Transmission capacity allocation between countries will be more effective

The natural gas transmission system operators of the Baltic countries – AB Amber Grid (Lithuania), Connexus Baltic Grid AS (Latvia), and Elering AS (Estonia) – have signed agreements on transmission capacity allocation at connection points between the three Baltic countries.

These capacities will be allocated in accordance with the implicit capacity allocation model, where the capacity allocation will be the responsibility of the natural gas market operator UAB GET Baltic, which won the tender on the provision of capacity allocation services.

The implicit capacity allocation model will include the allocation of short-term transmission capacities between member states on the natural gas exchange platform together with the volume of gas sold on the Baltic countries’ markets through the exchange. The model was approved by the national regulatory authorities of each Baltic State on January 6.

“This not only improves the effectiveness of transmission capacity allocation but also leads to the optimisation of relevant costs and the integration of short-term natural gas markets of Lithuania, Latvia and Estonia, increase their liquidity and the level of competition,” said Saulius Bilys, CEO of Amber Grid.

The implicit capacity allocation method for Baltic market is developed by the Baltic operators to ensure a closer integration of the national natural gas markets of Lithuania, Latvia and Estonia, promoting international trade and developing the competitive regional market.

“By implementing implicit capacity allocation method Baltic TSOs are showing their potential and readiness for close cooperation as well as internal knowledge and capabilities to develop innovative solutions  and improved services for the gas market participants’ needs. We believe, this first, coordinated step in the direction of the creation of single Baltic gas market will serve as a good starting point for even closer integration of the transmission systems of our countries and deeper integration of Inčukalns underground gas storage offering broader toolkit for ensuring effective regional security of gas supply”, says Aigars Kalvītis, CEO of Conexus Baltic Grid.

Along with the implementation of the implicit capacity allocation method, the trade platforms of the gas exchange will be set up in Latvia and Estonia, and the natural gas exchange GET Baltic will become a regional exchange. When this model is implemented, the suppliers of all Baltic countries will be able to compete directly on the exchange, a development which should decrease gas prices for consumers.

“This agreement is the next important step in bringing the gas market to the same level with electricity market, which has been a regional success story,” Chairman of the Elering Board Taavi Veskimägi noted.

According to the agreements signed by the natural gas transmission system operators of the Baltic countries, capacity allocation services at cross-border connection points should be launched on the July 1.

About the operators

The natural gas transmission system operators of the Baltic countries ensure the reliable and secure transmission of natural gas to the users of the system through high pressure pipes, and the use, maintenance and development of the natural gas infrastructure.

A controlling shareholding in AB Amber Grid is owned by the managing company UAB EPSO-G, which is wholly owned by the Ministry of Energy of the Republic of Lithuania.

Connexus Baltic Grid AS is the Latvian gas transmission system operator, which was set up by separating trunk pipelines and the Inčukalns underground gas storage facility from Latvijas Gaze in December 2016. Gazprom controls 34%, Marguerite Gas 28.97%, Uniper Ruhrgas International (former E. On Ruhrgas) 18.26%, Itera Latvija 16%, and small shareholders 2.77% of Connexus Baltic Grid’s shares.

Elering AS is wholly owned by the Ministry of Economic Affairs and Communications of Estonia and operates also Estonian electricity transmission grid.