Baltics reject paying rubles for Russian gas, will boost reliance on LNG

Riga, Mar 30 (EFE).- While most of Europe worries that Russia may cut off natural gas supplies in retaliation for sanctions imposed for its invasion of Ukraine, the Baltic nations of Latvia, Lithuania, and Estonia, also heavily dependent on Russian energy, have one of Europe’s largest underground gas storage facilities, a unified gas distribution network and both existing capacity and future plans for replacing Russian gas deliveries with liquid natural gas (LNG).

The major players on the Baltic gas market appear unshaken by Russia’s demands to be paid in rubles for gas, most say they will continue to pay in euros, according to existing contracts. This is roughly in line with the position of G7 countries as well as the European Union.

In terms of LNG, Lithuania is farthest along having established an LNG terminal in the port of Klaipeda. Its state-controlled (and partly bourse traded) energy company Ignitis this year “already tested and learned how to supply Lithuanian customers exclusively via the LNG terminal,” Arturas Ketlerius, head of public relations at the energy group, told Efe.

“Ignitis has already announced that we are not planning payments to (Russian gas supplier) Gazprom in the near future, so the information about rubles is not relevant for us. Our natural gas portfolio strategy relies mostly on LNG. At the moment Ignitis has clients in all Baltic states and Finland and we are supplying LNG to them,” Ketlerius said.

He noted that the company had bought small amounts of Russian gas to store at an underground facility in the‘Latvian town of Incukalns, one of the largest gas storage sites in Europe operated by Conexus Baltic Grid, formed in 2016 as a Baltic-wide gas wholesale distribution and storage network.

Conexus says on its home page that: “The active gas capacity of the Incukalns underground gas storage facility can reach up to 2.3 billion cubic meters (m3), which can fully supply the fuel and energy needs of Latvia and the region.”

The company also reported that it had started pumping new gas into the storage space on March 16, ahead of schedule. Normally the underground gas supply is refilled starting April 30 when the heating season is mostly over in the Baltic region.

In Estonia, the privately-owned gas and energy company Eest Gaas has started working with a local LNG facility in Tallinn, mainly for bunkering or supplying gas to ships.

In a statement, the company said: “The goal of Eesti Gaas is to do everything in our power to ensure the gas supply to our customers and the fulfillment of contractual obligations. We have gas reserves in the Latvian storage facility and a contract with the Klaipeda LNG terminal.”

Meanwhile local media report that the Estonian government has proposed a supplementary state budget that, in addition to expenses tied to refugee accommodation and civil protection, aims to bolster energy security.

Plans are in place to develop capacity to handle large quantities of LNG, with investments to connect small renewable energy producers to the grid also on the table.

A floating LNG terminal is also planned and should be connected to the grid before the start of the next heating season in the fall, according to the report cited by Estonian TV.

In Latvia, Aigars Kalvitis, a former prime minister who now is board chairman of Latvijas Gaze, the largest wholesale gas trader in Latvia, recently told local media that: “At the moment, the terms of the contract (with Russia) do not provide for any different conditions. The contract is in euro. I can’t imagine how we might otherwise pay. We do not have the possibility to pay in another currency.”

However, when contacted by Efe, Anastasija Petere, a media spokesperson for company, said that Latvijas Gaze “has no comment” on how it would pay for Russian gas deliveries. She also did not comment on Kalvitis earlier statement.

Unlike the Estonian and Lithuanian gas companies, which are owned by private shareholders or the state, 34% of Latvijas Gaze is still held by Gazprom, the Russian energy group.

In line with EU regulations, the gas companies in all three countries have been divided into trading, wholesale distribution and retail distribution companies to encourage competition and diversification.

Ignitis and Eesti Gaas, for example, also sell electricity. A subsidiary of Japan’s Marubeni group is a shareholder of just over 29% of Conexus.

jkz/jt