PUC does not object to Conexus Baltic Grid JSC planned pipeline repair works to enhance the security of supply

Natural Gas

Public Utilities Commission of Latvia (PUC) has assessed the situation of repair works in gas pipeline Vireši – Tallinn. Short-term limitations on transportation of natural gas from Latvia to Estonia and Finland are possible, nevertheless, planned results will provide long-term benefits for the Baltic States and Finland.

Planned repair works will be carried out by the Latvian transmission system operator Conexus Baltic Grid JSC (Conexus Baltic Grid) from 1 May 2020 to 31 May 2020 in gas pipeline section Vireši – Tallinn close to Valmiera in the territory of Latvia. Repairs will result in improved security of supply. The schedule for repair works is determined by Conexus Baltic Grid.

Planned repair works are part of the Project of Common Interest “Latvia-Lithuania interconnection improvement” approved by the European Commission. This project is a part of the Baltic Energy Market Interconnection Plan, which foresees improvements of the gas supply infrastructure in order to eliminate the isolation of three Baltic States and Finland, reduce the dependency on the single supplier, strengthen internal grid infrastructure and improve diversification of supply sources and security of supply in the Baltic Sea Region.

PUC recognizes that Conexus Baltic Grid has taken into consideration impact on the security of supply and environment as well as system tariffs when deciding on the schedule and technical solutions.

During the repair works it will be necessary to reduce the flows of natural gas to Estonia, however, supply to Baltic consumers will not be constrained.

“Repair works of the natural gas transmission system in the gas pipeline section Vireši – Tallinn are crucial to ensure secure supply to consumers in Latvia and Baltic Region, taking into account the significant increase in the utilization of the main gas pipeline since January 2020. The increased utilisation rate is caused by the opening of the common FIN-EST-LAT gas market; furthermore, planned repair works have strategic importance for strengthening the functioning of market in long-term,” explains Board Member Rota Šņuka.

PUC assessed the aspects of security of supply, impact on market as well as the chosen timing for repair works.

From the security of supply point of view, main argument for repair works is the necessity to deal with high risks of defects detected by the transmission system operator, which can potentially cause emergency situations and gas supply interruption. Higher utilization and planned increase of operating pressure in this particular pipeline section is to be considered as risk increasing factor.

As regards the impact on market, PUC notes the repair works will be carried out during the time when the gas consumption for heating purposes is low, therefore the impact on the functioning of the market is limited, maintaining stable supply of gas to consumers of Valmiera. It can also be expected that natural gas flows will be lower due to the end of the Inčukalns Underground Gas Storage withdrawal season on 30 April 2020.

When assessing the impact on the market, PUC considered the actual circumstances of current situation – significant decrease in the prices of natural gas. However, considering the high level of uncertainty regarding price forecasts, in the view of PUC, price forecasts cannot be relied on when planning repair works. This means that price forecasts have a high risk of uncertainty and the situation in the market can change rapidly, however, planning of repair works is less flexible process which needs to be done well in advance.

Forward-planning obligation comes from the Common Regulations for the Use of Natural Gas Transmission Entry-Exit System developed by Estonian and Latvian transmission system operators.1 Conexus Baltic Grid has informed market participants 42 days in advance of the planned repair works according to the regulation. PUC encourages closer cooperation between market participants with regard to planning of repair works, which exceeds the minimum requirements set in the regulation.

To reduce possible risks of technological constraints of supply in the direction towards Estonia, PUC kindly calls on market participants to consider use of market based solutions such as swaps.

[1] https://www.vestnesis.lv/op/2020/81.2