Lithuania ends Russian grip on Baltics

Vilnius first LNG terminal breathes a sigh of relief

VILNIUS, Oct 19, (AFP): As much of Europe anxiously awaits a Ukraine-Russia deal to avert the risk of winter gas cuts, Lithuania is breathing a sigh of relief as its first liquefied natural gas (LNG) terminal will sever Moscow’s grip on gas deliveries to the Baltic states.

Aptly dubbed “Independence”, the massive floating LNG facility measuring three football fields in length is due to dock in the port of Klaipeda on Oct 27.

Its arrival comes just as Russian President Vladimir Putin warned that Europe faces “major transit risks” to gas supplies coming from Russia this winter unless Ukraine resolves a gas dispute with Moscow.

The terminal gives Lithuania the capability to import up to four billion cubic metres of gas per year from sources like Norway’s Statoil — well above the 2.7 billion cubic metres it bought from Russia last year.

That leaves plenty of extra capacity for its Baltic neighbours Latvia or Estonia, analysts note.

Despite joining the EU and NATO in 2004, Lithuania has been completely dependent upon Russia for natural gas, a legacy of five decades of Soviet domination that wound down in 1990.

The nation of three million will initially import 0.54 billion cubic metres of gas from Statoil in 2015, covering about onefifth of its demand.

Tensions have been running high between Vilnius and Moscow for years over gas, as Lithuania believes that statecontrolled Gazprom has abused its monopoly position and driven up the price.

Gazprom’s prices are confidential, but Energy Minister Rokas Masiulis told AFP that “Lithuania has paid the highest prices for natural gas in the EU in recent years”.

Vilnius has not taken the situation lying down. In addition to arranging for the LNG terminal, it has asked the EU to conduct an anti-trust probe against Gazprom and launched an international arbitration procedure, with decisions expected within the coming year.

Gazprom’s contract with expires at the end of 2015.

While Gazprom is likely to remain a key supplier, Vilnius insists competition will improve pricing and energy security, and so curb Moscow’s political leverage in the region.

Terminal

Lithuania

We’re “looking forward to important negotiations with LNG suppliers and Gazprom,” said Masiulis, adding that “in a worst-case scenario, we could buy all our gas via the terminal”.

As the arrival date neared for the new LNG facility, which Lithuania is leasing for a decade, Gazprom already agreed to a price cut of around 20 percent.

Gazprom has always denied monopoly practises in Lithuania and warned that shipped-in LNG will not come cheap.

“If Lithuanian consumers are willing to pay more to reduce their dependence, it’s their business,” Gazprom spokesman Sergei Kupriyanov told AFP in Moscow.

Lithuania’s state-owned Litgas LNG agency says Statoil’s LNG prices will depend on market factors.

The floating 294-metre (964-foot) terminal owned by Norway’s Hoegh LNG will also buoy tiny Lithuania’s political leverage towards its Soviet-era master Russia at a time when Moscow’s meddling in eastern Ukraine has sent geopolitical jitters in the Baltic states through the roof.

“Dismantling Russia’s monopoly deprives it of yet another tool of political influence over Lithuania,” Marius Laurinavicius, an analyst at the Eastern Europe Studies Center, a Vilnius-based think tank, told AFP.

Lithuania’s Prime Minister Algirdas Butkevicius recently told US Vice President Joe Biden the terminal meant “de facto energy independence” and finally integrated the “Baltic States into the internal market of the continental EU.”

Fellow Baltic states Estonia and Latvia, also EU and NATO members dependent on Russian gas, say they could also use the terminal to seek out alternative suppliers.

Latvia has the capacity to stockpile more than a year’s supply of gas, while Estonia is almost self-sufficient with shale oil.

The Baltic states and Finland are also in talks with Brussels over a separate EUfunded LNG terminal in the Gulf of Finland.

Unlike Poland, Slovakia, Austria or Hungary, the Baltic trio have not seen any dip in deliveries from Gazprom this autumn.

Russia cut off Ukraine in mid-June after a pro-Western government took power, accusing Kiev of not paying its gas bills.

The EU, which gets over a quarter of its gas from Russia, is seeking a deal to ensure that Russian gas will flow uninterrupted to European homes via Ukraine this winter.