomsk wells was secured. Development of this new discovery was onerous however, as the permafrost of the northerly region required surface-only pipelines. But with reserves of 35 m tons compared to the 30 m tons of the Tomsk wells, this was undoubtedly a huge triumph.

Oil Production and the Environment

In 2004, the British investor set his attention to some of the sources of pollution resulting from the oil extraction process. So-call associated petroleum gas (APG) – a form of natural gas found with oil deposits which usually escapes and is flared off during the oil pumping process – occupied Tamaz’ mind. Again, with his keen business sense and seeing a wasted potential energy source, Tamaz arrived at the idea of an electricity generating facility with pistons powered by APG. As a result, in 2004 he built plants on Lukoil’s fields to supply oil companies with much needed electricity. One such generating facility, using Jenbacher (GE) gas piston technology, supplied 36 megawatts of power after one year of operations.

Tamaz was the first in Russia to come to an agreement with the World Bank under Kristalina Georgieva (currently director of the IMF), which would see his idea to reduce a potent greenhouse gas during oil production implemented and thus, conform to the requirements of the Kyoto Protocol to reduce one of the sources of global warming.

Moscow Residential Project

Tamaz was occupied from 2008 to 2010 with work building the Moscow government commissioned joint residential and business complex known as Family House. Once the massive 29,000 square meter complex was completed his interests in Russia ended.

Aviation Industry in Georgia

Now a British citizen and investor (2007), Tamaz focused on the airplane maintenance sector so he founded Airplane Technics, with Vincent Morelli, from Lufthansa Technik, as Chief Manager. Shortly thereafter, an airplane maintenance facility opened at Tbilisi Airport, servicing the many civilian Boeing and Airbus aircraft landing there.

Following from his interest in aviation and airplane maintenance, Tamaz next founded the Aviation College to provide the opportunity to young people in Georgia to study in an international educational institute leading to professional certification in aircraft maintenance. The college provided a joint training program, based in Tbilisi, with the Istituto Scolastico San Carlo, a European Aviation Safety Agency recognized school in Verona, Italy. Participating students pursued courses in a variety of European countries including Germany, Turkiye, Switzerland and Italy and Dubai.

Unfortunately, as a result of the cessation of airflight and reorganization of the industry during the Covid pandemic, the company’s business was negatively affected by the losses affecting the whole airline industry since 2020.

Ongoing Investment Interests

Tamaz’s current business pursuits include metallurgy research (ferrochrome) as well as  projects in innovative technologies and telecommunications.

Philanthropy

Tamaz is one of the largest donors to St. Andrews University of Georgia of the Patriarchate of Georgia in addition to purchasing the Georgian Orthodox Church in London in 2009.

 Sports Enthusiast

Sport shooting has always interested Tamaz, so it is no surprise that he was happy to contribute his skills and time as president of the National Federation of Sport Shooting of Georgia from 2017 until 2021. In addition to martial arts, shooting is a source of national pride in international competitions including the Olympics, for Georgia. Tamaz also established a  Shooting club at European standards in Tbilisi complete with shooting ranges and armories for serious athletes to train.

Pastimes

Tamaz has loved sport pistol and rifle shooting since he was a young man. He also became an expert practitioner of sambo and judo and is a fan of tennis which he continues to play.