Developments in the natural gas market in 2022

The beginning of 2022 brought gas prices down to between 70 and 100 €/MWh, but unfortunately the period of low prices didn't last very long. Russia's military aggression against Ukraine significantly disrupted the global energy system. This led to difficulties due to high energy prices and increased concerns for energy security, highlighting the EU's overdependence on gas, oil and coal imports from Russia. To solve the problem, steps were taken to reduce energy dependence on Russia. One important step was the new EU regulation, according to which gas storage owners had to fill at least 80% of their storage by 1 November 2022, to ensure security of supply during the winter.

The Competition Authority asked the system operator Elering for an assessment of a scenario where the Russian gas supply is completely cut off and the Baltic states and Finland depend only on the supply of the Incukalns gas storage and the Klaipeda terminal. According to Elering, in such a case it was likely that there would be deficits in the gas supply of the countries. In such a situation, a scenario must be launched to limit gas consumption and to ensure the gas supply of protected consumers defined on the basis of subsection 2 of § 261 of the Natural Gas Act.

At the beginning of March 2022 the Competition Authority held a meeting with the heads of the energy market regulatory authorities of Latvia, Lithuania and Finland, where solidarity between countries was emphasised in the coordination of gas supply and the need to turn to national governments to coordinate measures used in a crisis situation. In addition, a meeting of the gas market crisis committee was held in March, during which the operation of the gas system in conditions of deficit and short-term measures to limit gas consumption were introduced.

In April 2022 the Government of the Republic of Estonia made a decision of principle that Estonia will stop importing Russian gas this year. In order to implement the decision, it was necessary to create the capability to receive liquefied natural gas in Paldiski by the fall of 2022 and obtain a national gas reserve of 1 TWh for the Latvian gas storage.

On 17 May 2022 Estonia declared an early warning level for gas supply, which in accordance with EU regulations provides additional opportunities to secure gas supplies in a crisis situation.

In July 2022 the European Commission proposed new legal instruments and a European Gas Demand Reduction Plan to reduce gas demand by 15% from 1 August 2022 to 31 March 2023.

In October 2022 Floating Lng Terminal Finland Oy submitted to the Competition Authority for approval a package of standard terms and conditions for the use of a liquefied gas terminal, comprising Terminal Rules, Terminal Service Contract, Joint Terminal Use Rules and Joint Terminal Use Contract, General Terms and Conditions and Annexes. The reason for the approval of the standard terms and conditions of the LNG terminal is the creation of receipt capability of the liquefied gas terminal to be built in Estonia and Finland. The Competition Authority and the Finnish Energy Authority started cooperation to specify and check the standard conditions submitted for approval. From mid-October to mid-November, the authorities conducted a joint consultation on the standard conditions of the contract for the use of the LNG terminal and approved the standard conditions of LNG. The approval of LNG standard conditions was a prerequisite for the Inkoo terminal to start selling LNG to market participants.

By the end of October 2022 European gas storages were 94% full, and the existing LNG terminals and transnational pipelines were no longer sufficient to unload and transport gas. A situation arose where ships were used as floating storage facilities. The oversupply of LNG on the gas market led to a sharp drop in the exchange price of natural gas, which fell below 100 €/MWh for the first time in a long time.

In the last week of December 2022 the LNG ship Exemplar, which can hold up to 68,000 tons of liquefied natural gas, arrived at the Finnish port of Inkoo. Gasgrid Finland signed a ten-year lease agreement for the Exemplar. LNG is transported from the Inkoo terminal to Estonia through Balticconnector, a gas pipeline between Estonia and Finland.