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2019.10.29 18:36

Five years ago Lithuania broke Russian gas monopoly – but at what cost?

Timeline
LRT TV, LRT.lt2019.10.29 18:36

Heralded as the breaker of Lithuania’s dependence on Russian gas, the floating LNG terminal ‘Independence’ reached Klaipėda port from its construction site in South Korea five years ago.

However, falling gas prices and an increase in global supply, coupled with ‘Independence’ upkeep costs, are pushing critics to question Lithuania’s need for the terminal.

‘Independence’ is currently rented from a Norwegian company at a cost of over 100,000 euros a day, or over half a billion over a decade.

Yet, during the height of the Gazprom monopoly in Lithuania, the country “ended up paying the highest prices in Europe” for gas, said Laurynas Kasčiūnas, a conervative MP and member of the Seimas National Security and Defence Committee (NSGK).

“Critics forget this [fact], and only stress the maintenance costs,” he added. According to him, Gazprom cut their prices only when the market opened up.

Although Lithuania still buys a small proportion of Russian gas, Kasčiūnas said continuing trade with Russia could be worrying.

“The number of contracts with ‘Novatek’ gas [suppliers] are increasing,” said Kasčiūnas. “Gennady Timchenko [Novatek shareholder and member of its board], is one of the closest business associates of Vladimir Putin.”

Although political issues when buying Russian gas remain, it no longer carries the same costs. “They can’t dictate prices to us, and if they interrupt the supply, we will find gas elsewhere,” he said.

Meanwhile, the head of the Klaipėda LNG service at Klaipėdos Nafta, Arūnas Molis, said that Russian gas totalled just two percent of all imports over the last five years, and under 10 percent in 2019.

“Most gas arrives from Norway, US and other places,” said Molis, adding the initial goals of the project shouldn’t be forgotten.

“Firstly, to diversify gas imports, and then, make sure that its supply is depoliticized,” he said, adding that both goals were met, as none of the gas suppliers can present political or other non-commercial conditions for Lithuania.

“We usually look at the profit-loss balance,” said Romas Švedas, lecturer at Vilnius University, an energy expert, and a former Lithuanian energy vice minister. “But we shouldn’t calculate it the same way here, because economic and national security is a big part of the [LNG] terminal’s benefits.”

Just recently, LNG transported by tanker ships cost more than pipeline gas, but the situation is changing.

“The view that we should in no circumstances [buy] Russian gas via the terminal has its limitations,” according to a Lithuanian MP and member of the Seimas’ Energy Committee, Virgilijus Poderys. “If we enter the market to buy gas and immediately restrict ourselves, the prices will be automatically higher.”

Lack of regional solidarity

However, the running costs could be decreased if the other Baltic states were to get involved, said MP Poderys.

“According to its output and size, the [terminal] is built for all the three Baltic states, who now do not contribute to its upkeep,” he said.

“There are situations when [Lithuania’s neighbours] buy gas from the LNG terminal, produce electricity in their country, and then sell the power on the Baltic market,” said Poderys.

Lithuania is planning to buy out the ship by 2024, and operate it until 2044.