Latvian Minister Addresses LNG Allies

At a breakfast seminar hosted by LNG Allies on Tues. July 14, Latvian Minister for Economic Affairs, Dana Reizniece-Ozola, spoke candidly of Latvia’s tenuously dependent energy position and the need for a full and transparent transition to open energy markets connecting the whole of the European Union (EU).

Ms. Reizniece-Ozola, who assumed her cabinet portfolio in Nov. 2014, brings a distinguished and remarkable background to her position. Among the achievements illustrating the variety and depth of her interests are her title as Woman Grandmaster Chess Champion and her possession of an advanced degree in aerospace business.
Minister Reizniece-Ozola made several key points underscoring her belief in the need for immediate and steady action in several critical directions to prepare for a secure European energy supply.

EU Energy Union: “Probably never before, I would say, due to the geopolitical situation, have energy security issues been put so high on the [EU] political agenda. That is why [during Latvia’s presidency of the EU Council we put so much effort into promoting] the concepts of the Energy Union in order to ensure affordable, secure, and sustainable energy for the EU consumers.

“But we also have to take into consideration that the [necessary implementing] legislation takes time. In order for the Energy Union to come into force, a package of proposals will first need to be translated into legislation to be adopted, some say, by 2019. And only afterward can the Energy Union [expect] to be fully realized and operational.”

Single-Source Dependence: “There will be several issues that the member states will have important debates on. We are a country fully dependent—especially in the gas sector—on one supplier. Those issues will [address] the benefits of the common gas purchases, a very sensitive issue that is still very important.”

Ms. Reizniece-Ozola spoke of the difficulty in dealing with a single supplier of natural gas (Gazprom) across the Baltic states and Finland. “Earlier this year The European Commission sent a statement of objections to Gazprom alleging that they are most probably abusing their dominant position in some of the Central and Eastern European countries. Latvia is one of those. “The dependency rate ranges from 50 percent to 100 percent. I must say that we are seeing investigations carrying on, but from our own experience it’s true that it’s very difficult to work with this single supplier.”

She stressed that the supply security of holding long-term contracts comes at a high cost. “We have the long-term contracts, the long-term supply agreements, which is the good side of the story. But the price we pay for the gas is really high [compared to neighboring nations]. “For Latvia, it is important to end its energy market isolation from European gas networks as well as dependence on one supplier.”

Partnerships: “We see a clear, direct [interest by] the European Commission and also of the member states to intensify the work on the projects that might give us alternative gas supply options… and also try to establish strategic energy partnerships with the important producing [and] transit regions, such as Algeria, Turkey, Azerbaijan, Turkmenistan, [The] Middle East and Africa. And in this context, we do, of course, see the United States as a very important [future] partner.”

Immediate Groundwork: “Personally, I think we should do our best to […] prepare the ground according [to future needs]. In 1997, the privatization agreement came into force in Latvia that really envisaged exclusive rights for Gazprom to sell their gas in Latvia for 20 years. The privatization agreement will end [by] March, 2017. This is the date by which I see we have to prepare all the legislative platforms for the other competitors to come in and work openly in the market.”

We have prepared [a legislative package] and passed it over to the cabinet of ministers. Then it has to go through the parliament, but I hope that this time we will be successful and overcome all the objections. And in this respect, we also need the political support coming from the United States, your embassy, your business people, to come and really help me as the Minister to go forward with this important legislative package.”

Ms. Reizniece-Ozola acknowledged that her nation finds itself holding a potentially valuable card in discussions with European nations, as Latvia has the ability to store significant amounts of natural gas underground. The Minister said her government would want to “ensure that the critical infrastructure would be in the hands of [Latvians] or a neutral friendly investor so that the other sales operators coming on the market would have flexible, convenient, cooperation with it and would be able to really sell the gas.”

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