Vitenbergs denies Latvia received immediate offer to buy cheap US gas in 2022

  • 2023-03-17
  • LETA/TBT Staff

RIGA - A Latvian government delegation that visited the United States last year did not receive an immediate offer to purchase less expensive liquefied natural gas (LNG) from the US, Transport Minister Janis Vitenbergs (National Alliance), who in April 2022 led the delegation as economics minister, told LETA. 

"If there had been a clear offer as the Bank of Latvia's Head of Sustainability Edvards Kusners claims on website, we would have been crazy to not accept it. But no such offer was made," Vitenbergs said. 

The minister indicated that during the visit, the Latvian delegation had high-level talks with US politicians and gas sector entrepreneurs about potential cooperation and the amount of natural gas Latvia might need in the future.

The Latvian delegation included representatives of the Economics Ministry and managers of Latvenergo energy company. In Vitenbergs' words, this was a time when he as minister had signaled that Latvenergo's further cooperation with Russian gas suppliers would not be possible and that it was necessary to look for alternatives. 

"There were general discussions about an option for Latvenergo to start buying liquefied gas from US companies from 2025, because in the gas industry it is not possible to increase capacities at once. First, it is necessary to agree on bookings for the future. The amount the US initially offered to book was larger than Latvia's annual gas consumption," Vitenbergs said.

Vitenbergs noted that after the visit to the US, Latvenergo continued negotiations with US companies and that letters of intent were signed, providing a basis for further talks. 

"Latvenergo, as a potential buyer, continued these talks. As I was informed, they also concluded a non disclosure agreement with an American company before starting discussions on details of the deal," Vitenbergs said, adding that he does not have information on how the potential deals were further developed. 

The minister underlined, though, that during last year's visit, the US companies did not make any concrete offers to purchase liquefied gas right away. "These were business talks, some sort of "feeling about" potential cooperation," he said.

As reported, Kusners wrote on the Bank of Latvia's analytical website that Latvia last year passed up the opportunity to purchase liquefied natural gas from the United States that was significantly less expensive than the LNG available on the European market.

The expert noted that at the beginning of April 2022, then economics minister Vitenbergs and a delegation of public officials and Latvenergo managers made a working visit to the US to "discuss long-term cooperation in energy".

During the visit, the Latvian delegation reportedly received an offer to conclude a 10-year agreement for the purchase of 10 terawatt hours (TWh) of LNG for a price consistent with the Henry Hub price. In 2022, the highest Henry Hub price was EUR 30 per megawatt hour (MWh) of gas, but now it has dropped to EUR 8 per MWh. At the time when the offer made, the price was EUR 10 per MWh.

Kusners says that considering the tense situation on the LNG market, the US was doing Latvia a favor by offering it LNG from its terminal.

Discussing the possible end-price of the US gas with experts, Kusners learned that the gas transportation price has been highly changeable and ranged from EUR 2 to EUR 15 per MWh last summer. To that, it would also be necessary to ad insurance and other risk management costs. The gas price on Europe's TTF exchange, however, was in the range between EUR 200 and EUR 300 per MWh last summer.

According to Kusners, Latvia never started formal talks with US energy companies about gas purchases.

Kusners believes that this was a political choice with far-reaching economic and social consequences but at the same time also an undeniably effective shock therapy accelerating the switch to non-fossil fuels in Latvia.

"Informal explanations for refraining from the gas agreement with the US contain rather weak arguments - the most frequently mentioned reasons include fear to conclude a long-term deal while still hoping for a resumed flow of cheap Russian gas after the war, as well as the necessity to cut the consumption of fossil fuels and a shortage of regional LNG terminals," Kusner writes.

Kusners believes that the latter argument is to the point, although the amount of gas the US offered under the proposed agreement was smaller than Latvia's annual gas consumption, which is around EUR 12 TWh, and the logical solution would be to include reselling rights in the agreement so that Latvia could send tankers with LNG to other buyers once demand at home dropped.

It is hard to imagine, for instance, Asia, a fast-growing LNG consumer, overtaking Europe in cutting back on fossil fuels consumption and Latvia having problems selling them the leftover gas, Kusners says. "As for the hope to return to energy dependency on Russia, I am simply out of words."