Lithuania breaks Gazprom’s monopoly by signing first LNG deal

  

Lithuania, dependent for 100% for its gas imports from Russian monopoly Gazprom, has signed its first contract with Norway’s Statoil for the supply of liquefied natural gas (LNG), the website Delfi announced today (21 August).

Litgas, the gas trading arm of the Lithuanian energy holding company Lietuvos Energija (Lithuanian Energy), and Statoil signed a five-year LNG supply deal preliminary valued at 2.5 billion to 3 billion litas (€725-870 million).

Prime Minister Algirdas Butkevičius said after the signing ceremony today that Lithuania had negotiated a competitive LNG price.

Litgas CEO Dominykas Tuckus said that the price would be linked to the UK NBP index and currently stands at LTL 900-1,000 per thousand cubic meters (€260-290 per tcm). That puts the total preliminary value of the five-year agreement at 2.5 billion-3 billion litas.

Statoil is to deliver 540 million cubic meters of gas to Klaipėda LNG terminal annually. This is an estimated minimum capacity at which the facility needs to operate to pay for itself.

The LNG facility, which Klaipėdos Nafta (Klaipėda Oil) is building in Klaipėda, is to be launched in early December. Lithuania is planning on importing an estimated 1 billion cubic meters of gas via the terminal in the first year of operation, with the annual capacity to be increased to 4 billion cubic meters in the future.

Speaking to EurActiv, former Lithuanian energy minister Jaroslaw Neverovič said last year that 20 to 25% of his country’s gas needs will come from the national LNG terminal. Another larger LNG terminal is to be built for the needs of Lithuania and its Baltic neighbours, Latvia and Estonia.

But Neverovič said that since the trilateral decision making was slow, and the time horizon for the completion of the regional LNG project was “2020 at best”, his country had decided to proceed with a national option.

>> Read: Baltic countries ask EU to solve LNG terminal row

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Comments

Fos_Tonkin's picture

I am curious to see whether Statoil's contract is entirely hub-based or it still contains some oil-indexation elements. The latter seems to be one of the reasons why Gazprom's gas is somehow more expensive. On the other hand spot indexation does not guarantee cheap gas in itself as shown by 2011/2012 winter spot prices. But in all cases, the problem with Gazprom seems to be that its decision-making center is in Kremlin rather than in its own headquarter, as it is normally the case with normal companies. As to Lithuania, was it them who voluntarily shut down their only nuclear power plant? The latter move is neither very intelligent you know, especially when you strive for energy independence.

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