A step to regional natural gas market: simplified gas trading and transportation in Baltic States

On July 1 natural gas transmission system operators of the Baltic countries – AB Amber Grid (Lithuania), Connexus Baltic Grid AS (Latvia), and Elering AS (Estonia) have started using the implicit capacity allocation model to allocate short-term natural gas transmission capacities at interconnection points between the Baltic countries. The mechanism connects capacity allocation with trading in GET Baltic gas exchange. At the same time UAB GET Baltic started to operate market areas of the gas exchange in Latvia and Estonia becoming a regional exchange.

CEO of the natural gas transmission system operator AB Amber Grid, Saulius Bilys says that the company has achieved one more important stage creating a single regional natural gas market of Baltic States and consecutively implementing AB Amber Grid strategy. Rapid changes in Baltic natural gas markets while integrating them and creating new opportunities for market players are constantly underlined by European Commission and given as an example to follow for other Member states.

This is a new page in the history of natural gas trading in the Baltic countries. By applying implicit capacity allocation model a short-term gas market of Baltic States becomes integrated. This will surely increase its liquidity and competitiveness, as well as the possibilities for the market participants to acquire gas when needed, of needed quantity and with a better price’, says Saulius Bilys, Amber Grid CEO.

Plans are to start a single regional gas market in 2020. By that time all Baltic natural gas markets will be united into one area, where interstate transportation fees will be waived, as well as gas system balancing and transmission capacity allocation centralized and gas trading will be carried out in a single virtual trading point. This will lead the prices of natural gas to be unified, a significantly increased trading point of single market to become more attractive for the world gas trading companies making conditions for a drop of gas prices for consumers.

Natural gas exchange GET Baltic not only has become a regional trading platform, but also started to offer new services and long-term monthly products.

By starting trading areas in Latvia and Estonia we became a regional exchange trading platform de facto. Baltic natural gas market is attracting not only large local energy companies, but also international commodity traders. Therefore we do utmost to meet the needs of market players, offer them more effective and convenient services and new products when creating technological solutions. For instance, from now on those buyers who purchase day-ahead products do not need to take care of gas transportation between Baltic countries anymore. We made a trading system that has all needed connections with the systems of TSOs to allocate capacities’, Gintaras Buzkys, a head of GET Baltic said.

By applying implicit capacity allocation model a request to buy or sell natural gas in one country will be displayed on the market areas in other Baltic countries including the transportation price.

When a contract is made in two different market areas, the natural gas exchange operator will take care of transportation and the short-term transmission capacities for the purchased amount of gas will be allocated automatically.

It is important that this model was approved by the national regulatory authorities of each Baltic State in the beginning of January. In the end of June the natural gas transmission system operators of the Baltic countries have signed the agreements with the contractor GET Baltic, which won the tender on the provision of the implicit capacity allocation services.

The implicit capacity allocation model is widely implemented in electricity trading sector, i.e. Nord Pool Spot Exchange.

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.

For more information please contact
Mindaugas Linkaitis,
Spokesperson of AB Amber Grid
Phone: +370 5 2327750
E-mail: m.linkaitis@ambergrid.lt

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