Similar to year 2023, the situation in natural gas markets in the first quarter of 2024 has been favourable for natural gas consumers - despite the increase in natural gas prices in November and December 2023 due to geopolitical events in the Middle East, natural gas prices continued to decrease in the first quarter of 2024, and in March reached the lowest point since June 2021. The decrease in natural gas prices is mainly explained by warmer than usual weather in Europe during the heating season, as well as high natural gas storage fulfilment levels. After reaching the lowest point in March, natural gas prices have experienced a slight uptick in April and May. This is mainly due to the start of the natural gas injection season in European natural gas storages from April 1, and as a result natural gas traders in Europe have to compete for supplies of liquefied natural gas with traders in Asia. Also, the price of natural gas was affected by planned and unplanned natural gas supply interruptions from Norway, which has become Europe's largest supplier of natural gas since the beginning of the war in Ukraine.
The main challenges for natural gas traders, including the Company, are still the low consumption of natural gas compared to the pre-war level, the ever-increasing costs of the use of natural gas storage, as well as the economic and political events in Europe and the world. Despite lower natural gas prices, consumers still continue to save natural gas, which shows that consumer habits caused by the sharp rise in natural gas prices in 2022 have not changed significantly. And although there is a tendency for natural gas consumption to increase in certain industrial sectors, such as fertilizer production, weak overall economic activity in the Eurozone reduces the chances of natural gas consumption increasing in the near term and returning to pre-war levels. Also, the consumption of natural gas is affected by the ever-increasing production capacity of renewable energy resources, as well as the commitment at the European Union level to voluntarily reduce natural gas consumption by 15% until March 31, 2025. Latvia's natural gas supply, although without a direct technical connection with Western Europe, is directly dependent on economic and political events not only in the Baltics, but also in Europe and the world, as the price of natural gas in Latvia is linked to Western European natural gas hub indexes. As a result of the decrease in natural gas prices, price differences between summer and winter periods are getting smaller and smaller, but at the same time, the costs of the use of natural gas storage are increasing every year. For example, the tariff of the stock transfer product will increase 2.4 times during the storage cycle, which will last from 1 May 2024 to 30 April 2025. In order to ensure the safety and stability of natural gas supplies to its customers, as well as to fulfil the conditions of the European Union Council Regulation (EU) 2022/1032 regarding the fulfilment levels of natural gas storage facilities by November 1 of a given year, natural gas traders, including the Company, inject natural gas into storage facilities in the summer, in order to deliver it to its customers during the heating season. This situation creates significant challenges for natural gas traders to be able to compensate for rising storage costs, but at the same time continue to provide customers with favourable natural gas prices.
In such market conditions, the Company's years of experience and knowledge of the natural gas markets in Latvia and Europe play an important role. As a result, despite all the challenges, the Company has achieved firm profit figures in the first quarter of 2024. In the first quarter of 2024, the Company worked with a net profit of 8.7 million EUR, which was 25% higher compared to the corresponding period of 2023, when the net profit was 7 million EUR.
The Company still continues talks with the institutions responsible for the energy sector regarding the compensation of losses, which were incurred by fulfilling the obligations set out in the Cabinet of Ministers Regulations No. 503 "On the Supply of Energy Users During the Declaration of Early Warning and Alarm Level", as well as the losses resulting from the difference between tariff and actual price of natural gas in the last regulated tariff period from January to April 2023 before the opening of the natural gas market from 1 May 2023, when the Company performed the duties of a Public trader in accordance with the law "Amendments to the Energy Law".
The Company will publish its Unaudited Interim Condensed Financial Statements for 6 months of 2024 on 30 August 2024.
JSC "Latvijas Gaze"
Chairman of the Board
Aigars Kalvitis
www.lg.lv
