Skip to main content

Baltic gas diversification

Hydrocarbon Engineering,


According to Business Monitor International (BMI), in a development that could act as a blueprint to other areas of the European Union (EU), the new LNG import terminal and improved pipeline links to Latvia and Estonia has provided the Baltic States with greater flexibility in natural gas supply.

The EU has been promoting the installation of gas grid interconnectors and bi-directional pipelines to improve competition, enable greater flexibility of gas supply and reduce Russian energy hegemony. LNG developments are also being supports to improve supply diversity. Given the Baltic States are among the most dependent on Russian gas in Europe, the will to diversify away from Russian supply has been among the strongest in Europe.

The floating storage and regasification unit (FRSU) installed at Klaipeda, Lithuania in October 2014, received its first 84 million m3 cargo of gas (in LNG form) in early December. While the majority of the shipment was delivered to Lithuanian customers, approximately 100 000 m3 of gas was sent via Latvia to Estonia. This highlights the success of efforts to improve international gas pipeline network connections, and the impact of the Lithuanian LNG import terminal on the region, not just Lithuania. The purchaser of the gas, Estonia’s Baltic Energy Partners, announced it is looking to buy more gas from the Klaipeda LNG terminal in the future.

In 2013, Lithuania, Latvia and Estonia consumed a combined 4.8 billion m3. The gas storage facilities at Incukalns in Latvia have a 2.3 billion m3 capacity, meeting approximately half this demanded if needed. This will enable greater flexibility for the Baltic region to import gas when prices are low, according to BMI. Latvijas Gaze is also planning on increasing the capacity to 2.8 billion m3 by 2025. Lietuvos Energija is also looking to complete a gas storage facility at Syderiai, with project commissioning planned for 2021.

A small but significant step

While the 100 000 m3 of gas sent to Estonia is negligible in volume terms – Estonia consumed 700 million m3 in 2013 – it strengthens the country’s position when negotiating gas prices with Gazprom, Estonia’s gas supply contract is due for renegotiation in 2015 and will be the first time in history the country has had some leverage in the talks.

The Baltic States have been paying among the highest prices for natural gas in Europe. Lithuania’s LNG import terminal has enabled the country to reduce the price paid to Gazprom from US$465/1000 m3 to US$359/1000 m3, after negotiations in May 2014. Statoil sells LNG to Litgas for approximately US$346 – 384/1000 m3. That said, Litgas is expecting gas prices for customers to increase in 2015 due to a ‘security’ surcharge on imported LNG. While it is unlikely Estonia will receive the same concessions, it has longer term plans that will give it a further advantage.

Estonia is planning an LNG import terminal of its own at Paldiski to the west of Tallinn, as well as an EU supported gas interconnector across the Baltic Sea to Finland. The Baltic connector would enable access to a propsed LNG terminal to be built in Finland, while also enabling Finland to access gas from the Baltic’s Along with the Baltic states, Finland remains almost completely dependent on Russian gas. The LNG terminals and interconnector are targeting first operations by 2019.

The achievement of the Baltic states in developing new gas supply options highlights the success that could be realised in other regions of Europe. In particularly, the Balkan states are contemplating a similar option, which has now become more pertinenet following the cancellation of the South Stream project. There are a number of interconnector projects planned to improve connectivity in the Balkan region, while progress on an LNG terminal in Croatia continues to gather momentum. The EU’s strategy to diversify away from Russian gas is slowly but steadily taking shape.


Adapted from a report by Emma McAleavey.

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/19012015/baltic-gas-diversification-087/


 

Embed article link: (copy the HTML code below):