Lithuania receives its first shipment of US LNG

Lithuania receives its first shipment of US LNG
Lithuania's floating LNG terminal "Independence", operated by Klaipedos Nafta.
By bne IntelliNews August 22, 2017

Lithuania has received its first shipment of US liquefied natural gas (LNG) as Russia’s western neighbours seek to diversify their energy imports and reduce their dependence on Moscow.

Lithuanian state-owned gas trader Lietuvos Duju Tiekimas (LDT) signed a LNG supply contract with US company Cheniere Energy back in June. On August 21 Lithuania received the gas at its LNG terminal in Klaipeda, whose launch in 2014 ended the Russian state-owned supplier Gazprom’s monopoly on supplies to the region.

Klapeida has previously received gas shipments from Norway. Lithuania estimates it will import half of its gas consumption in 2017 as LNG, mostly from Norway’s Statoil, the rest being supplied by Gazprom via pipeline.

The deal with Cheniere is the second such deal in CEE, following a contract signed by Poland – which also vows to end its dependence on Russian imports – with the same company in late April. Polish state-controlled oil and gas company PGNiG is in talks with the US on more LNG shipments to follow the first supply from Cheniere that arrived in Poland in early June to its LNG terminal at Swinoujscie.

Lithuania is looking to diversify the sources of gas supply in a bid to reduce its dependence on gas imports from Russia. It also wants to tighten relations with Washington, the main guarantor of the country’s defence against its former Soviet-era overlord.

“This is crucially important for the whole region,” Lithuanian Foreign Affairs Minister Linas Linkevicius told Reuters. “We want to cement our relationship with the United States in many aspects in addition to defence and security – energy trade is one of the strategic areas for cooperation.”

Lithuania now plans to make the terminal a hub to take in and forward LNG to the other Baltic states. That is now possible after Latvia pushed Gazprom out of ownership of its gas grid and storage infrastructure, the last of the Baltic states to do so.

The shipment also represents an offensive by US shale gas producers into a continent long dominated by Russian gas supplies. The US only approved gas exports recently, as the shale revolution has boosted production to the point where the country is now a net exporter. US President Donald Trump said in a speech in Poland in July that US gas exports to the continent would increase.

The US provoked fury from Germany and Austria in June when the Senate approved new sanctions that will stipulate restrictions against EU companies involved in energy projects with Russia, should they become law. Gazprom joined Berlin and Vienna in claiming that Washington’s real goal is to boost its LNG exports to Europe.

Zygimantas Vaiciunas, Lithuania’s energy minister, said that Cheniere Energy’s shipment from the US Gulf Coast was done at a price that was competitive with gas delivered through Russian pipelines. “We are happy to reach a point where importing gas from the US is not only politically desirable but also commercially viable,” Vaiciunas said.

According to the Financial Times, Cheniere is the first US company to export LNG from the US mainland, and has sent out more than 160 cargoes since operations started in February last year. The majority of these are on long-term contracts, though it has a number of cargoes available for sale in the spot market through its London-based trading arm, such as the Lithuania shipment.