Liberalization of the Natural Gas Market in Latvia: Overview and Challenges 3 LATVIEŠU

Natural gas is a significant resource for Latvia’s economy and a significant component in its energy balance, making both natural gas supply and cost a national security issue.

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Latvia sources all of its natural gas from Russia at a price that it cannot influence because for the moment (in November 2014 before the Klaipeda LNG terminal begun operations) Latvia has no technically feasible means of securing alternative supplies, nor does Lithuania or Estonia. Latvia is also legally constricted in its ability to pursue alternative suppliers to Russia’s Gazprom: the shareholders’ agreement between Latvia and the energy company JSC Latvijas Gāze (LG) stipulates a privileged situation until 2017 for JSC Latvijas Gāze in transmission, distribution, storage and trade.

Access to the natural gas transmission system by alternative suppliers is at the discretion of LG until April 2017.

There is reason to believe that the March 2014 amendments to the Law on Energy did not simply move forward the deadline for liberalization of the natural gas market, but in fact closed this market until 3 April 2017, hampering efforts at improving energy security in Latvia and the Baltic States.

This has created an extremely unfortunate scenario, limiting access to opportunities offered to the Baltic States by the completion of the Klaipeda liquefied natural gas (LNG) terminal at the end of 2014. This terminal is the only realistic prospect for creating alternative natural gas supply routes for the Baltic States. As of May 2014 the Klaipeda LNG terminal operator Klaipēdas nafta had not yet signed agreements on LNG deliveries, but the geopolitical situation has created a favourable climate for conclusive negotiations with potential suppliers in Norway, the Middle East, North Africa or the United States.

This policy paper aims to assess progress towards the liberalization of the natural gas market in Latvia in both a local and global context, to examine risks associated with the lack of alternative natural gas suppliers, and to offer policy proposals to lessen Latvia’s energy dependence.

The liberalization of the natural gas market in Latvia affects much more than simply the purchasing price for the consumer.

The policy paper examines Latvia’s energy supplies and Latvia’s dependence on primary fossil energy resource imports, the natural gas transmission infrastructure of the European Union, and of the Baltic countries in particular, which creates a barrier to entry for alternative suppliers. Analysis of the role of natural gas in Latvia’s energy portfolio and the legal framework, under which JSC Latvijas Gāze operates, highlights Latvia’s dependence on Russian natural gas, a situation exacerbated by the de facto monopoly situation in which LG operates.

The policy paper provides a detailed overview of the decision-making process leading to the delay of the liberalization of the natural gas market, which will keep alternative suppliers away until the spring of 2017.

Finally, recommendations are made for actions that could ensure that Latvia will have alternative suppliers in 2017. Towards this end, the policy paper sets out conditions that should be taken into account if the Latvian government is to consider purchasing shares in JSC Latvijas Gāze.

(Liberalization of the Natural Gas Market in Latvia: Overview and Challengespdf)

(Gāzes tirgus liberalizācija Latvijā: situācija un izaicinājumipdf)

The publication was created in Project „PROVIDUS - a partner of state in policy planning and policy making process”, that is financed by Iceland, Liechtenstein and Norway in framework of NGO Project Measure. NGO Project Measure is financed with support from EEA Financial Mechanism and Republic of Latvia.

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Izņēmuma pilsoņi 1 Autors:Dace Akule, Thomas Huddleston