January 23, 2012 / 4:36 PM / 8 years ago

UPDATE 1-Lithuania turns to LNG, picks Hoegh for platform

* Floating LNG platform to have 170,000 cubic meter capacity

* Operations expected to start at the end of 2014

* Terminal to reduce Lithuania’s dependence on Russian gas (Adds Hoegh statement)

By Nerijus Adomaitis

VILNIUS, Jan 23 (Reuters) - Lithuania took a step on Monday towards reducing dependence on Russian gas by picking Norway’s Hoegh LNG to supply and maintain an offshore platform for imports of liquefied natural gas (LNG).

Majority state-owned oil terminal Klaipedos Nafta said in a statement that it had chosen Hoegh to supply a floating storage regasification unit (FSRU) and that it was expected to start operating at the end of 2014.

The contract, which is to be signed in February, will be based on a 10-year leasing period, after which Klaipedos Nafta will have the right to purchase the FSRU, Klaipedos said.

Hoegh, a floating LNG service company, said it expected the lease to contribute about $50 million per year to its EBITDA (earnings before interest, tax, depreciation and amortisation).

“This award confirms Hoegh LNG’s strong position in the FSRU market, and this segment will remain our main focus for continued growth in the future,” Hoegh President and Chief Executive Officer Sveinung Stohle said in a statement.

Klaipedos Nafta said the FSRU would be manufactured in South Korea and would have a storage capacity of 170,000 cubic meters of LNG.

Lithuania opted for a floating unit, because it’s cheaper and faster to build than a fixed LNG terminal on land.

“We can supply about 11 million tonnes of gas per day, which is about the amount Lithuania consumes on a winter day,” said Rokas Masiulis, general manager of Klaipedos Nafta.

“That means that we would be able to meet demand if (Russian gas export monopoly) Gazprom halts all gas supplies,” he added.

The other companies that took part in the tender were Norway’s Golar LGN and U.S. LNG terminal developer Excelerate Energy.

ALTERNATIVE TO RUSSIAN SUPPLIES

Lithuania wants an alternative supplier to Gazprom as the Baltic state, which joined the EU and NATO in 2004, depends entirely on Russian gas supplies.

The Lithuanian government has expressed fears that energy supplies could be used for political purposes and as leverage for price increases.

Lithuanian Prime Minister Andrius Kubilius said the FSRU would help address these problems.

“By being a sole gas supplier, Gazprom could abuse its monopolistic position harming consumers ... It (the LNG terminal) is the best solution to solve that problem,” Kubilius told a news briefing after the cabinet meeting on Monday.

Lithuanian officials have said they expect the FSRU to provide access to LNG spot gas prices, which are currently lower than under long-term contracts linked to oil prices.

U.S.-based Cheniere Energy plans to start exporting LNG by 2015 and said last year it hoped to take a stake in a floating LNG terminal in Lithuania.

Klaipedos Nafta said that Hoegh would run operations and maintenance and provide a qualified crew for the FSRU.

The FSRU will receive super-frozen LNG from tankers and warm it into gas that can be transmitted by pipeline to consumers. (Additional reporting by Henning Gloystein in London, editing by Jane Baird)

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