Latvia Says Plans to Split Gas Monopoly in 2017

Latvia's government finalised on Tuesday a plan to split its natural gas monopoly Latvijas Gaze to boost competition, in line with European Union rules, and said it would be completed in 2017.

 

The plan sets the Baltic states on a collision course with its sole gas supplier, Russia's Gazprom, which has a 34 percent stake in Latvijas Gaze, a gas sales, transportation and storage business.

 

Germany's E.ON is seeking to sell its 47.2 percent stake in Latvijas Gaze, but the sale process has been stalled by uncertainty about the Latvian utility's future.

 

"Splitting of Latvijas Gaze has to be finished by the end of 2017," Latvia's Prime Minister Laimdota Straujuma was quoted as saying by news agency LETA.

 

She spoke after the cabinet approved amendments to Latvia's Energy Law requiring the gas monopoly to set up a separate independent company to operate the country's main gas pipeline and underground gas storage until April 3, 2017.

 

By the end of 2017, ownership of the gas transport and storage business will have to be separate from gas sales.

 

The amendments have to be approved by parliament.

 

Latvia's Baltic neighbours Lithuania and Estonia have carried out similar reforms recently, forcing Gazprom to exit gas transportation business in those countries.

 

EU rules require member countries to separate control of gas transportation and supply to ensure competition.

 

Latvia's energy regulator, the Public Utilities Commission, approved last week rules for third-party access to the country's gas infrastructure, including underground gas storage.

 

The rules require Latvijas Gaze to disclose information about available spare capacity, which could be used by other participants to transport or store gas.

 

The regulator has said the rules should allow Latvian consumers to look for alternative supplies.

 

"This is the most significant development towards a real (gas) market," Reinis Aboltins, an analyst at Riga-based think tank Providus, told Reuters.

 

The European Commission called on Latvia last year to approve the rules to increase its energy security.

 

Latvijas Gaze, however, said the rules contradicted the Energy Law and violated shareholders rights, as a privatisation agreement from 1997 gave the utility exclusive rights to sell and transport gas in Latvia until April 3, 2017.

 

The company was considering its options, which do not exclude disputing the rules in court, Vinsents Makaris, a spokesman for Latvijas Gaze, told Reuters in an email.

 

The government has previously dismissed Latvijas Gaze threats to challenge the monopoly's breakup.

 

While it remains unclear how the rules will work in practise, Latvia's biggest gas consumer, state-owned power group Latvenergo, said it was considering importing gas from neighbouring Lithuania, which opened a liquefied natural gas (LNGLF) (LNG) terminal last year.

 

Lithuanian LNG importer Litgas told Reuters it had been holding discussions with potential clients in Latvia, but declined to elaborate.