Lithuania: LNG Export Talks with Cheniere Not Over Yet, Price Must Be Right

Although several international sources hurried to announce this week that Lithuania will be the first European country to receive the tentative delivery of US liquefied natural gas, with the first arrival of the cargo ostensibly scheduled for February 2016, Lithuanian official sources knowledgeable of the situation told Natural Gas Europe this cannot be confirmed yet as the negotiations between Lietuvos Energija, Lithuanian state-controlled energy holding, and US-based Cheniere Energy are not over yet.

“That the United States will start delivering liquefied natural gas to Europe in the beginning of the new year is something all agree on, but to tell at this point that it will be directed to Lithuania as early as February next year is a little bit too premature (to say), as the negotiations are not over yet. Lithuania’s primary concern meanwhile is securing a competitive price of the US gas in the negotiations,” Mantas Dubauskas, advisor to Energy Minister Rokas Masiulis, told Natural Gas Europe.

Some Lithuanian sources who did not want to be identified speculated that Lithuanian MEP Antanas Guoga, who recently hosted an LNG export-focused event organised by Natural Gas Europe and Geopolitika at the European Parliament in Brussels, may have hastened to call the possibility of the US LNG exports as “a desired outcome” (of the negotiations).

Russian and Greek news outlets were among the first to have reported that a US vessel with LNG cargo will be mooring at Lithuania’s Klaipeda-based FSRU “Independence” in February.

A source at Lietuvos energija also suggested to “have some patience,” refusing to speculate on the start of US LNG export to the Baltics.

“Lithuania is on the list of the potential US LNG receivers, especially that in the Klaipeda facility we have the required technical capacities to accommodate such kind of cargo. But as I said, our primary concern now is securing a competitive gas for the US gas,” the advisor reiterated.

Lithuania is now bound by a five-year LNG supply contract with Norway’s Statoil, but as the Baltic country struggles to find buyers for the expensive Norwegian gas and deals with severe surplus gas, the Baltic country’s government does whatever it can to turn things around.

This week, a group of Lithuanian legislators asked government to renegotiate LNG gas supply terms with Statoil and extend time period for commissioned gas from it.

Lithuania’s Litgas, a state-owned gas company, signed a 5-year contract with Statoil in 2014 to buy 540 mcm/year of gas at price pegged to the UK LNG exchange, National Balancing Point.

Lithuanian authorities had tried to approach Norway’s Höegh LNG from which Lithuania leases for 10 years the Klaipeda-based FSRU Independence with the request to allow buy out the vessel ahead of the scheduled time, but the lease-holder has refused to negotiate it.

Reportedly, Lithuania uses only third of the Klaipeda LNG terminal capacity, at 3 billion cubic meters of gas now. With the gas consumption sharply decreasing in the Baltic country, the burden of the LNG infrastructure support is a major headache for the Lithuanian government.

Lithuania pays Höegh LNG approximately 60 million euros yearly for the jetty lease.

Aiming to cut LNG terminal operational costs, Lithuanian Parliament has amended this week LNG Terminal legislation which from now on requires all gas consumers to help support LNG infrastructure in the country.

The amendments will allow Lithuania to re-sell liquefied natural gas both on the local gas exchange GET Baltic and international spot markets.

The legislative changes were also necessary for Lithuania to push forward long-sought Lithuanian gas export to neighboring Latvia, but a Latvian court’s ruling this week to satisfy Latvijas Gaze’s request to temporarily halt Lithuanian gas deliveries to Latvia is a setback to the plans.

Lithuania’s Litgas signed a master trade agreement with Cheniere Energy last February. Litgas also signed a memorandum of understanding with Delfin LNG, the first offshore floating natural gas liquefaction project in the United States.

It is estimated that LNG projects being developed in the US may increase the output of liquefied natural gas by 30 billion cubic meters annually by 2018, which accounts for around 10 percent of the current global LNG market. By comparison, three Baltic countries of Estonia, Latvia and Lithuania consumer roughly 4 billion cubic meters of natural gas yearly.