The state LNG terminal: it lacks where it’s short

Klaipėda LNG terminal
DELFI / Erikas Skardžius

This is how we could describe the expensive maintenance model of Klaipėda liquefied natural gas (LNG) terminal, which exceeds the needs of the country by several times, Lietuvos žinios reported.

The LNG terminal maintenance fee is paid by gas consumers, and not only the terminal, its infrastructure and port installation and all of the exploitation and the operators of the transmission system of “Amber Grid” overall administration of the security costs are included but also the loss of LNG trading of the experienced by the designated supplier “Litgas“.

The amount of gas in the LNG terminal, that is necessary to maintain a minimum activity, countries’ energy (including heat) manufacturers buy according to the obligatory procedures are buying for the foreseen average gas price, which was approved by the Price Commission.

The more producers pay for the LNG to a designated supplier, the less trading losses “Litgas” experiences. And then the maintenance fee of the LNG terminal is less for gas consumers. However, if imported gas becomes cheaper, the LNG terminal fee would grow accordingly.

Is hiding the trading losses

From the start of the LNG terminal activities in 2015 the market price, at which gas was sold in Lithuania, has always been lower than the one that “Litgas” bought from the Norwegian company “Statoil“. To prevent the state-owned from going bankrupt, the loss from selling gas is covered by the LNG terminal fees that are collected. Previously, it was paid by all gas customers, now it is paid by companies according to the gas capabilities.

Price commission had earlier calculated that LNG terminal gas, according to the contract with “Statoil” that was in force until the first quarter of 2016, was almost twice as expensive as those that were bought in the market. Now imported LNG is more expensive by only about 25 percent.

The appointed supplier “Litgas” isn’t disclosing the price of gas that is bought from “Statoil” nor the loss that it experiences. In a letter sent to “Lietuvos žinios”, “Litgas” states that neither 2015 nor 2016 the company suffered losses. However, it stayed silence about how much of loses did it add to their income over the last two years. To the questions sent twice by “Lithuanian news”: What was the difference of the cost from the designated provider, which accumulated because of the price difference between the gas purchase form energy producers and sales, “Litgas” didn’t answer.

LNG terminal fee and gas consumption in Lithuania has a direct impact on the price of heat, especially in cities, where the heat is generated from gas. In recent years we consume less gas so the fee is increasing. However, the LNG terminal fee decreases, if LNG gas is more expensive because they need to collect less funds to cover “Litgas” trading losses.

Increased the price, reduced the fee

On Monday the Price Commission has decided that from the 1st of July, the LNG terminal maintenance fee, officially known as the additional complementary to the LNG terminal supply security to the natural gas transmission prices, decreases by 4.1 per cent from the current application of 473.60 euros per megawatt hour (€ / MWh) to 454.25 Eur / MWh.

LNG terminal fee is reduced when the Price Commission increased the price of regulated energy (including heat) mandatory sold LNG that is imported via Klaipeda terminal by almost 14 per cent last Thursday. It is foreseen that the market price of the natural gas from the 1st of July increases from 16.45 EUR / MWh to 18.74 EUR / MWh.

Energy producers will buy the state established quantity of LNG from UAB “Litgas” on an increased price because in 2017 the UAB “Lithuanian gas supply” “Gazprom” discount will expire. In addition, in the first quarter of this year private and one state-owned company payed more for the gas, the gas price also increased in the exchange.

On Monday the National Energy Price Commission announced that the 2017 foreseen natural gas (LNG) purchase price is EUR 23.55 / MWh. “Lithuanian News” asked the state regulator to clarify is this the average price of all importers of LNG (“Achema”, “Lithuania Gas Supply” and “Litgas”) or is it just the price for the designated supplier of LNG “Litgas”. “Unfortunately, we can’t disclose this information” replied Aistė Griškonytė, the advisor of Price Commission Performance Management Division.

LNG terminal is saved by “Achema

2015 LNG terminal activities were ensured only by “Litgas”, and in 2016 three companies imported natural gas through the LNG terminal: “Achema”, “Lithuania Gas Supply” and “Litgas”. These changes determined that in 2016 the import of natural gas through LNG terminal had increased from 4.6 TWh in 2015 to 14.6 TWh in 2016.

The imported natural gas through LNG terminal in 2016 consisted of 64 per cent of Lithuania’s total consumption. In 2015 consumers used 18 per cent through LNG terminal imported natural gas.

It is likely that in 2017 about 11 TWh will be brought in through the terminal, which is 50 per cent of the country’s demand.

The largest gas consumer is the Jonava Fertilizer Plant “Achema”, which consumed about 12.5 TWh of natural gas in 2016, or more than half of the country’s consumption (22.8 TWh). Out of these, Achema brought in about 7.5 TWh of gas through the terminal. It was about 60 per cent of the factory natural gas demand last year.

In 2017 “Achema” is planning to use about 14 TWh of natural gas and plans to bring in about 5.7 TWh of them through the terminal. That would be about 40 per cent. Total company needs. In 2015 “Achema” consumed about 14.12 TWh of natural gas and didn’t buy anything through the terminal.

Each year more is collected

Total Lithuanian gas consumption is decreasing every year. According to the data from Price Commission, in 2016 22.8 TWh of natural gas was consumed, or 9.5 per cent less than in 2015, when it was 25.2 TWh. It is foreseen that in 2017 about 22 TWh of natural gas will be transported through the transmission.

Prices Commission acknowledges that the LNG terminal fee will have to increase with the decreasing amount of gas that is used. Because while calculating the safety component consumer capacities are used, which are indirectly linked to the consumed amount of natural gas. “Increasing number of declared consumption capacity determines that the security component decreases, decreasing number of declared consumption capacity leads to the increase of the security component” explained A. Griškonytė to “Lietuvos žinios”, who is the advisor to Commission Performance Management Department.

During 2015, according to the collected data of Price Commission, 70 million Euros were collected for the LNG terminal security component. In 2016, according to unaudited data, it was 81 million Euros. 2017 it is planned to collect 88.7 million Euros.

Both factors will affect the collection of LNG terminal security component funds but w only the components associated with the designated supplier of natural gas (“Litgas” – Ed.) cost will be affected” said A. Griškonytė.

Most of the burden falls to “Achema”. In 2013-2014 out of the 30.7 million of the state planned collection, “Achema” had to pay 13 million 137 thousand Euros or 46.5 per cent of all the tax funds of the whole state. In 2015, the LNG terminal fee was 56 million 292 thousand Euros, out of which “Achema” paid 30 million 238 thousand Euros, or 53.7 per cent of the total tax collected in the country. In 2016 “Achema: paid about 17 million Euros of the LNG terminal security component (21 per cent of the total). In 2017 for the company it increases by 4 million Euros and will draw up to 20.3 million Euros, or 23 per cent of all funds that are planned to collect.

Denied to build their own terminal

The maximum annual capacity of the Klaipėda LNG terminal, which started operating in 2015, is 4 billion cubic meters per year. The appointed supplier “Litgas” imports about imports of 325 million cubic meters to 503 million cubic meters of LNG annually, which the regulated energy manufacturers are obligated to buy by the Price Commission at the market price. The attempts to sell ​​LNG to other countries are still unsuccessful. LNG terminal is mostly saved by the largest gas consumer “Achema”. The company pays a largest fee of the LNG terminal and last year brought 60 percent of all imported LNG.

“Lithuania news” remind that in order to reduce the gas prices,”Achema” was planning to build its own LNG terminal in Smeltė peninsula. UAB “Project Centre” in April of 2012 had prepared a development plan for a terminal like this, which was approved by the board of “Achema Group”. However, the Government institutions denied permission to start construction by basing their decision on the grounds that the public LNG terminal will supply enough gas, which is will satisfy the needs of “Achema”.

The public LNG terminal together with the ship’s storage rent will cost 695 million Euros to Lithuania over ten years. According to the agreement signed in March of 2012, which was signed with “Hoegh LNG” for Lithuania for every day rent of LNG ship pays about 168.55 thousand Euros, per year that is 61.446 million Euros, and over 10 years it will pay about 614.465 million Euros.

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