Heightened activity on Lithuania’s LNG sector

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Lithuania's state-owned gas trader Lietuvos Duju Tiekimas (LDT) has signed a liquefied natural gas (LNG) supply deal for 2017 with Koch Supply & Trading, a trading arm for Koch Industries.

The deal – which foresees deliveries of 2 million megawatt hours of LNG at an undisclosed price – will cover a third of next year’s needs of the Lithuanian company. Norway’s Statoil and Gazprom have so far been the only two gas suppliers to Lithuania in 2016.

A subsidiary of state-owned energy group Lietuvos Energija, LDT imports and supplies gas to around 650,000 customers in Lithuania. “The arrival of a new supplier to the Lithuanian market indicates growing competition among liquefied natural gas (LNG) suppliers, and this benefits us,” Lietuvos Energija CEO Dalius Misiunas said in a press release.

“The gas can be delivered from various places, including from the United States,” LDT CEO Mantas Mikalajunas said. The gas will arrive to Lithuania’s LNG terminal in Klaipeda, launched at the start of 2015 and the only alternative supplier to Russia in the Baltic states.

A Norway deal

Lithuania also has a supply contract with Norway’s Statoil in place and preliminary agreements with other US suppliers. Statoil will supply Lithuania with around 3.2 million MWh of gas this year. Vilnius will also purchase pipeline gas from Gazprom, mostly residual gas from the long-term contract it held with the Russian supplier until the end of 2015.

Gazprom’s former monopoly in the Baltic States now exists only in Latvia.

Lithuania – the largest of the three Baltic nations – started importing the chilled fuel via Höegh LNG’s FSRU independence in December 2014 in order to reduce its dependence on Russian pipeline gas supplies. The LNG is being imported under a new deal Litgas has with Statoil.

“We are very glad that we have strengthened our strategic partnership with Statoil. It is a major step for Lietuvos Energija, Klaipėda’s LNG terminal and for our country. We are entering into the emerging Baltic small scale LNG market and the cooperation agreement not only allows us to develop a successful business, but creates a potential for Klaipėda’s LNG terminal to become a regional small scale LNG supply center as well,” said Dalius Misiūnas, chairman and CEO of Lietuvos Energija.

“Important to note that this new activity would increase the usage of the terminal which, in turn, allows to lower its operational costs,” he added.

According to the statement, the three companies believe that this segment will continue to grow in the coming years as LNG represents the best technology for marine users to comply with Sulphur Emission Control Area (SECA) requirements and competitive supply solutions are becoming more and more available.

“Based on the latest trends in the Baltic Sea small-scale LNG market, there is a need for a wholesale supply point of LNG for the small scale LNG market to develop here. Klaipėda’s LNG terminal is conveniently located for LNG bunkering: it is based in the center of the Baltic Sea and can be reached in a day from the central part of sea and within three days from its farthest points,” the statement said.

US plans on hold

In January Lithuania put plans to buy liquefied natural gas from the US on hold because the LNG is not yet suitable for the Baltic state’s gas system, its state energy company said. Lithuania’s system was built to use Russian gas and state energy group Lietuvos Energija said US LNG was much more calorific than Russian gas.

The country opened an LNG import terminal in the Baltic Sea at the end of 2014, which allowed it to start importing from Norway and end its total dependence on gas imports from Russia. “We are not buying gas from the U.S. at the moment, because the gas they are offering at the moment does not meet specifications needed for our gas distribution system,” Ernesta Dapkiene, a spokeswoman for Lietuvos Energija, told Reuters.

Litgas, the LNG import arm of Lietuvos Energija, has been negotiating LNG deliveries from Cheniere Energy’s landmark Sabine Pass export plant in Louisiana.

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