Concerns about gas supply this winter in Latvia

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Concerns about adequate amounts of natural gas have intensified. The government has so far comforted the public that there will be enough gas for all, but the Minister for Economics Ilze Indriksone (National Alliance) has already mentioned that only households and strategically important companies will certainly have enough gas, Latvian Radio reported August 2.

Information at the disposal of Latvian Radio shows that major heating providers are also looking for gas for the heating season.

A document at the disposal of Latvian Radio shows that in April the Rīga heating company Rīgas siltums sent a letter to AS Latvenergo that the company had decided to accept Latvenergo's offer of liquefied gas trade with a previous volume reservation, ordering liquefied gas at Klaipeda terminal. In May, Rīgas siltums, in contact with Latvenergo, found that the planned supply of liquefied natural gas from Klaipeda terminal would not take place. In June, Rīgas siltums wrote a letter to Latvenergo asking for additional information. In July Latvenergo officially replied that it was not possible to ensure the supply of natural gas for Rīgas siltums.

Raivis Elliņš, a member of the board of Rīgas siltums, confirmed that the information in the document was true and expressed surprise that the document had made it out of the company.

“As far as I recall, it is our Rīgas siltums internal document. Yes, this document is definitely with limited availability information. It also includes commercial information. We are also slightly surprised that this document has come out,” said Elliņš.

Rīgas siltums does not have information about why Latvenergo did not have the possibility to purchase gas from the Klaipeda terminal for the amount of 0.25 terawatt-hours (TWh).

Elliņš said: “The cooperation is not over. Latvenergo has simply informed us until now that this supply of natural gas is not possible, but it should be noted at the same time that Latvenergo is continuing its work to purchase this natural gas. We also buy natural gas, of course. We have natural-gas purchases every week. We're slowly replenishing our portfolio for the next heating season. We launch procurement contests, regardless of the fact that we have this cooperation with Latvenergo. This volume from Latvenergo was the same – if it is easy to get, then we would be happy to take advantage of this opportunity. It was not that we were counting a hundred percent on this opportunity."

Latvenergo has purchased an additional amount of liquefied natural gas of 1.8-2.2 TWh from the Klaipeda LNG terminal to ensure immediate security of natural gas supply.

Latvenergo did not comment on the more specific deal with “Riga Heat”, but in a written explanation to Latvian Radio,  said: "The price of gas has increased radically, and it continues to rise. Due to its scarcity in the wider region, alternatives to gas as a resource should therefore be sought, and this is also the latest recommendation of the European Commission.

"Although the price of gas is not predictable in the long term, everywhere it may need to be switched to another, preferably local fuels.

"At present, demand for natural gas is high, so trading transactions are a continuous process and market participants participate in both auctions by infrastructure owners and bilateral transactions as part of demand collateral. Any supply scenario other than Russia is under consideration. At the Klaipeda terminal, the capacity reservation will take place once the long-term capacity auction is opened in Q3 of the year. At the moment, companies and municipalities need to re-examine their crisis supply solutions carefully, in view of the fact that gas as an energy resource might not be physically available or that its price would not allow its economic use. "

Latvenergo pointed out that the creation of another terminal in the region is an essential prerequisite for the supply of natural gas to Latvia and the Baltic as soon as possible, and it is soonest to be established in Paldiski, Estonia. The terminal is currently expected to be operational in November this year and the infrastructure has started.

Gunars Valdmanis, executive director of the Latvian Association of Electrical Engineers also said that there is indeed a possibility that there may be too little natural gas in the region.

Valdmanis pointed out that the only solution that could mitigate risks involves the construction of a new terminal. In the event of an energy crisis in the region, all four participating countries – the Baltic States and Finland – will be in the same boat. While there is a possibility that natural gas supplies could be deficient at some moments during this heating season, Valdmanis forecast that the region could avoid this.

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