Litgas, Statoil JV to Develop Baltic Sea LNG
Natural gas supply and trading company Litgas, part of Lithuania's state owned energy holding Lietuvos Energija, and Statoil, leading global energy company in oil and gas production, signed a memorandum of understanding (MoU) on July 2nd in Vilnius, Lithuania regarding establishment of a joint venture company in Lithuania to develop small scale LNG bunkering services.
The new joint venture company is planned to be established in Lithuania later this year and would supply LNG as a fuel to ships, small terminals in the Baltic Sea, and transport LNG by trucks to on-shore customers.
Statoil has a contract with Litgas to deliver 0.5 billion cubic meters of gas per year to Lithuania’s LNG terminal at Klaipeda port in 2014. The terminal will be used as a hub to distribute LNG by smaller tankers around the Baltic Sea to fuel ships and for inland use where pipelines don’t reach.
"This marks an important milestone in Lithuania's energy industry and will enable Litgas to diversify its activities internationally," General Manager of Litgas Dominykas Tuckus said. "Increased usage of the Klaipeda terminal will help to reduce infrastructure and maintenance costs incurred by the Lithuanian and Baltic gas consumers and position Klaipeda as an important hub in the Baltic LNG market."
"We believe that the small scale LNG market in the Baltic Sea has the potential to become commercially attractive business opportunity. The combined competencies of the two companies put the joint venture in a position to successfully develop this market and contribute to the usage of environmentally cleaner fuel in the Baltic region. Naturally, all relevant regulatory and corporate approvals will need to be obtained prior to the final investment decision," Geir Heitmann, Chief Origination Officer, LNG, Statoil, said.
It is predicted that Baltic Sea small scale LNG market can reach from 0.5 to 1 BCM a year by 2020. The joint venture company would be well positioned to supply this growing market due to convenient logistical setup capturing one of the shortest supply chains in the region and operational flexibility. The joint venture company is expected to start its small scale supply operations in the Q4 of 2017 or sooner.
Securing vessel capacity is an important prerequisite for the joint venture company and dialogue has been initiated with shipping companies with the aim to secure vessel capacity from the time the joint venture company becomes operational and received the final regulatory approvals.
The possibility to cooperate on joint development of small scale LNG bunkering services was identified in a 5-year supply contract signed by LITGAS and Statoil in August 2014, which is meant to provide baseload LNG supply for Klaipeda’s LNG terminal.
