Lithuania aims to finish talks on LNG purchase agreement in Q3

OSLO, June 10 Mon Jun 10, 2013 3:42pm BST

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OSLO, June 10 (Reuters) - Lithuania expects to wrap up negotiations on an liquefied natural gas purchase agreement in the third quarter after parliament decides on a minimal offtake rule to ensure that the new source of gas supply is viable, the state-controlled trading company said.

The Baltic state plans to lease a floating gas storage and regasification unit (FSRU) from Norway's Hoegh LNG for 10 years to provide an alternative source of supply to Russian pipeline gas starting from 2015. It has yet to sign a supply contract, however.

The plan was to complete an agreement for LNG supply in the third quarter, but the talks are tied to the outcome of parliament's decision on the minimal offtake rule. Such a rule would ensure the terminal would sell enough gas in competition with Russian gas export monopoly Gazprom.

"It's not such an easy thing to compete with Gazprom. There is too much risk that Gazprom could lower prices to undermine LNG imports," said Tadas Adomaitis, head of gas supplies and operations at Litgas, a trading arm of Lithuanian oil terminal company Klaipedos Nafta, which is also in charge of the LNG terminal project.

A previous plan to require all gas distributors to buy at least 25 percent of supplies from the terminal was appealed to the European Commission. The new plan under discussion is to make power producers that sell electricity under government-regulated prices buy gas from the LNG terminal.

"We are currently framing LNG sourcing and gas offtake structures," Adomaitis said.

One potential LNG buyer could be a new 450 megawatt combined-cycle gas unit at the power plant in Elektrenai, which could consume about 0.2 billion cubic metres of gas per year, he added.

The government has said it aims for imports from the terminal to reach at least 0.7 bcm per year, which compares with annual consumption of over 3 bcm in 2012.

The Lithuanian terminal would have a maximum capacity to regasify and supply 11 million cubic metres of gas per day or 4 bcm per year. (Reporting by Nerijus Adomaitis; editing by Jane Baird)