Gas market

Gas is a fuel that is used extensively in energy sector, households and industries and represents a raw material characterised by convenience of use. It is easily transported and subject to extensive world market trade.
 

The natural gas used in Estonia comes from Russia and Lithuania, where in 2014 a liquefied natural gas terminal was opened. In summer, the Inčukalns natural gas storage facility in Latvia, which is used to supply Estonia in winter, is filled with Russian gas. Minimum quantities of gas are imported from Russia during this period.

The shale gas revolution in North America provides interesting opportunities for developing the Estonian gas market; this and the development of technologies for the liquefaction of natural gas have materially changed the pricing models that were based on natural gas oil prices.

District heating is the main area of application for natural gas in Estonia (39% of the volume of gas consumed). An increase of natural gas prices, resulting from limited competition, have forced producers who use natural gas for production to consider the use of local renewable fuels over the last couple of years.

Gas market

 

Estonian gas market
 

The Estonian gas market has been completely open since 2007; however, our gas distribution network is only connected to the gas distribution networks of Russia and Latvia and there is only one company that imports natural gas – AS Eesti Gaas. In an open gas market, every consumer can choose a gas supplier for their liking and it is not important to which network they are conntected.
 

Until the end of 2014, there was no competition between the gas suppliers, which was hindering the market to function effectively. The situation improved in the end of 2014, when a liquefied natural gas terminal was opened in Lithuania. The situation will improve even more once gas infrastructure projects that connect the Estonian gas supply systems to the Central European gas networks (Baltic and Polish gas links) will be implemented over the coming years; this will help in using alternative supply channels to receive natural gas (additonal liquefied natural gas (LNG) terminal in Estonia).

At the same time, Ministry of Economic Affairs and Communications together with other Baltic contries and Finland have started co-operation to develop a regional gas market. During this co-operation, gas market regulation rules will be developed to lay down a foundation for a market situation, involving several suppliers and for cross-border trade.

Gas market undertakings
 

Apart from AS Eesti Gaas, which imports gas to Estonia from Russia, the required permit is also held by AS Nitrofert, though it only delivers gas for production. As of 2015, natural gas has been imported by Baltic Energy Partners OÜ, which holds import licence as well as Reola Gaas and AS Eesti Energia has announce that it would be interested in starting to import.

In 2013, AS Eesti Gaas held 89.2% in the retail market; the remaining 10.8% of the gas was purchased by distribution network operators from AS Eesti Gaas for resale. In 2014, 35 activity permits for the sales of natural gas were issued.

Transmission networks from abroad to Estonia
 

Gas supply is secured by a system administrator in Estonia, AS EG Võrguteenus, which controls 878 km of transmission networks and 37 gas distribution stations.

The Estonian gas system lacks its own compressor station and the pressure required for transmission is provided by compressor stations that form a part of the Russian transmission system or the compressor station of the underground gas storage facility in Inčukalns, Latvia. Estonia is connected to Russia through Narva and Izborska, and to Latvia through Karksi.

Natural gas consumption volumes
 

In 2014, the total gas market volume was 530 million cubic metres. During the top gas consumption season, Estonia gets all the required gas from Inčukalns gas storage facility in Latvia.

  • In February 2012, gas consumption rates reached a five year high – 6.7 million cubic metres per day.

In 2013, the winter peak consumption volume was 4.7 million cubic metres per day.

 

Gas distribution networks in Estonia
 

In Estonia, the largest gas distribution network operator is AS Gaasivõrgud, a subsidiary of AS Eesti Gaas, which operates 1,500 km of gas distribution networks.

In addition, there are 25 more natural gas distribution network operators in Estonia, owning 650 km of natural gas distribution networks or 22% of the total length of natural gas distribution networks. 14% of the scope of total distribution services is covered by these networks.

Gas import does not suffer from capacity deficit; the gas networks have been dimensioned to meet much bigger demand. The capacity of the Estonian distribution network at input pressure 40 bar can reach up to 14 million cubic metres per day.

As a comparison, we can observe Latvia, where the maximum daily import capacity at the same pressure is 26.48 million cubic metres. The pressure of gas imported to Lithuania is 54 bar and the maximum imported quantity is 37.44 million cubic metres per day.

Estonian gas connections are characterised by the following daily capacities:

  • Karksi-Latvia: 7 million cubic metres (at input pressure of 40 bar)
  • Värska-Russia: 4 million cubic metres (at input pressure of 40 bar)
  • Narva-Russia: 3 million cubic metres (at input pressure of 22 bar)

From May to October, Estonia gets its gas supplies directly from Russia, mostly using the Värska and Narva connections.

During warmer seasons, Estonia will import less gas through connections in Värska or Karksi, as then it would be possible to pump gas, more efficiently, to the natural gas storage facility in Inčukalns, hence improving the security of the natural gas supply from November through April. Gas is mostly supplied from the gas storage facility in Inčukalns, Latvia, through gas metering stations in Karksi and Värska.

 

Market regulation
 

In Estonia, the gas market is regulated by the Natural Gas Act, which lays down the requirements for gas importing and transmitting undertakings, sellers, distributors and also the Estonian Competition Authority that conducts market surveillance.

The Estonian Competition Authority will approve:

  • Network service prices for distribution network operators

  • A sales margin imposed on sales to consumers for gas undertakings in a dominant position

  • Guidelines and methodologies for subscription charges

  • Standard network and sales contract terms and conditions

Quality requirements for gas supply
 

Quality requirements for gas supply were established with the amendments to the Natural Gas Act at the beginning of 2007. According to the requirements, the consecutive duration of an interruption of gas supply caused by failures may not exceed 72 hours and the total duration of interruptions per year may not exceed 130 hours.

The distribution network operator shall maintain records of the duration of interruptions and the Estonian Competition Authority has the function of checking the compliance with quality requirements.

The Estonian Competition Authority will also publish, every year, the Estonian electricity and market overview.

 

Last updated: 13 September 2017