Energy, Gas, Gas Market , Latvia

Next the legislation will be reviewed by the government.

Economics Minister Arvils Aseradens (Unity) told the government committee that importance of the national gas security reserve was often exaggerated, adding that concerns expressed by Prime Minister Maris Kucinskis (Greens/Farmers) about the creation of "a new mandatory procurement component" were unfounded.

"The reserve will make up about 2% of the amount that is stored at Incukalns underground gas storage facility. Gas storage costs are not astronomical - around EUR 90,000 to EUR 300,000 annually," said Aseradens.

According to the Economics Ministry, the national gas security reserve is needed to supply natural gas to secured users at a time of energy crisis when regular natural gas supplies are interrupted.

"Judging from other European Union countries' experience, relying entirely on the free market's ability to ensure security of supplies is preferred by countries where natural gas is produced, for instance, Great Britain and Netherlands. During the next few years, natural gas supplies in Latvia will mostly be organized from the underground gas storage facility.

That is why we are planning to task the storage system operator (Conexus Baltic Grid) with maintaining the reserve at the Incukalns underground gas storage facility," says the bill.

It goes on to say that, based on natural gas consumption in 2016 (1.318 bln cubic meters), the approximate amount of gas to be stored at the Incukalns underground storage facility is approximately 245 mln cubic meters of natural gas. This amount is necessary to ensure natural gas supplies to secured users for an entire year.

However, Conexus Baltic Grid has expressed objections to the concept. It said that the development and maintenance of natural gas security reserve was an untypical function for the operator of natural gas transmission system, and one that was not in line with the Energy Law. Development and maintenance of the natural gas security reserve is in essence a function of the state, as it deals with overcoming consequences of disasters and threats to national security, said Conexus Baltic Grid.

In addition, the solution proposed by the Economics Ministry will make services of the natural gas transmission operator costlier, and therefore affect the natural gas market of Latvia. This will have a negative effect on all natural gas users. Secured users account for approximately 20% of total natural gas consumption in Latvia. It means that users who account for 80% of the total market, but do not meet the criteria for secured users and cannot apply for natural gas supplies at a time of crisis, will be the ones to pay for the creation of the natural gas security reserve and its maintenance, emphasized Conexus Baltic Grid.