Lithuania takes step towards being less dependent on Russian gas

Lithuania has decided to pick Norway's Hoegh LNG to provide an offshore platform for liquefied natural gas (LNG) imports. This is considered a step towards less dependence on Russian gas for Lithuania.

According to Reuters, majority state-owned oil terminal Klaipedos Nafta said in a statement that it chose Hoegh to supply a floating storage regasification unit (FSRU), and that operations were expected to start at the end of 2014. FSRU are cheaper and faster to build than fixed LNG terminal on land.

The FSRU has been ordered in South Korea and will have a capacity of 170,000 cubic meters of LNG.

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

"That means that we would be able to meet the demand if Gazprom halts all gas supplies," he added.

The contract would be based on a 10 years leasing period after which Klaipedos Nafta will have the right to purchase the FSRU, Klaipedos said. Signing on the contract will take place in February.

Other companies taking part in the tender were Norwegian Golar LGN and U.S. LNG terminal developer Excelerate Energy.

Lithuania wants an alternative supplier to Russia's Gazprom. The Baltic state depends 100% on Russian gas supplies. The Lithuanian government has expressed fears that energy supplies could be used for political purposes, but also to increase their pricing leverage.

Andrius Kubilius, Prime Minister of Lithuania, said that the FSRU would help address these problems.

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

Officials from Lithuania have said they expected the FSRU to provide access to LNG spot gas prices, which are currently lower than under long-term contracts linked to oil prices.

Cheniere Energy plans to export LNG by 2015. The company said last year that it hoped hopes take a stake in a floating LNG terminal in Lithuania.

Klaipedos Nafta said that Hoegh would also provide operation and maintenance, as well as a qualified vessel crew for the FSRU.

The FSRU will receive super-frozen liquefied natural gas from tankers and warm it into gas that can be transmitted by pipeline to consumers.