Nationalism may delay LNG project

  • 2010-09-22
  • Staff and wire reports

VILNIUS - Lithuania says it may share its planned liquefied natural gas terminal with neighboring Latvia and Estonia, in a move designed to reduce the Baltic region’s dependence on energy imports from Russia, reports Bloomberg. Lithuania plans to build the LNG terminal on its own, without the help from its partners in Latvia and Estonia, in order to “speed up the project,” Energy Minister Arvydas Sekmokas said on Sept. 15 at a press conference in Vilnius.
Latvia and Estonia will be expected to share the construction costs relative to their gas demand when the terminal is online, he added.

The Baltic nation is planning to build an LNG terminal in Klaipeda, a Baltic Sea port, adjacent to Klaipedos Nafta, as it seeks to wean itself off dependence on energy imports from Russia. The terminal will have a capacity of up to 3 billion cubic meters a year. That is 500 million cubic meters more than the country’s demand last year, according to BP Plc.
In July, Lithuania’s government approved plans to build an LNG terminal off the Baltic port of Klaipeda by 2012. It tasked state-owned company Klaipedos Nafta with drawing up details of the project.

Sekmokas said the European Commission has backed the idea of a single LNG terminal for all three Baltic States. But he cautioned that financial support from the EU would only be possible after the group’s post-2014 budget is in place. He also said it was premature to discuss the cost of the project.

The three Baltic States have been seeking to reduce Russia’s role in their energy markets, a legacy of their five decades as Soviet republics before the communist bloc collapsed in 1991. Russian giant Gazprom is Lithuania’s only gas supplier, via a pipeline across Belarus, and the country has been affected by feuds between Moscow and Minsk.
In June, its supplies were cut by more than 40 percent amid a row between Belarus and Russia over gas payments and transit fees.

Lithuania is also eyeing a separate LNG terminal project with Belarus.
Latvia, throwing a wrench into the discussion, insists that it has strategic advantages over its Baltic neighbors for the construction of a liquefied gas terminal, Economy Ministry State Secretary Juris Puce said in an interview, reports Such a project has been submitted to the ministry by businessman Juris Savickis, and the project is still being evaluated.
According to Puce, Savickis has submitted his ideas, on 90 pages, however, this is not a full-fledged investment project. It is also unclear what kind of state support the businessman hopes to receive.

Savickis said that the project could cost up to 500 million euros. He added that he was prepared to invest his own money, however, he also hoped for funding from the European Commission. When asked if he was also hoping for financial support from the state, Savickis said he saw no reason why the government could not support the project.
Although Savickis has discussed his project with Economy Minister Artis Kampars (New Era), he does not hope that a decision on the project would be made by the Saeima elections in October. “There is no one to really talk to at the moment; people are busy with other issues. Any government is interested in such projects. When the elections are over, we will return to pragmatic issues,” said Savickis, adding that he was confident that the project would move on regardless of who is elected to the government.

Savickis noted that Lithuania, Finland and Estonia were also considering similar projects, but in Savickis’ opinion, Latvia is a better place for implementing the project thanks to its well-developed infrastructure. Latvia’s competitors in this area have allotted major administrative resources for their projects, and they are trying to secure Europe’s support, while Latvia currently is just waiting and doing nothing.

He did not wish to reveal much about his project because Lithuanians and Estonians “keep a close eye on such information,” he says.
Savickis believes that high-level politicians will take the decision whether to support his project. In his opinion, Europe is uninterested in having a major energy center in one member state.

Puce noted that Estonia and Lithuania were also considering construction of liquefied gas terminals. The initiative to interconnect the Baltic energy markets allows for the construction of such a terminal, but evaluation of such a project on the inter-governmental level requires the project to be further developed, he said.

He went on to say that no private investors may be denied the possibility of implementing their projects, nevertheless, if state support is requested, the project must meet certain conditions. At the moment, no such funds are to be allotted from the budget, and they hardly will be, which means that aid from the European Union will have to be considered. There already are projects that are co-financed by the EU, for instance, a project to increase gas link capacities between Latvia and Lithuania, Puce mentioned.

“There may be forty projects, but the European Commission will not support all of them. The Commission could support just a few of them,” said Puce, when asked how many liquefied gas terminals could be built in the three Baltic countries altogether. Puce also believes that Latvia has certain strategic advantages over its neighbors, for instance the Incukalns underground gas storage facilities and well-developed infrastructure. None of the three Baltic countries is ahead of the others in this respect, he said.