Lithuania puts LNG imports from US on hold

By bne IntelliNews January 13, 2016

Lithuania has postponed plans to buy liquefied natural gas (LNG) from the US, an official from state-controlled energy company Lietuvos Energija said on January 13.

The company will not import US gas to feed the LNG terminal in Klaipeda for the meantime, spokeswoman Ernesta Dapkiene told Reuters. US gas does not meet  the techincal requirements of the Lithuanian gas grid, she claimed.

That mis-match could be a blessing in disguise, however. Lithuania's floating LNG facility has been struggling to sell the 500mn cubic metres of gas it is contracted to buy with Norway’s Statoil since it launched operations at the start of 2015.

Gas demand in Lithuania has been dropping due to the sluggish economy, mild winters and growing use of biomass for heating. The falling demand for gas in the Baltic state is expected to trim use of the terminal's 4.5bn cm capacity to just 300mn cm in 2016.

Meanwhile, gas from dominant supplier Gazprom is assumed to be slightly cheaper, although it is not yet clear what price the Russian company will offer this year, as negotiations on a new contract have reportedly stalled. Russian state-owned newswire TASS reported in late December that Gazprom will carry out an auction of gas supplies to the Baltic states early in 2016.

Russia will be delighted with the troubles at the terminal. While Lithuania could in theory cover the bulk of demand across the three Baltic states, Lithuania has only managed to sell some small volumes to Estonia. Latvia, where the Russia-controlled utility Latvijas Gaze (LG) is the gas market monopolist and controls the only gas storage facility in the region, has proved a problem. Riga is being pushed by the EU to begin the process of LG’s unbundling, which would pave the way to opening the regional market to third party supplies by 2017.

However, that leaves the Lithuanian terminal struggling to cover its costs, as the CEO of operator Klaipeda nafta told bne IntelliNews last year. Looking to ensure the economic viability of the LNG project and quell anger amongst major consumers, Lithuanian lawmakers tweaked the way that maintenance costs will be covered this year.

Lawmakers also decided that the government would set a minimum threshold for the amount of gas it will be necessary to sell to ensure the terminal’s operations. Should demand fall – as it is now – the terminal will be required to sell the gas on international markets. 

Litgas, the LNG import arm of Lietuvos Energija, has been negotiating deliveries from Cheniere Energy. The US company had said it expected to send the first shipment this month. However, Lithuania's system was built to use Russian gas. US LNG is much more calorific the spokeswoman said.

"They are still testing their liquefaction equipment, and at the moment they cannot ensure the chemical composition of gas which is needed for Lithuania," Dapkiene said. "We believe that once the testing phase is over they will be able to meet our specifications."

The test phase could take four to six months before the first shipments under a long-term contract between Cheniere and LNG shipper BG Group begin, Reuters sources said last year. However, Lithuania will likely need longer than that to source the demand for additional LNG shipments.

Related Articles

Lithuania calls for further committments from Gazprom to end EU anti-trust case

Gazprom’s commitments to lessen the impact of its dominant position as a supplier of gas to Lithuania and other CEE countries are not sufficient and the European Commission should ensure they are ... more

Russia offers Latvian port a slice of the Nord Stream pie

The Latvian port of Ventspils has been asked to store and handle delivery of pipes for Nord Stream 2, the controversial Russian gas pipeline project, the chairman of the port said on April 20. The ... more

Latvia opens its gas market as it seizes control from Russia

The Latvian gas market opened up to liberalisation on April 3 following entry into force of a number of legal changes. Riga has fought hard to end control of the gas transmission and storage ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss