Acquisition of LNG storage vessel after 2024 approved

2018-08-21

The Governmental Commission on the Economic Infrastructure Development has offered to assure possibilities of long-term import of LNG in Lithuania by adopting current decisions regarding the acquisition of an LNG storage vessel in 2024. The commission believes that this is the most economic and strategically sustainable choice for Lithuania. It will ensure competitive gas prices and the lowest LNG infrastructure maintenance cost in the short and the long run.

The decision regarding the acquisition of the LNG terminal has been adopted with regard to the technical and economic alternative analysis and recommendations of international independent consultants.

“Today, we have not assessed the circumstances of the acquisition of the LNG storage vessel and the relevance of its size and price. These decisions were made much earlier, and we have no possibility to change them. Today it is important to maximize Lithuania’s energy independence and to reduce the costs of natural gas for residents”, says Prime Minister Saulius Skvernelis.

Two main alternatives have been assessed. These are the long-term rent of the terminal after 2024 and the acquisition of the terminal. The decision to acquire LNG terminal after 2024 provides the consumer with the maximum benefit. When adopting decision regarding the terminal acquisition after 2024, it has been offered to distribute the terminal maintenance costs under the current model for a longer period. It will allow reducing the LNG infrastructure maintenance costs for the consumers by EUR 23 million as from 2019 (from EUR 66 million to EUR 43 million).

“Bearing in mind that in future Lithuania will need a long-term assurance of LNG supply and taking into consideration energy security and competitive prices, we have chosen the option, which provides the highest economic effect and which is the most sustainable in the long run, since Lithuania will have the access to the international LNG markets”, claims Žygimantas Vaičiūnas, Minister of Energy.

“According international experts and our estimations, the choice of the acquisition of the storage vessel offers the highest level of flexibility and future possibilities of prompt reaction to market changes. A vessel like “Independence” is quite universal and, when necessary, it can be used in other commercial projects, and in the long run, it could remain in demand among LNG operators across the world”, says Mindaugas Jusius, CEO of AB Klaipėdos nafta (KN), the operator of oil and liquefied natural gas (LNG) terminals.

According to the study performed by the international independent consulting company “Pöyry Management Consulting”, the LNG terminal in Lithuania will remain the main tool for the exertion of pressure on gas prices. According to the consultants, failure to assure the import of LNG supply will result in insufficient competitive pressure on Russian gas prices. The LNG terminal eliminates the risks related to “Gazprom” (the dominating supplier in the region) possibilities of abuse of the dominating position in the market and its unreasonable increase of gas import prices for consumers. Experts believe that without a terminal, “Gazprom” could increase the Russian gas import prices by up to 20 percent, i.e. the annual amount overpaid could reach EUR 160 million.

When addressing the reduction of the terminal costs before 2024, amendments to relevant legal acts related to this decision will be initiated during the autumn session of the Seimas (Lithuanian Parliament).

The Plan of Implementing Measures of the Government Programme specifies that decisions regarding the long-term assurance of LNG supply must be adopted before the end of 2018.

Klaipėda’s LNG terminal is among the most efficient LNG terminals in Europe. It supplies about half of the total amount of the natural gas consumed in Lithuania.

Source: Klaipėdos Nafta

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