Lithuania looks for alternatives to counter Russia’s high gas price

Jaroslav Neverovi?, photo Georgi Gotev

Jaroslav Neverovi? [Georgi Gotev]

Lithuanian Energy Minister Jaroslaw Neverovi? has warned his Russian counterparts that selling gas to the Baltic country at an excessive price is not sustainable, the minister told EURACTIV.

Neverovi?, a diplomat and banker before taking his ministerial post, said the country paid $500 per thousand cubic metres (tcm) of Russian gas, while Germany paid only $400.

The price Lithuania pays to Gazprom was “one of the highest, if not the highest in the EU,” he said.

Liquefied natural gas is available at lower prices and the planned Lithuanian LNG terminal, to be up and running by the end of 2014, was a “game changer” for the country’s relations with Russian gas exporter Gazprom, Neverovi? said.

Shale gas has allowed the United States to stop importing gas and is converting some of its LNG terminals from import to export use, undermining Gazprom's position on the European market.

Shale gas is sold at spot prices, while Gazprom’s prices remain tied to the cost of oil and are negotiated in long-term contracts. In contrast, Norway, the other major European gas exporter, left this system of indexation and sells its gas at spot prices. As a consequence, in 2012 Norway for the first time outpaced Russia the EU’s main gas supplier.

>> Read: Norway overtakes Russia as EU’s biggest gas supplier

"I tell Russians the high gas price is not good for them," Neverovi? said, saying the policy motivates foreign customers to look for alternatives to Gazprom.

At present, Lithuania is nearly totally dependent on Russian gas. Neverovi? said 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 Neverovi? said the trilateral decision-making was slow and the time horizon for the completion of the regional LNG project was “2020 at best”, his country decided to proceed with a national option.

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

The Lithuanian minister also mentioned other projects, such a gas interconnector with Poland, improving links between the Baltic states, strengthening the gas storage capacity in Latvia and building a gas interconnector between Estonia and Finland.

The minister – whose country holds the EU’s rotating presidency through the end of 2013 – also said that Lithuania was working on unbundling its gas system under the EU’s Third Energy Package.

Unbundling would be completed by the end of next year, he said, when Lithuania would have an independent transmission system operator in gas, the same as it is already the case in the electricity sector.

On shale gas, the minister said that Lithuania was of the view that EU member countries were free to develop this resource if they wish so, in conformity with environment legislation. The government had no direct plans to do so but it was useful to know the country’s shale gas potential, he said.

'Energy island'

In the electricity sector, Neverovi? mentioned ongoing projects to connect the electricity systems of Lithuania and Sweden, the Nordbalt project, a planned submarine power cable between Klaip?da in Lithuania and Nybro in Sweden, as well as a 160-km 400 kV alternating current with Poland.

Lithuania’s electricity grid is still interconnected with the old Soviet system and is referred to as an "energy island' inside the EU. The country plans to synchronise the transmission network with that of the Union’s ENTSO-E system by 2016.

Neverovi? said his country was 60% dependent on electricity imports from other countries, the biggest part coming from the Russian enclave of Kaliningrad, and from Belarus.

The nuclear project, he said, was in a “state of reflection”. A majority of participants in a non-binding referendum held in October 2012 rejected the construction of a new nuclear power plant.

>> Read: Lithuania swings left, abandons nuclear plant project

The minister said, however, that the government saw “room for nuclear” in the country’s energy mix.

Asked if the new government, in which a pro-Russian party is represented, has made any changes in its energy policy with respect to the former centre-right cabinet, known for its staunch anti-Russian positions, he said:

“I wouldn’t say that our coalition government or one of the parties is more, or less, pro-Russian. [But] we can see a more constructive approach from our partners’ side, and I think that’s what we need.”

Lithuania has relied on Russia for 80% of its energy since the closure of the Ignalina nuclear power plant in 2009. The former Soviet republic sees itself as vulnerable because of its dependence on Russia.

In 1992, at a G7 summit, it was decided that Ignalina in Lithuania, four units of the Kozloduy nuclear power plant in Bulgaria, and Bohunice in Slovakia had to be closed as they presented a high level of risk. All these nuclear units are now closed, the last to be shut down in December 2009 being the second unit of Ignalina.

The closing of the nuclear power stations was negotiated as part of the countries' EU accession treaties. As this early closure is a heavy financial burden for these countries, the European Union provides financial support.

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