RIGA - The price of natural gas could grow by some 40 percent in Latvia after Latvijas Gaze signed a new three-year contract with Russia's Gazprom, which is expected to increase tariffs substantially.
Latvijas Gaze CEO Adrians Davis said that after the contract is finalized, the company will apply to the Public Utilities Commission with the new tariff plan, which in turn could be confirmed in 2008.
Davis stressed that the exact time when the new tariffs would kick in was unpredictable, since the contract with Gazprom could be signed as late as October.
Latvijas Gaze raised tariffs 17 percent to residents and by 33 - 33.9 percent to large consumers starting May 1. The company had asked to increase the gas tariffs since Gazprom in turn had raised gas prices by 50 percent.
Latvijas Gaze, which is owned by Germany's E.ON Ruhrgas, Gazprom and Itera Latvija, buys 70 percent of its supplies of gas from Gazprom and 30 percent from Itera Latvija, which ultimately gets its supplies from Gazprom as well.
Latvijas Gaze also announced that it has closed one of the two pipelines from Russia due to damage, which will cost 2.5 - 3 million euros to repair. The damaged pipe will re-open in April 2008.
Davis explained that the gas main had to be shut after about 50 various defects capable of causing an accident were discovered in its Latvian section. To boot, in some places the thickness of the pipe's linings had decreased by 80 percent.
"There are a lot of repair works that must be carried out, and our target is to complete the repairs by the next pumping season, which begins in April," Davis said.
Since the company has yet to complete the current pumping season, it has decided to buy the remaining stocks of gas at the Incukalns facility owned by Gazprom in order to meet next winter's needs, or 2.3 billion cubic meters of gas. Latvijas Gaze estimates that this will be sufficient for the next heating season.
The company has arranged a short-term loan of 28.5 million euros from SEB Latvijas Unibanka to buy the gas.