[Premium] Lithuania Eyes more US LNG
Lithuania's state-controlled energy company Lietuvos Energija will soon start negotiations with two US LNG producers on a possible agreement to supply Lithuania and Latvia and Estonia with natural gas.
Lithuanian president Dalia Grybauskaite was on a visit to the US early April and was speaking at the White House where she and the Latvian and Estonian presidents met US president Donald Trump. "American LNG will come to us on time and make us more independent in our decision-making and in diversifing our gas supply," she said.
Trump praised the agreement as an indication of strong relations between the US and the Baltic states. "We're all collaborating to diversify energy sources, supplies and routes throughout the Baltic region, including expanding exports of US LNG, of which you've become a bigger and bigger user," Trump was quoted as saying.
The LNG deals were signed in Washington DC by Klaipedos Nafta (Klaipeda Oil), the operator of the Lithuanian LNG terminal, and Lietuvos Duju Tiekimas (Lithuanian Gas Supply, LDT), which is owned by Lietuvos Energija.
LDT CEO Mantas Mikalajunas said the deal widened the circle of potential gas suppliers. "The growing number of LNG exporters in the US does not only contribute to diversified supplies but also helps ensure favourable prices for consumers," Mikalajunas said in a press release.
One of the two US companies is Texas-based Freeport LNG, which is working on the completion of three liquefaction trains at a site near Houston by 2019; the other has not been identified.
As part of the agreement, Freeport will sign a memorandum of understanding, committing to start negotiations on the "commercial possibilities" of providing LNG to Lithuania and other Baltic states. It will also discuss developing floating storage and regasification import infrastructure globally. The company is said to be seeking regulatory approval from the US for a fourth train that is scheduled to begin operations in 2023-24.
Last year, Lietuvos Duju Tiekimas imported two US cargos, putting it in third place in Europe after after Spain and Portugal, for whom pipeline gas suppliers are limited.
The first of the LNG shipments from the US reached the coasts of the Baltic Sea last August after Lithuania purchased it from Cheniere, the operator of the Sabine Pass terminal. Freeport LNG intends to open the first LNG train at the end of this year, with another two trains expected in 2019.
"The LNG exports terminals under development in the US are very important for the European market. The new trains are built on the US east coast, therefore, the growing LNG supply in the Atlantic Ocean will boost competition. This will help us ensure diversified and flexible gas supplies at competitive prices," said Mikalajunas.
According to forecasts, the US' annual nominal capacities of LNG production will grow to 70mn mt (95.5bn m³)/yr in 2020-2021, making the US the largest LNG exporter after Australia and Qatar.
Gas supply and trading companies Lietuvos Duju Tiekimas and Litgas, which are part of Lietuvos Energija group, have signed around 15 non-binding general trade contracts with global LNG suppliers that supply around half of the world's liquefied natural gas.
The US over the past two years has exported two cargoes of LNG to Lithuania containing a total of 6.8bn ft³ of natural gas, according to government data. Those exports are equivalent to 0.7% of US LNG exports over the same time period.
Cheniere in 2016 offered to supply LNG to Lithunia and was said to be considering taking a 20% stake in the country's 2.9mn t/yr Klaipeda import terminal, but no deal materialised. However, when it comes to pipeline gas exports in Lithuania, it was Gazprom that supplied the bulk, or 60% of Lithuania‘s gas demand last year.
The co-operation contracts that the Lithuanian energy companies have signed with US suppliers bring major political and economic benefit for Lithuania, says the country's energy expert Romas Svedas. They also send a loud signal to Russia, which has dominatedg the Lithuanian gas market for years.
"The Kremlin used natural gas as an instrument or even a weapon for its goals in foreign policy and geopolitics, while Gazprom was the soldier that executed the policies. Signing the agreement in America during the US-Baltic summit shows that Lithuania and other Baltic states are no longer dependent on energy supplies from Russia and can choose a reliable supply partner that is also a Nato partner," Svedas, Lithuania's former energy vice-minister, said. "The liquefied natural gas market in Lithuania is finally operational, there is competition and different gas suppliers who are starting to compete. The competition benefits the people of Lithuania and the economy," he added.
The US is becoming a major player in European gas supplies, he said, bringing it into commercial as well as political conflict in Europe. But while Gazprom is state controlled, Cheniere sells its cargoes free on board at the US coast, except for a small annual quantity it has reserved for its own trading purposes.