Baltic States Eye Single Market

Energy regulators and decision-makers of the former Soviet Baltic states – Lithuania, Latvia and Estonia – are mulling the creation of a single gas market with no internal borders. Lithuania and Estonia are pushing harder than Latvia, which is taking a more cautious stance as its gas sector remains bundled. Finland may also join the scheme if it thinks it will be efficient.

Most of the gas used in the region comes from Russia but for the past year or so Lithuania has a floating storage and regasification vessel offshore Klaipeda, allowing it to bring in gas from Norway and elsewhere; and as the oil price has fallen the price of gas is not as critical as before, when the vessel was first leased.

Vygantas Vaitkus, a member of Lithuania's national commission for energy control and prices (VKEKK), said that the discussion on setting a single gas market has just started, adding that the negotiations would take a few years.

“The issue is still being discussed, a Baltic regional task force has been formed and a Baltic regional study of the gas market was drafted last month,” Vaitkus told BNS, a Lithuanian news agency.

In his words, the model would eliminate cross-border transport tariffs, with the Baltic States and Finland treated as a single market. In such a case, entry-exit points would remain at the exterior borders of the Baltic states, and after paying once for shipping gas into the market, companies would not have to pay any additional fees, unlike now.

Dominykas Tuckus, board chairman of Lithuania’s state energy holding company Lietuvos Energija (Lithuanian Energy), believes that creating a single Baltic market would lead to more similar prices. In his words, gas traders may incur losses due to the fact that Latvia is measuring gas in cubic metres rather than megawatt-hours, as measuring higher-calorie gas received via the Lithuanian LNG terminal in Klaipeda in megawatt-hours leads to a higher price.

“Of course, there will be more competition on the retail market – Lithuania, as the biggest natural gas consumer in the Baltic states, would attract suppliers from Estonia and Latvia. It would be a win for clients. Speaking about export possibilities in the course of a few years is still difficult. As we know, a lot will depend on the strategy of (Russia's) Gazprom and the prevailing prices,” Tuckus said.

In his opinion, even broader opportunities would be opened by inclusion of Finland and Poland into the single market, as they consume about 2.5bn m³ of gas and 15bn m³ of gas, respectively. Construction is starting on a gasline between Poland and Lithuania, part-funded by the European Union, in order to integrate the gas markets of the Baltic states with the EU. It is due to be operational by July 2019.

Lithuania's energy minister Rokas Masiulis believes a single Baltic market would revitalize the Lithuanian market. He says he is expecting the best version of a single market model.

Staff