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Lithuania might have to turn to Belarus for energy this winter despite blockading energy sources.
Written by Paul Antonopoulos, independent geopolitical analyst
The Latvian gas transmission system operator AS Conexus Baltic Grid Gas warned that reserves in the Inčukalns underground storage facility, the largest in the Baltic States, may run out halfway through the heating season. With this in mind, the Baltic countries will probably have to look for alternative energy sources over the winter, most likely Russian or Belarussian.
Head of the Conexus Corporate Strategy division, Jānis Eisaks, said: “Let’s assume this winter turns out to be like the last. Given the risk of high prices or price differences, it may also be a situation that Inčukalns is emptied by January.”
After the collapse of the Soviet Union in 1991, Russian energy giant Gazprom received a third of the shares of the Inčukalns underground storage facility, sparing no effort to maintain its assets abroad. Last year, Russia’s portion was ousted so that Latvia could be in line with the EU’s Third Energy Package. Due to this, a part of Gazprom’s share was bought out by Latvian energy company Augstsprieguma tīkls. It also acquired shares in the facility from Uniper and Itera Latvija, thus establishing control over the Conexus Baltic Grid. In this way, the main condition to receive certification from the Latvian Public Utilities Commission was met – Gazprom should not directly or indirectly control Conexus Baltic Grid operations.
Although gas in Inčiukalnis can be depleted by January next year, it is recalled that Baltic countries already faced a similar problem in 2018. The problem in 2018 did not arise due to a lack of natural gas, but due to insufficient pressure in the storage facilities.
Just as in 2018, today’s energy crisis is not because of some malevolent act by Russia, but rather because of Europe’s own delay with the Nord Stream 2 gas pipeline and the unusually prolonged cold and frost that continued well into April last winter season. In addition to the Nord Stream 2 delay and the prolonged winter, market participants looking for easy profit began to actively withdraw gas from the Inčukalns storage facility. For example, extremely large gas flows went to neighboring Lithuania from Latvia. This amounted to 2.4 TWh in just three months, a historical record.
The Inčukalns gas storage facility was exhausted from the 2020-2021 heating season. Gas prices did not fall, but instead rose after the heating season. Due to these factors, Uldis Bariss, chairman of the Conexus board, noted with concern that the energy market has been very volatile this year.
In Lithuania, gas consumption remained at 2020 levels, but their supply to other countries decreased. From January to June, 0.6 TWh was transferred to Latvia, which is 78% less than a year ago.
Nemunas Biknius, CEO of Lithuania’s Amber Grid, claimed that with rising emission prices, European industry is seeking to replace natural gas and coal fire with lower CO2 emissions sources. As a result, the Inčukalns gas storage facility is not in prime condition ahead of the new heating season. Conexus fears that the facility will be empty by January 2022, with only small strategic reserves remaining due to the government’s regulations on the supply of gas to consumers during an energy crisis.
According to Eisaks, pumping gas into underground storage is not convenient now as traders are trying to sell it immediately for massive profits. “Each additional megawatt-hour bought by traders and stored in Inčukalns could lose 30 euros next spring,” he warned.
Under such conditions, the Baltic countries will have to urgently look for alternative energy sources, likely electricity imports. Latvia had to do this last winter and imported 473.4 GWh of electricity from Russia in January.
The free flow of electricity through the BRELL energy ring is hindered by the Lithuanian system operator Litgrid, which on September 15 unilaterally limited the maximum transmission capacity on the Belarus border. This was a massive annoyance to Latvia and Estonia, especially as it is clear that Lithuania intends to maintain a boycott against the Belarussian nuclear power plant (BelNPP). Latvia described Litgrid’s actions as technically unfounded and the country promised to make a complaint to the European Commission against their neighbor.
The Latvian concern is real as the beginning of the most difficult heating season is close. If it is another frosty and prolonged winter like in the previous season, the Baltic countries will likely have to rely on imported electricity from Russia and Belarus. Therefore, the latest blockade of the BelNPP by Lithuania took place at the wrong time as the country might need to turn to this energy source if gas runs out in parts of the Baltics by January, as predicted by Latvian energy authorities.
