Lithuania start realizing the projects leading toward energy security and reduction of dependence on one supplier

The European Commission will provide $US549,000 to help fund a feasibility study for a pipeline connection between Poland and Lithuania. | Image: The Holowczyce Compressor Station, part of Poland’s gas transmission system. Image courtesy of Gaz-System.

Lithuania seems to start realizing the projects leading toward energy security and reduction of dependence on one supplier (Russia). These projects (energy connections with Poland and Sweden, a planned gas pipeline between Lithuania and Poland etc.) will be realized with the EU assistance as part of the Baltic Energy Market Interconnection Plan (BEMIP).

This EU plan can be divided into two parts: development of the electricity sector and development of the gas sector. The latter is relevant in considering the construction of liquefied natural gas (LNG) terminals in the eastern Baltic Sea region. Lithuania, Latvia, Estonia and Finland are still isolated from the integrated EU gas supply system. According to BEMIP these states are referred to as a single segment, therefore one of the key goals is their integration into the EU gas supply system.

All three Baltic States declared their willingness to construct LNG terminals. Lithuania is determined to build a small-size terminal independently, i.e. without the EU’s financial assistance. Its capacity could be 2-3 billion cubic meters of gas per year (primarily for the internal use). The so-called Kiaules Nugara (Pig’s back) island in the Kuršių Lagoon (close to Klaipėda) has been chosen for the construction of the terminal. Lithuania has selected the US company “FluorInternational” as lead adviser for preparation and implementation of the project.

A Letter of Intent has been signed between „Klaipėdos nafta“ and the US-based energy company „Cheniere“ on a possibility to supply liquefied natural gas to Lithuania. Estonia is also determined to build an LNG terminal, as well as Latvia which wants to turn the construction of LNG terminal into a regional project and, consequently, secure financial assistance of the EU.

According to BEMIP, the relative small gas markets in Finland, Estonia, Latvia and Lithuania (about 10 billion cubic meters of gas/year) do not generate the scope for more than one LNG terminal. Construction works could commence only after establishing gas pipeline connections between the states. Until the year 2014 the focus should be given to:

• the investment to the gas interconnection Lithuania-Poland. Several modifications are possible, namely: „Amber PolLit“ in case a connection to the Yamal-Europe pipeline and reverse flow are possible; if not – „Amber PolLit(AS)“, i.e. a connection  to the Polish gas system. Due to low capacity of the gas pipeline between Poland and Lithuania, construction of an LNG terminal is suggested for Lithuania;
• a gas pipeline between Estonia and Finland („Balticconnector“);
• LNG terminal in Finland (in case of technical problems in Estonia);
• Extension of gas transportation possibilities in Latvia and Lithuania, Latvia and Estonia, modernization of the internal systems of the above states.

Thus, the EU is ready to finance only one regional LNG project, but construction of even a small (1-3 billion cubic meters) terminal can be justified only in case of an integrated gas market of Baltic States and Finland.  Today there is no real impetus for preparing a gas connection with Poland; construction of the connection between Estonia and Finland has not started yet (except the design works), and there are no plans to increase gas transportation between the Baltic neighbors in Lithuania.

Without any doubt, there are many reasons for constructing an LNG terminal in Lithuania, and they are specified in the “National Energy Strategy”.  However, the region hardly needs more than one terminal (especially in case of connection with Poland with quite substantial gas supplies from the West to Lithuania, and through Lithuania to Latvia, Estonia and Finland). Moreover that LNG terminals do not guarantee energy security, and without a connection with Poland integration in the EU gas grids is impossible.

It seems that today, when Baltic States are in race for LNG, other projects (development of local gas pipelines) are pushed to the second plan although they should be realized in the first place.  Yes, today we pay high price for gas and LNG terminal could solve the problem. Besides, one terminal in the region would be useful also after integration into the EU’s gas pipeline system. But what happens if Baltic States will construct more LNG terminals then needed and supply will exceed demand? The statements of Lithuanian Government on preparations to construct a small-size 2-3 billion cubic meters/year terminal also sound strange.  When we use about 3 billion and Baltic States together with Finland about 10 billion cubic meters gas/year, it is not clear what terminal could be considered to be large for this region.

Without any doubt determination of the current Lithuanian Government in the sphere of energy is praiseworthy. However the today’s picture is characteristic of the Baltic States: each state is fighting for itself. A question arises: do we trust our neighbors? Can they trust us? Are we capable to forget national interests and think strategically at regional level?

by Rimvydas Ragauskas

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