State reserves chief rejects criticism over natural gas purchases

Estonia's state gas reserve is stored in Latvia.
Estonia's state gas reserve is stored in Latvia. Source: SCANPIX/REUTERS/Ints Kalnins

Estonia has no shortage of natural gas in its reserves, Ando Leppiman, head of the Estonian Stockpiling Agency (EVK), said Friday, and has used up it budget to purchase a sufficient quantity, but has not failed in its role.

He said: "The reserve center can get more gas when there is money. The funds allocated with the additional budget have been either used or reserved. Before considering whether we can use additional funds, we cannot do anything additional to obtain more gas reserves."

The EVK had already purchased 650 gigawatt-hours (GWh) of natural gas as a crisis reserve in four tenders, paying an average of €204 per MWh. 

Leppiman told the Riigikogu's state budget select committee Friday that he does not agree with the assessment of the committee's chair, Tõnis Mölder (Centre Party), that the EVK's gas procurement had failed.

He said: "I do not agree with the statement that these tenders have failed. We saw a different pattern of behavior in all four tenders. In the first three tenders we received gas offers in a limited amount and from a number of small bidders. With them we procured 450GWh of natural gas. The fourth tender was different in nature . There were bidders and many offers, and the margins that were asked over the market price were also low. What was the average price? €204 for four tenders."

As of Friday, the price of natural gas November futures on the Netherlands-based TTF exchange was in the range of €148-151 per MWh.

All of Estonia's national gas reserves are to be located in the subterranean Incukalns storage facility, in Latvia.

The government had put the estimated requirement for this reserve at 1TWh earlier this year; Estonia's annual natural gas consumption is estimated at 5TWh (including this reserve).

The 650GWh, ie. half the planned figure above, should also be sufficient given that many large concerns, such as district heating companies, have switched from natural gas to other fuels, such as wood chips.

The state had allocated €170 million to the EVK in total, of which €132 million was intended for the natural gas reserves purchase, plus €38 million for compensating the costs to private sector firms of constructing the currently unused Paldiski LNG berth.


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Editor: Andrew Whyte

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