On the 30th of December the National Energy Regulatory Council (hereinafter - the NERC) has lowered a natural gas security component by 38.55%, effective from 01 January 2020. Lowering of the security component, when compared to the current security component, will save natural gas consumers 36.1 million euros per year.

 The decision was passed by the NERC after KN, the operator of oil and liquefied natural gas (hereinafter - the LNG) terminals, received a 134 million euro loan from the Nordic Investment Bank to finance part of the cost of the LNG storage facility lease.
 On 30th December 2019 NERC approved the fixed component of the LNG regasification price of 194.31 Eur/(MWh/day/year) excluding VAT. Compared to 2019, this price is twice as low (in 2019 it was 390.42 Eur/(MWh/day/year)).

 Arūnas Molis, the Head of KN Klaipėda LNG office, emphasizes that the decision, advantageous for all Lithuanian gas consumers, was the result of the increased use of the terminal, which allowed to implement the first stage of the assurance of the long-term operation of Klaipėda LNG terminal, i.e. To distribute long-term payments for the terminal more evenly.

 “Another important decision affecting sustainability has been passed, it consolidated the long-term competitiveness of LNG and promotes the use of natural gas as a clean fuel in Lithuania. In this context, we are also contributing to the implementation of the recently announced European Green Agreement, which provides for an important role for the LNG. In terms of economic benefits, most time it was more advantageous to Lithuanian and Estonian state-owned and private companies to import by large LNG vessels from Norway or the USA, or even by  small LNG vessels from Vysotsk than through pipelines, both in terms of gas prices and charges of infrastructure. The first step in the implementation of the long-term LNG supply project should provide the market with even more certainty about the future of the terminal, and stable volumes of LNG regasification will create preconditions for further reduction of the security component for Lithuanian gas consumers,” emphasizes Arūnas Molis.

 In 2019, 51 LNG vessel arrived at Klaipėda LNG terminal, and brought 3 million cubic meters of LNG, and 19.36TWh of gas was re-gasified. That’s more than twice the re-gasification rates of 2018 and corresponds to approximately 85% of Lithuanian annual natural gas consumption. The majority of natural gas (81.2%) supplied through the Klaipėda LNG terminal this year was shipped from a natural gas liquefaction plant in Norway, and at the end of the year one of the largest LNG cargoes arrived to Lithuania from the USA.

 More information on the decision is available on the NERC website: https://www.regula.lt/Puslapiai/naujienos/2019-metai/2019-gruodis/2019-12-30/VERT-patvirtino-38,55-proc--ma%C5%BEesne-gamtiniu-duju-saugumo-dedamaja.aspx
 

The Nordic Investment Bank (NIB) and Lithuanian liquefied natural gas (LNG) and oil terminal operator AB „Klaipedos Nafta“ (KN) have signed a EUR 134.1 million loan agreement to optimize costs of LNG terminal.

The 25-year maturity loan will be directed to finance the rent payable for the Floating Storage and Regasification Unit (FSRU).

“Through this loan agreement we are continuing to support Lithuania´s security of energy supply, a strategically important objective for our member country”, says Henrik Normann, NIB President & CEO.

Currently, the FSRU used for LNG import to Lithuania is leased from the Norwegian Höegh LNG on a ten-year arrangement that expires in 2024. Following the Lithuanian government’s decision  to secure a long-term import of LNG to the country, KN Board adopted principle decision to acquire LNG storage unit “Independence” or another floating liquefied natural gas storage unit by 2024 and optimize current costs of the LNG terminal infrastructure.  

NIB’s funding will cover around EUR 26.8 million of the payments each year during the period 2020–2024, and thus will provide an opportunity to reduce the cost of LNG terminal infrastructure for consumers immediately. The financing will enable equalized tariff levels to be maintained throughout the full lifetime of the terminal, both before and after an FSRU is acquired.

“As a company of strategic importance, KN will contribute to the common goals of the state – in particular, to contribute to the long-term diversification of gas supply, energy security and independence, as well as to competitive gas prices for consumers. International energy experts confirm that the use of natural gas and LNG as the cleanest fossil fuel for power generation and heavy-duty road transport will play an important role in the transition for the EU to become a climate-neutral economy by 2050. Therefore, it is important for us to find the most cost-effective and sustainable solutions to the reduction of the security supplement of gas supply to ensure the competitiveness of LNG over other forms of energy and fuels”, says Darius Šilenskis, KN CEO.

This is NIB’s third loan agreement related to LNG infrastructure developments in Lithuania; the first two loans with Klaipedos Nafta AB were signed with in 2014 and 2017, respectively.

The LNG terminal in Klaipeda, called “Independence”, was inaugurated in 2014. The project was developed to secure the natural gas supply by breaking down the market dominance of a sole supplier.

The majority state-owned oil and LNG terminal operator KN is one of the largest energy resources logistics companies in the Baltic States.

NIB is an international financial institution owned by eight member countries: Denmark, Estonia, Finland, Iceland, Latvia, Lithuania, Norway and Sweden. The Bank finances private and public projects in and outside the member countries. NIB has the highest possible credit rating, AAA/Aaa, with the leading rating agencies Standard & Poor’s and Moody’s.

For further information, please contact
Mr Vilius Girkontas, Senior Manager, Lending, at +358 10 618 0240, Vilius.Girkontas@nib.int
Mr Vytautas Brazaitis, Communications Unit, at +358 10 618 0235, Vytautas.Brazaitis@nib.int
 

Under the operation of KN, the operator of oil and liquefied natural gas (LNG) terminals, volumes at Klaipėda LNG terminal improved significantly in November, potentially reducing Lithuanian gas prices. In the last month of autumn, the volume of gas re-gasified at LNG Terminal was one-fifth higher than the volume of gas consumed nationwide. The gas price for Lithuanian consumers could be reduced as a result of collecting significant revenues for re-gasification of the gas for export.
 
In November, a total of three large and four small LNG vessels arrived at Klaipėda LNG terminal, bringing 450 thousand cubic meters of LNG. Most of the gas (92%)  was delivered from a gas liquefaction plant in Norway. In total, about 2.7 TWh of gas was re-gasified in November, or 20% more than the entire need of Lithuania.
 
As of the beginning of 2019, the LNG terminal has carried out as many as 57 LNG loading and reloading operations, and the regasification rate for January-November 2019 is more than double the amount for January-November of 2018, with a total of 17.4 TWh of gas re-gasified by the end of November.
 
“The fifth operational year of Klaipėda LNG Terminal was a turning point for both consumers and the entire industry, said Arūnas Molis, the director of KN Klaipėda LNG office. 
“Firstly, the terminal has handled more loading operations than over the last four years combined and attracted two users of the Terminal from Estonia. By using the services of the terminal, they directly reduce the security component for Lithuanian consumers. Second, due to the above circumstances and lower terminal costs, the National Energy Regulatory Council has been able to reduce the security component by nearly 4 million euros. The introduction of a new LNG supply model would further reduce the security component by almost 27 million euros. As a result, every gas consumer in the country will benefit as early as next year. Third, companies that import record amounts of gas through the terminal and their customers utilised the low price period in international gas markets as best as possible: preliminary calculations, comparing the market index and the Finnish regulator’s data, show that gas price from a single pipeline supplier for Finland in November was about EUR 5/MWh higher than the price of imported LNG in Lithuania. As a result, the same amount of gas imported at the terminal (2.7 TWh) saved the terminal users more than 10 million euros in November alone, even if all costs of the terminal are included.” 
 
It is planned that the utilization of Klaipėda LNG terminal will remain extremely high during the last month of this year and in the upcoming years. Two large and five small LNG vessels will arrive in December, which will bring about 328 thousand cubic meters of LNG and the re-gasification rate will be about 2.2 TWh. Over the gas year of 2020 (from October 2019 to October 2020), users of the terminal will have booked re-gasification capacity in a total of over 19 TWh. This compares favourably to a total of 14TWh of gas which was re-gasified during the 2019 gas year (October 2018 to October 2019).
 
The efficient operation of the LNG terminal recorded in Klaipėda also reflects international trends. According to McKinsey & Company, the global gas market has grown 5.3% over the past year and is expected to grow 0.9% annually till 2035. The LNG segment is considered to be extremely promising - its growth is projected to be 3.5% annually till 2035. In addition, the European Association of Transmission System Operators for Gas (ENTSO-G) predicts that by 2025, a transforming power generation market alone will increase demand for natural gas to 290TWh.

“The increasing demand for natural gas in the world and in Europe opens up new opportunities for Klaipėda LNG terminal as well,” said Arūnas Molis.
“The natural gas infrastructure planned to be implemented in the upcoming years, connecting Poland and Lithuania as well as the Baltic States and Finland with other European Union countries through pipelines, will bring even more benefits to the Lithuanian population and efficient operation of the terminal. In addition, at the end of November, KN entered into a strategic partnership with the Polish oil and gas company PGNiG, which booked the capacity of the Klaipėda LNG Distribution Station for five years, this capacity will be used with maximum efficiency, while at the same time developing and expanding LNG market in Baltic countries and in Poland.”
 

On Friday, oil and LNG terminal operator KN entered into a strategic partnership agreement with Polish Oil and Gas Company PGNiG, for which LNG reloading station capacity has been reserved for five years. PGNiG will start commercial operation of the LNG reloading station from April 2020.
 
KN invited global and regional LNG companies that have LNG trading portfolios and / or LNG transport capacities and are interested in the development of the LNG market in the Baltic region and Poland to participate in the capacity allocation reservation tender. The final decision has been made based on the tender with the best price. According to Darius Šilenskis, KN CEO, the signed agreement allows KN to secure a steady revenue stream.
 
“KN will continue focusing on the flawless operations of LNG and oil terminals as well as development on the range of services provided for our customers. This is the main reason why for the purposes of developing the regional market, we decided to look for strong partners who would be interested in developing commercial activities with our infrastructure and would be actively engaged in the development of the LNG market. We are delighted with the partnership with PGNiG and believe that our synergies will contribute to strengthening the regional prospects,” says Darius Šilenskis, CEO of KN.
 
According to D. Šilenskis, the development of LNG as a significantly more environmentally sustainable energy source is also important in our region, given the intensified energy diversification in the. world in recent years and the need to search for less polluting energy and fuels in the context of global warming.
 
KN reloading station, located near the gate of Klaipėda port, officially opened in October 2017. It consists of five tanks for liquefied natural gas, each with a capacity of 1,000 cubic metres. Up to two LNG tankers and a small volume LNG vessel can be filled at the same time at the LNG reloading station. Upon the commissioning of the KN LNG reloading station, together with the opportunities provided by the LNG terminal in Klaipėda, KN became one of the first companies in the world, providing all integrated LNG logistics services, thus consolidating the full value chain in the region.
 
“This agreement broadens the horizons of strategic cooperation between Lithuania and Poland in the energy sector. We have an example of very practical and valuable cooperation rather than  theoretical. This is good news for the region and for natural gas consumers, as it means further development of the LNG market, increased access to LNG for off-grid customers, and more competitive prices” says Minister of Energy Žygimantas Vaičiūnas.
 
During the two years of operation about 12 companies from Lithuania, Estonia and Poland used the LNG reloading station for filling of their tankers. 44,000 cubic metres of LNG have been delivered to the KN LNG reloading station since beginning of its operations, with 6 different small scale LNG vessels have delivered LNG during this period.
 
“KN appreciated our experience in operations and sales of small-scale LNG from the President Lech Kaczyński Terminal in Świnoujście and from our LNG facilities in Odolanów and Grodzisk Wielkopolski. PGNiG will also gain better access to the small-scale LNG market in the Baltic countries and increase the competitiveness of its offer for customers from the area of ​​north-eastern Poland and Central and Eastern Europe due to the use of the onshore LNG reloading station in Lithuania. It is very important from the point of view of security of supply that PGNiG will independently decide from whom to buy and bring LNG to the onshore reloading station in Lithuania,” commented Piotr Woźniak, President of PGNiG Management Board.
 
Polish Oil and Gas Company PGNiG deals with exploration and production of natural gas and crude oil and – through its branches and key companies from the Capital Group – with import, storage, sales, distribution of gaseous and liquid fuels, production of heat and electricity as well as geophysical and drilling services. Its subsidiaries and branches carry out exploration and production activities in Norway and Pakistan, gas sales in Germany and LNG trading through an office in London.