Gas companies brace for price rise

  • 2004-12-09
  • By TBT staff
TALLINN - Baltic gas companies this week warned of an imminent rise in the price of natural gas, which could spill over into 2006.
Eesti Gaas officials said at this point it was unclear how high prices would rise and for which category of customers. "The process to raise the price is under way," Urmas Kuusik told the Baltic News Service on Dec. 6.

He did not specify whether Eesti Gaas was preparing an application to the Energy Market Inspectorate to have a new list of prices approved. He did, however, make it clear that the price of gas may rise from 2006, but a rise as early as next year cannot be ruled out either.

A cubic meter of natural gas currently costs 2.5 kroons (0.16 euro) - 4.7 kroons for small consumers, depending on the annual level of consumption. Baltic gas companies, in turn, have been paying Gazprom $80 - $85 on average for 1,000 cubic meters of gas.

As recently as two months ago Eesti Gaas said that the price of natural gas supplied by Russia's Gazprom wouldn't change before 2009. But Gazprom representatives have repeatedly said this year that the price paid by the Baltics may be raised to the same level as Poland, which pays $120 per 1,000 cubic meters.

The Latvian press reported this week that the Russian gas monopoly would raise the price of gas by 16 percent supplied to Latvijas Gaze in 2005. Should this occur, the latter said it would in turn ask the state for permission to raise the retail price for gas beginning in 2006.

However, it is likely Latvijas Gaze will find little sympathy in the social service regulation committee. This week the company reported that 2004 earnings could reach some 17 million lats (24.5 million euros), a 70 percent increase year-on-year. The company said the better-than-expected results were due to higher sales and a weaker U.S. dollar (which is used for buying gas from Gazprom).

What's more, the company was given the green light for a 12.5 percent price rise in July 2003 and another 2.5 percent from January this year. Thus if consumers used to pay 50 lats for 1,000 cubic meters, they are now paying 84.8 lats for the same amount, the Biznes & Baltija daily reported.

Latvijas Gaze President Adrians Davis confirmed that the price of gas would increase 16 percent next year.

Also last week the company announced that it could supply gas to southern Finland from its Incukalns underground storage facility.

Speaking in an extraordinary shareholders meeting on Dec. 3, Davis said the company would decide on this project next year. The project would require expanding the Incukalns storage facility, located some 20 kilometers away from Riga, and building a gas pipeline between Helsinki and Tallinn in the Gulf of Finland.

Latvijas Gaze is owned by Gazprom, Germany's Ruhrgas and Latvija Itera, a division of Russia's-based Itera.

Gazprom owns 37 percent of Eesti Gaas, while Ruhrgas owns 33.4 percent, Finland's Fortum Oil & Gas 17.7 percent and Itera Latvija, 9.75 percent.