RIGA - Latvijas Gaze President Adrians Davis helped clear up some of the speculation about a second gas-storage facility in Latvia by saying that the existing facility in Incukalns was enough to fully provide Latvia and neighboring countries with natural gas and that there was no need to develop another facility.
Davis said the construction of a storage facility in Dobele was only necessary if European Union officials felt it justified.
"The Dobele gas storage facility is not Latvia's issue, as the nation is fully provided with gas. The EU member states would [need the excess,] and it is a political issue that should be solved between the EU and [Russian gas company] Gazprom," he said.
Once the Incukalns facility is upgraded, Davis explained, it will provide sufficient supplies of gas for Latvia, Estonia, Lithuania, Finland and the western part of Russia.
In recent weeks there has been more talk of the need for a second underground natural gas storage facility that would help prevent any gas shortages during unforeseen events. Lithuania was mentioned as one possible site, but the Lithuanian government, which is more interested in building a new nuclear power plant, has suggested that Latvia is better suited for gas storage.
In late 2005, the Latvian government established a task force to decide how the resource could best benefit the country economically. The group is also preparing informative materials for investors on the possibility to create underground gas storage facilities in the western part of Latvia. Davis said that Latvijas Gaze planned to invest 11.5 million lats (16.3 million euros) in upgrading the Incukalns facility. Investments planned for 2007 will reach 12.7 million lats.
Company spokesman Vinsents Makaris said that upgrading the facility would take until 2010, with total costs amounting to 76 million lats. Incukalns' capacity will increase from 2.3 billion cubic meters to 2.6 billion cubic meters at the end of the first stage, and to 3.2 billion cubic meters at the end of the second stage in 2015.
The storage facility currently provides natural gas to Latvia, Estonia, Russia and Lithuania.
Meanwhile, the business daily Dienas Bizness reported that Davis was set to travel to Russia in April to discuss a price hike in 2007. "There will be another hike of the gas delivery price on Jan. 1 next year. The decision has been made, and it's inevitable," Davis told the newspaper.
The exact gas price increase has not been revealed yet. Presently Latvijas Gaze buys natural gas from Gazprom for about $140 per 1,000 square meters, while the gas price on the European market is $230-250 per 1,000 square meters. Considering that delivery makes up about two-thirds of the price, Latvijas Gaze is expected to submit to the regulator a new tariff proposal this year.
The Latvian Public Utilities Regulatory Commission will decide on March 22 whether to approve the gas tariff hike from May 1 as proposed by Latvijas Gaze. This tariff proposal calls for a 16.9-27.3 percent rise of natural gas tariffs if fuel oil prices remain at the current level of some $280 per ton.
Latvijas Gaze largest shareholders are Gazprom, Germany's Ruhrgas and Itera Latvija, a local subsidiary of the Russian concern Itera, which is also controlled by Gazprom.
