The European Commission has consented to reduction of the safety component of the LNG terminal

Date

2019 09 19

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Klaipeda LNG terminal.jpg

On 19th of September, the European Commission has consented to the measures proposed by Lithuania to reduce annual operating costs of the LNG terminal. It will provide ground for making necessary further decisions regarding reduction of payments for the LNG terminal by EUR 23-25 million every year, starting from 2020.

The state aid was coordinated with the EC during implementation of the decision adopted by the Seimas on long-term LNG import assurance and optimisation of LDN terminal operating costs.

In December 2018, the Seimas adopted the decision by which from 2024 Lithuania will secure long-term LNG supply by acquiring a LNG storage vessel. It will enable spreading the operating costs of Klaipėda LNG terminal evenly over the planned period of the LNG terminal operation, instead of over the LNG storage vessel lease period of 10 years, as it is now.

'This decision of the European Commission supports our selected long-term LNG strategy, in which the LNG terminal plays an important role as an alternative source of natural gas in respect of both energy security and assurance of competitive gas price at present and after 2024', said Minister of Energy Žygimantas Vaičiūnas.

To reduce LNG terminal operating costs from the 1st of January 2020 until then JSC Klaipėdos nafta (KN) must adopt corporative decisions, the National Energy Regulatory Council must adopt decisions on fixing tariffs for national gas, and the Seimas must pass decisions on state guarantee.

The decision adopted by the EC today also serves as a basis for future decisions on LNG storage vessel acquisition after 2024, as the reduction of the security component is linked with the LNG terminal acquisition. Since final decisions on LNG storage vessel acquisition will be made when the LNG terminal lease term will be expiring, the measures of the state aid for LNG terminal redemption will be coordinated with the EC during the second stage.

Analysis by independent international consultants (the study is available here) and comprehensive technical and economic assessments showed that acquisition of the LNG storage vessel will bring the biggest strategic and economic benefits for Lithuania. It guarantees energy independence for the country, ensures effective competition among natural gas suppliers and sufficient competitive pressure on dominating supplier's gas prices.

The General Court of the European Union rejected the appeal of Achema company against the EC last week. Achema appealed against the decision of the EC of 2013 regarding state aid to the LNG terminal.

The purpose of the Energy Union of the EU is to ensure that every state has three alternative sources of natural gas supply needed for energy security and competition. Lithuania will have three sources once the GIPL gas pipeline will be launched between Lithuania and Poland.

For more information, click Website of the EC state aid register.