Lietuvos Dujos, Gasum Form Natural Gas Exchange Company in Lithuania

On 7 September 2012, in Vilnius, a statutory meeting was held of the joint venture established by the Finnish gas company Gasum Oy and AB Lietuvos Dujos (LD) to operate a gas exchange, at which the articles of association were approved and the governing bodies were elected.

Haroldas Nausėda, who managed the project for the establishment of this joint venture right form the start, was appointed head of the new joint venture. New company is owned by Lietuvos Dujos, 66% and Gasum, 34%.

As a result of the adoption of the new Law on Natural Gas in the summer of 2011, conditions for the operation of a natural gas exchange were created, and LD started assessing the possibilities for the establishment of an effectively functioning natural gas exchange. As the size and the structure of the Finnish gas market are comparable to those of Lithuania, and this country’s natural gas exchange has been operated by a subsidiary of Gasum Oy for more than ten years, it was jointly decided to incorporate a natural gas exchange with Gasum Oy.

The exchange will operate on the basis of an electronic trading system accessed using the Internet. The trading system that is currently in operation at the Finnish natural gas exchange and which will be adapted to the needs of the Lithuanian market according to applicable legislative provisions will be used for the trading. The trading in the natural gas exchange will be anonymous and will be carried out in accordance with the natural gas exchange rules as adopted by the exchange and previously coordinated with the National Control Commission for Prices and Energy. The transactions will be based on the best price offers, and prices in the natural gas exchange will be determined by the principles of supply and demand. Despite the fact that Lithuania has a single external gas supplier, the natural gas exchange is expected to optimize and facilitate trading in natural gas. This will enable fast procurement – at one click – of natural gas at the natural gas exchange, i.e. without having to conclude any individual gas sale and purchase contracts. It will be particularly relevant in cases where gas consumers need to purchase additional gas volumes for short periods, whereas other gas consumers need to sell their surplus gas volumes. This will increase the flexibility in the gas market and promote the efficient use of gas.

Trading in natural gas on the exchange is just one of the options available for buying or selling gas, so gas market participants, having rationally evaluated all the potential gas trading alternatives, will be able to choose which specific instrument of gas trading is most relevant to them in each specific case.

“I believe in the success of the gas exchange that we are developing, and I think that this additional trading instrument, that will help form a dynamic natural gas market with a clear and transparent pricing system, will become important to our customers. It will create additional opportunities for quick and simple buying or selling of natural gas volumes, depending on the changing needs of natural gas consumers. At the same time, it is another step towards the formation of a joint and integrated gas market in the Baltic Region through the implementation of the National Energy Strategy. In order to bring benefits to our consumers and the entire gas sector, market integration is important not only in terms of the development of a competitive environment, but also in terms of securing stable operations of gas systems,” said Viktoras Valentukevičius, CEO of AB Lietuvos Dujos.

The CEO of Gasum Oy, Antero Jännes, commented on the joint venture’s future as follows: “In Finland, our natural gas exchange has been operating successfully for more than ten years, so I can confirm the point that it is a useful trading instrument for the gas sector. A need for such an instrument increases substantially with the diversification of gas supply sources and with the formation a dynamic and competitive gas market. Therefore, we believe that we are starting the operations of the exchange at a well-chosen moment. The long-term goal of our cooperation is to create an effectively functioning natural gas exchange for the Baltic Region.”

[mappress]
LNG World News Staff, September 10, 2012