Lithuania: moves towards new roadmap for gas industry

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11 July 2011, Gas

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The Russian utilities player Gazprom has a clear monopoly in the Lithuanian market with a 37.1% stake in Lietuvos Dujos AB, which is currently Lithuania's sole gas transmission system operator and distribution system operator. Lietuvos Dujos AB is jointly owned by Gazprom, E.ON Ruhrgas, and the state property fund. However, a bill approved by the parliament of Lithuania is an important step towards energy independence and the liberalization of the country's gas market. Once approved by the president, the bill will force Gazprom to give up its ownership of the country's gas pipelines.

With no indigenous gas production, liquefied natural gas (LNG) infrastructure, or ability to import gas from other parts of the world, Lithuania has been entirely dependent on Russia to meet its gas demand. Power demand has been on the rise and the closure of the Ignalina nuclear power plant in 2009 has turned the country from an electricity exporting state into an electricity importing state. The grid in Lithuania is linked directly to Russian export lines via an interconnection at Minsk in Belarus, while Lietuvos Dujos is not investing in interconnectors that would connect Lithuania's gas grid to the rest of Europe.

The new bill will enable the Lithuanian government to create a competitive gas market by diversifying gas suppliers and the gas delivery mode, adding LNG to the existing pipeline-delivered gas and freeing the country's pipeline system from Gazprom's control. The bill will split big utility groups, and ensure that smaller gas suppliers have unhindered access to European infrastructure, thereby creating a level playing field for all players operating in the market.

In addition, it is also expected that Lithuania will be able to lower its gas prices, which are currently among the highest in the region, by cutting the Russian-imposed link between the price of the "oil products basket" and the price of Gazprom-delivered gas. Datamonitor believes that the bill is essential for Lithuania to meet its increasing gas demand for power generation, and will pave the way for a new developmental roadmap for the liberalization of the country's gas industry.

Source: Datamonitor

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