Lithuanian Parliament approves of the acquisition of the LNG-FSRU vessel

Date

2018 12 18

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On the 18th of December, Lithuanian Parliament has approved the amendments of laws initiated by the Ministry of Energy, which will allow to reduce the annual costs of the liquefied natural gas (LNG) terminal as soon as next year.

Today the Seimas approved the proposal regarding long-term LNG import by acquiring the LNG-FSRU vessel after 2024. This decision to secure continuous supply of LNG enables optimisation and reduction of the annual operating costs of the LNG terminal in the short term – by EUR 23-25 million each year. This reduction could begin as of mid-2019.

“It is a very good and long-awaited news for natural gas consumers. Both business and residents will feel the economic benefits of this decision, because they will pay less. It is also a strategically important decision for the state that will retain an instrument after 2024, strengthening our energy security and ensuring price pressure on Russian gas,” says Minister of Energy Žygimantas Vaičiūnas.

According to the law, Klaipėdos Nafta, the operator of the LNG terminal, will acquire the ownership of the LNG-FSRU vessel by the 31st of December 2024 by selecting the most economically beneficial proposal using international tender. Thus the operating costs of Klaipėda LNG terminal will be distributed not during a ten-year LNG-FSRU lease period, like it is now, but during the entire planned period of operation of the LNG terminal. It is a well-balanced and right decision in terms of both current and future natural gas consumers.

Consistent preparation for this strategically important decision has been going on since the autumn of 2017: a detailed and independent technical and economic analysis has been conducted, potential scenarios have been discussed with experts, and the selected decision has been coordinated with a wide group of the parties concerned.

The analysis, as well as detailed technical and economic assessments carried out by independent international consultants, showed, that by acquiring the LNG-FSRU vessel, Lithuania receives the greatest strategic and economic benefits – guaranteed energy independence by retaining the access to the international rapidly growing LNG market and ensured competitive gas price without a likelihood to overpay. Economic benefits for Lithuania will reach from EUR 60 million to EUR 160 million per year, depending on the situation in the regional or national gas market.

The decision regarding the change of the model of realisation of the LNG terminal’s minimum volume of sales, adopted by the Seimas today, will also contribute to the reduction of the costs of the LNG security component. According to preliminary estimates, the improved procedure will lead to a reduction of these costs by about EUR 6 million, compared to the current situation.

In order to increase competition in the natural gas market and emergence of new suppliers, it has been established that state-regulated energy producers will have to acquire at least 50 per cent of gas in the natural gas exchange GET Baltic. So far, regulated energy producers had to buy gas supplied through Klaipėda LNG terminal from the designated supplier Litgas.

Preconditions for future gas acquisition at a more competitive price will also be created by the principles of completion and operation of the regional gas market, adopted by the Seimas today. It lays a legal foundation for the integration of national gas markets of the Baltic countries. The new regional gas market will allow a more efficient use of the natural gas infrastructure and reduction in gas transportation costs, thus enabling consumers to acquire gas at a better price.

The package of legal acts adopted at the Seimas today covers the amendments to the Law on Natural Gas, the Law on Liquefied Natural Gas Terminal, the Law on the Energy Resources Market, the Law on Heat Sector, and the Law on State Debt.