Overview of Baltic Gas Market
The current regulatory framework and the lack of common understanding between neighboring countries make it very difficult to develop regional infrastructure project and build a common Baltic gas market, experts say.
As the region seeks to reduce dependency from Russian gas, as well as to enhance competition in markets dominated by a single company, Lithuania, Estonia and Latvia also see gas as a key energy resource to replace fossil fuels and meet the 20-20-20 goals.
“The implementation of the third gas directive in Estonia and Lithuania – ownership unbundling – negatively impacts on the ownership rights and does not contribute to achieve energy des isolation,” said Mario Nullmeier, Head of Office for the Baltics at E.ON Ruhrgas International AG, during the 4th Annual Baltic Energy Summit in Tallinn.
The Estonian parliament approved earlier this year to separate ownership of natural-gas sales and transmission operations to reduce dependence on Russia’s Gazprom, the only supplier of this fuel in Estonia, Latvia and Lithuania. In the latter country, foreign shareholders of Lietuvos Dujos agreed also earlier this year to split gas transmission and sales ownership as part of the EU’s drive to improve competition in single company’s dominated markets.
The regional-wide gas debate has mostly been focused on the construction of a regional LNG terminal with the support of EU funding that would enable the three small countries to cut current energy isolation for a market of around 7pcm. The Baltic countries have always maintained that they are being charged more for Russian gas imports than western European countries, and that the project will reduce potential supply risks.
However, the Balts have yet to reach an agreement on the future location of such infrastructure, and Nullmeier believes that “missing political agreement can delay the project, and therefore we should start to look at a smaller scale projects that can contribute to boost other businesses too.
“There is a strong customer based market view on the LNG debate, and we should incorporate other factors like maritime fuel transport [Baltic and North sea areas] and the use of gas for the industrial and power generation industries, because these are markets that hold an important potential for the development of gas related infrastructure in the region.”
E.ON Ruhrgas International AG is shareholder in four gas companies in the Baltic region; it currently holds a strategic investors stake of 38.9% of Lietuvos Dujos, 47.23% of Latvijas Gaze, and 33.7% of Eesti Gaas.