VILNIUS — Preparations for creating a liquefied natural gas (LNG) refinery in Klaipėda roll ahead as the European Commission is expected to finance a feasibility study.
An LNG refinery in Lithuania would be the first step in diversifying the Baltic region’s imports of natural gas. Each country currently receives 100 percent of its natural gas from Russia via pipelines. Although LNG makes transportation by sea a possibility, liquefying and regasifying natural gas is an expensive and complex process that requires new infrastructure and industry.
“It is the beginning of the end of the Russian monopoly,” said Kęstutis Jauniškis, adviser to the energy minister. “To diversify our natural gas imports is a priority for the future, because in Europe, Lithuania and Slovenia mostly depend on only one gas supplier.”
The Energy Ministry released a brief statement to Baltic Reports on the feasability study. “This study will address the details related to the candidate LNG sites, technologies, import quantity, supplies, costs and other factors important in formulating an effective LNG strategy for Lithuania. We hope that the study will be ready at the beginning of 2nd quarter of 2010,” it read.
Lithuania will receive €212,000 from the European Commission to complete the study. However, Lithuania requested nearly twice as much for the survey.
The refinery is expected to be a hub for a pan-Baltic energy infrastructure. Should the refinery get built in Klaipėda, it would be able to account for increased energy demands across the three countries.
According to the Energy Information Administration, a statistical arm of the United States government, the costs associated with LNG have been declining for the past decade, but “LNG projects are among the most expensive energy projects.” Liquefication costs have decreased by as much as 50 percent. Although regasification terminal prices are site specific, they can range from $100 million to $2 billion (€67 million to €1.3 billion). The largest share of the cost of regasification is in loading and storage, which can take up 30 to 45 percent of costs.
Should the project continue to completion, the refinery would likely need private investors to help pay for it. Baltic News Service reported this September that Gazprom, the state-owned Russian gas company, had been interested in investing in an LNG refinery in the Baltics. If the company were to have a stake, especially a controlling one, it would have significant control over the majority of gas either flowing through or floating on the Baltic Sea. The Nord Stream pipeline, which flows from Russia to Germany under the Baltic Sea, is scheduled to be completed in 2012 and could transport up to 55 billion cubic meters of gas per year.
But Jauniškis expressed optimism about a more liberal natural gas market in the Baltic states. “The next step to seek this purpose — underground gas storage,” he said.
