Project of LNG terminal

The period from closing of the Ignalina nuclear power plant until the start of the operation of the new nuclear power plant is most challenging in terms of energy security for the Republic of Lithuania. The level of dependence on imported gas has increased and power production capacities decreased, which, together with limited possibilities to import energy resources from European countries due to absence of the necessary physical links, are very large challenges calling for an urgent solution. It is estimated that in 2010 natural gas will account for 70 percent of the primary energy in Lithuania.

The situation where one type of energy resources becomes clearly prevailing in production of power is dangerous in terms of economic and energy security. The degree of such a risk is considerably increased by the problem of dependence of the gas sector: the supply of gas is undiversified, emergency gas supply is not covered, and Lithuania has no access to international gas spot markets.

The National Energy Independence Strategy, which was approved and presented by the Government of the Republic of Lithuania to the Seimas of the Republic of Lithuania by its Resolution No. 1426 “On presentation of the draft resolution of the Seimas of the Republic of Lithuania “On approval of the National Energy Independence Strategy” to the Seimas of the Republic of Lithuania”, dated 6 October 2010, provides several alternatives for ensuring a reliable gas supply, the most economically advantageous of which is construction of a liquefied natural gas terminal in Klaipėda.

On 21 July 2010 the Government of the Republic of Lithuania by its Resolution No. 1097 “On development of the natural gas terminal” approved that AB Klaipėdos Nafta should start preparing the project of a liquefied natural gas terminal.

On 23 July 2010 the board of directors of AB Klaipėdos Nafta decided that the Company should start preparing the project of a liquefied natural gas terminal given approval from the general meeting of shareholders of the Company.

On 26 August 2010 the general meeting of shareholders of AB Klaipėdos Nafta approved of the decision of the Board of the Company that the Company should start preparing the project of a liquefied natural gas terminal.

On 29 December 2010 AB Klaipėdos Nafta announced an international public tender for the lead advisor for the preparation and implementation of LNG terminal project in Lithuania. For tender documents please visit here.

In consideration of the report by the Institutional Working Group led by the Ministry of Energy of the Republic of Lithuania, dated 2 November 2010, the purposes of the LNG terminal and the essential conditions for its implementation are the following:

• to create an alternative source of supply of natural gas, eliminating the dependence of Lithuania on the sole external gas supplier;
• to create conditions enabling Lithuania to independently obtain natural gas to cover emergency gas demand;
• to create conditions for the formation of national and regional gas markets, with a possibility to supply natural gas to neighbouring countries in the future;
• to create a possibility for Lithuania to access gas spot markets;
• to start operation of the LNG terminal as soon as possible but no later than in 2014;
• to implement the project at the lowest possible costs and to use as little of the Company’s, its shareholders’ and borrowed funds as possible, taking into account quality, safety, professionalism in development and other requirements and standards appropriate to this project;
• if expedient, to create a possibility, without disproportionately big additional costs, to expand the capacity of the LNG terminal to the regional LNG terminal.

• the annual capacity of 2 – 3 billion cubic meters of natural gas with the capacity expansion possibility;
• FSRU (Floating Storage and Regasification Unit) or
• FSU (Floating Storage Unit) with onshore regasification unit near Pig Back Island or somewhere else in southern part of the Klaipėda seaport.

The above-noted preliminary solutions are only preliminary. AB Klaipėdos Nafta notices that technical solutions for offshore LNG terminal may vary, so it is necessary to perform a detailed feasibility study which would provide technical analysis about a specific offshore LNG terminal which would be the most suitable for Lithuania.