Inčukalns UGS to more actively store the minimum required natural gas amount, ensuring emergency capacity supply

The unified natural gas transmission and storage system operator AS Conexus Baltic Grid (‘Conexus’) reports a significant rise in the interest of natural gas system users to participate in auctions to ensure a round-the-clock supply by receiving natural gas from Inčukalns Underground Gas Storage (Inčukalns UGS) in the event of an energy crisis. The offers submitted to the auction show that in the 2019/2020 season, the natural gas amount provision price will be lower than in 2018/2019, thus making less of an impact on the transmission system service fees.

On 18 March 2019, Conexus announced auctions for storing and ensuring access to natural gas in the active amount of 2,845,000 MWh in 2019/2020; the offers reached a total amount of 7,527,000 MWh, with the highest bid of 10.69 EUR/MWh. 

Board Chairwoman of AS Conexus Baltic Grid, Zane Kotāne commented on the increasing interest of system users in the auction: ‘It is true that competition among natural gas traders to find ways to store natural gas in emergencies is a good sign not only for our country’s energy security, but for the industry in general. We see a number of reasons to explain the increase in activity. First, last season’s winter was relatively warm, because of which many system users had a so-called temporary surplus of natural gas. Second, this is the first year when the auction took place on time, and it was successful right away, without any need for repeat auctions, as before. In view of the seasonality of natural gas, timely planning makes it possible to foresee resource use much more effectively: in other words, how much natural gas will be stored for the next season, and how this amount will be structured.’

It must be highlighted that organising the auction is required to comply with Section 121 of Cabinet Regulation 312 ‘Procedure for energy user supply and sale of fuel in the event of an energy crisis or threat to the state’ of 19 April 2011. According to this provision, a unified natural gas transmission and storage system operator must ensure that within the period between the end of the gas storage cycle pumping season and 1 March of the following year. The active amount in Inčukalns UGS corresponds to no less than 3160k MWh (300 million m3), intended to guarantee Latvia’s gas supply. Organising the auction, Conexus took into account the gas already stored at Inčukalns UGS intended to be supplied to users, including households, in the amount of 315k MWh.

Contracts with the auction winners shall be signed in the near future.

Overall, during the next natural gas injection season, Inčukalns UGS will offer a selection of storage services developed: the grouped capacity product, the market product and the virtual flow product. A newly-developed two-year capacity product has also been approved.

The maximum price applicable to the grouped capacity product for the storage cycle in 2019/2020 is 3.50 EUR per megawatt-hour (MWh), while the minimum market product price set for the next season is 1.38 EUR per MWh, resulting in a total two-year grouped capacity product price of 4.90056 EUR per MWh in 2019/2020 and 2020/2021.