Baltic States – CIS, Energy, Gas, Latvia, Legislation

Such a request had been made in line with the Energy Law, which provides that if a vertically integrated energy supply merchant has encountered or considers that it will encounter serious economic and financial hardships in relation to the fixed payment volume contractual obligations, which he or she has undertaken in one or more natural gas purchase contracts, such merchant may submit to the regulator an application for the granting of temporary derogation from the duties specified in the law.

Latvijas Gaze said in a statement to the press that the company is a vertically integrated energy supply merchant that by April 2017 has exclusive license for transmission, distribution, trade and storage of natural gas in the territory of Latvia and has a long-term agreement with Russian energy concern Gazprom on natural gas supplies until 2030 on certain volumes of natural gas that should be purchased annually. Due to several factors, for example, warm winters, that reduce natural gas consumption in the region, and reduction of capacities of large industrial gas consumers, Latvijas Gaze already now is not able to meet its terms under the agreement with Gazprom.

Latvijas Gaze at present is the only gas supply merchant in Latvia ensuring uninterrupted natural gas supplies service in Latvia, the company said.

The company noted that issue of temporary derogation would not leave a negative impact on safety of gas supplies and public utilities services. On the contrary, as a result Latvijas Gaze will be able to meet its long-term liabilities and continue to ensure safe and stable gas supply system in Latvia.

Rolands Irklis, the head of the Public Utilities Commission, said that the regulator received the letter on Monday morning and needs time to review it. "By the end of the week we will announce our decision on our further steps," he said.

The Public Utilities Commission in April issued a warning to Latvijas Gaze for its actions in power-supply company Latvenergo access to gas infrastructure so that the energy company could begin purchasing gas from Lithuania.

As reported, Latvenergo wished to make a test purchase of gas from a Lithuanian supplier already in March. Lithuania's Litgas has expressed readiness to supply gas to Latvenergo for a better price than offered by Latvijas Gaze.

Latvernergo in an auction in March purchased 5.2 million cubic meters of gas from Gazprom Export, a subsidiary of Russian gas concern Gazprom, and turned to Latvijas Gaze with two applications regarding storage of gas in its Incukalns underground natural gas storage facility for a certain period of time.

The Latvian government on February 9 adopted regulations on supply and use of natural gas, allowing companies to purchase gas outside Latvia. The new regulations allow Latvenergo purchase gas from the third parties before liberalization of the gas market in 2017.