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    Kaliningrad enters the LNG era [NGW Magazine]


The Russian enclave has gained energy independence – at least, freedom from transit risk – with gas-fired power plants and a new import facillity. [NGW Magazine Volume 4, Issue 2]

by: Linas Jegelevicius

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Top Stories, Europe, Premium, NGW Magazine Articles, Volume 4, Issue 2, Liquefied Natural Gas (LNG)

Kaliningrad enters the LNG era [NGW Magazine]

Signifying the importance of the event, it was Russia’s president Vladimir Putin who inaugurated the liquefied natural gas (LNG) import terminal in Kaliningrad January 8. He visited the Russian enclave sandwiched on the coast of the Baltic Sea between Lithuania and Poland to see the tanker and the storage facility.

According to Russian news agency Tass, he said that it was more efficient to deliver gas such a short distance by pipeline; but the back-up in the form of LNG would cut out all transit risk. He also said the government would ensure that the population did not pay more for LNG than they paid for pipeline deliveries.

The LNG was sourced by Kaliningrad’s pipeline gas supplier Gazprom from Singapore, although another Russian company’s LNG terminal is in full swing in northern Russia and transporting LNG westwards at this time of year.

Gazprom is also planning to build an LNG terminal on the Baltic coast for liquefying gas that may then be used for marine fuel or for sold for use in onshore gas grids.

Lithuania and Poland both have LNG import facilities of their own, somewhat under-used, on average. Their argument was that Gazprom was able to charge higher prices for gas as it was the monopoly, although many Lithuanian enterprises have complained about the cost of the terminal at Klaipeda which all have to pay for. And Gazprom has on occasion cut deliveries to Poland altogether.

For its part, Russia has long wanted a supply of gas independent of the 2.4 bn m³/yr Minsk-Vilnius Kaunas-Kaliningrad pipeline. Although it seems to have worked, a partner in independent consultancy RusEnergy, Mikhail Krutikhin, told NGW: “The Kaliningrad project is local and does not intend to rival in any way the other LNG terminals in proximity. In terms of economy, Gazprom would have done much better long-term if it had built a subsea gas pipeline.”

The FSRU Marshal Vasilevskiy is so far the only facility of this kind in Russia. The vessel’s capacity is 174,000 m³ – the new industry standard and the same size as those used by the Novatek-led Yamal LNG. LNG delivered to the vessel will be vaporised and fed into the gas transmission system through a newly-built 13-km connecting gas pipeline.

After that it can be consumed; or injected into an 800 m³ salt cavern storage facility in Kaliningrad if there is not the demand for gas immediately. This also is an option in Latvia, where Conexus operates the Incukalns storage facility some 375 km away and can receive gas from Klaipeda in Lithuania.

A key component of the Kaliningrad LNG terminal is a fixed marine berth with a breakwater. The berth is a 125.5-metre monolithic slab of high-strength concrete placed on 177 piles. It is 5 km offshore in about 19 metres of water.

With the terminal and FSRU operational, up to 3.7bn m³/yr of gas can be delivered by sea. If necessary, the new facilities will meet the current and future needs of the Kaliningrad region, says Gazprom. Gas demand within the Kaliningrad oblast is barely above 2.1bn m³/yr.

Moreover, with the LNG infrastructure in place, Kaliningrad has secured full energy independence from Poland and Lithuania, experts agree. It is not only the gas pipeline that runs across the European Union, but as part of the Russian-Belarussian electricity transmission ring (Brell), Lithuania was able, at least theoretically, to cut the enclave off from the electricity supply.

Poland and Lithuania have long complained about Gazprom’s monopoly. Although Russian gas imports to Lithuania decreased in the first half of 2018, but it imported 764mn m³, a drop of 4% year-on-year. In 2017, Russian gas accounted for just over half of Lithuania's total natural gas consumption.

Vidmantas Jankauskas, an independent energy expert and former chief of Lithuania’s energy pricing commission, told NGW: “Objectively, with the jetty and the floating storage and regasification unit, Kaliningrad has become fully independent, energy-wise. This is what Russia has striven for. Furthermore, now, with the LNG infrastructure and the power plants in operation, it is Lithuania and the Baltics that fear being disconnected from the same grid ring until they are linked with the electricity transmission system of continental Europe.”

Kaliningrad's gas demand has increased after four new combined-cycle gas turbines with a combined capacity of 454 MW were commissioned in Kaliningrad last year.

“Otherwise, the Kaliningrad LNG terminal and the regasification vessel play a little role in the regional LNG market. The new infrastructure is of local importance and does not aim to throw down the gauntlet against the LNG terminals in Lithuania or Poland,” he added.

The Kaliningrad LNG terminal and FSRU are already frightening neighbouring Lithuania, however.

By launching an LNG terminal in Kaliningrad, Russia is sending a message to Lithuania and Belarus that it might cut or stop gas transit through these countries altogether, says Ramunas Vilpisauskas, director of the Institute of International Relations and Political Science at Vilnius University.

“Russian officials have many times expressed their concern that Lithuania might use its transit position to restrict natural gas and electricity transit to Kaliningrad as a geopolitical tool,” Vilpisauskas told Lithuanian media. “We can only guess how much of it is genuine concern and how much of it is part of tactical negotiation argument amid the ongoing energy policy discussion.

“It might be so that the Russian leadership wants to send a signal to Belarus and the Baltic states about its readiness to reduce its dependency on transit…The interesting thing is that this move recognises the potential of LNG use after previously Russian representatives claimed that gas transported via pipes is undoubtedly more competitive than LNG,” the scholar said.

Lithuania has a contract with Russian gas giant Gazptom on gas transit to Kaliningrad until 2025 and it has not been breached, admitted Lithuania’s energy minister Zygimantas Vaiciunas following the Kaliningrad LNGT and FSRU launch. He added that statements on the alleged halt of transit had been  sparked by a temporary drop in the volume of transported gas as Kaliningrad tested the terminal.

“Kaliningrad is taking the same path Lithuania took four years ago, and is testing a similar LNG terminal to the one in Klaipeda. In fact, just the same way as Lithuania tested its own LNG terminal, natural gas imports from Russia were restricted,” the minister told a local newswire service. 

Poland cuts Russian imports

William Powell

Poland's dominant gas supplier PGNiG cut its share of Russian gas imports to about two thirds of its total imports in 2018, the state-run company said, the same day as the inauguration ceremony.

LNG imports accounted for over a fifth of total gas imports, it said, without saying what proportion of the total gas imports bill this fifth accounted for. In 2018, PGNiG imported about 9.04bn m³ from Russia, which was 6.4% less than in the previous year.  

LNG imports from Qatar, Norway and the US rose by nearly 1bn m³ (+58.2%) compared with 2017 and reached over 2.71bn m³ after regasification. It was not clear whether this includes the three spot cargoes that PGNiG said it bought last year,  including one from UK utility Centrica.

In 2018, PGNiG signed three long-term LNG supply contracts with US-based companies Venture Global and Cheniere, according to which they are to deliver a total volume of just under 70mn mt. Deliveries from Cheniere are due to start this year, while LNG from Venture Global will be available from 2022 and 2023, once the company’s two liquefaction terminals in the Gulf of Mexico come on-stream.

Throughout 2018, PGNiG imported about 13.53bn m³ while domestic forecast production was 3.8bn m³.