Latvia Looks to Norway for LNGT Construction

Latvia is mulling building its own liquefied natural gas terminal (LNGT), especially that it by now has been approached by reliable Norwegian investors who are set to take on the project alone.

“The Latvian Government and Economy Ministry see it as a non-state investment project and, approached by the possible investors are generally supportive of the idea. We support and encourage the further development of the initiative as a commercial project,” Evita Urpena, the Communications specialist at the Latvian Ministry of Economics, told Natural Gas Europe.

Latvian project cannot expect EU funding

Norway's BW Maritime had announced yet at the end of 2014 of its plans to build a sea LNG terminal and set out the main condition for the construction: allow the Norwegians link the facility with Latvia’s underground gas storage repository in Inchukalns, run by Latvian gas company Latvijas Gaze. Its shareholders include Russia’s Rosneft and Gazprom.

Earlier, the Economics Minister, Dana Reizniece-Ozola confirmed that, provided Estonia and Finland do not agree on the site of a regional LNG terminal satisfying the needs of the Baltics and Finland, Latvia “might build a moderate-size LNGT on its own.”

“It the two countries do not succeed in launching a regional liquefied natural gas terminal, it will become important for Latvia to take on building its own moderate-size LNG terminal,” the minister told. She added: “As far as I understand it, the situation is pretty opaque there over. The project has been declared and the discussion where it has to emerge is still ongoing between Finland and Estonia…But the negotiations, unfortunately, do not inspire so far confidence that the implementation of the project is realistic…Let’s remember that the European Commission’s reply regarding it is quite clear: a terminal of local-scale, like that one in Lithuania’s Klaipeda, will not receive the European support, while a regional terminal can expect the financing from the European Commission,” Reizniece-Ozola told.

She insisted that a national-level LNG terminal could be built in Skulte, the administrative center of the Limbazi Municipality.

“Regarding the site, we already have a tangible proposal on the table from a private investor. It has submitted the necessary paperwork to the European Commission in order to get permit for the project’s further work. As of now, other Latvian locations are of no interest to investors in developing a moderate-size LNGT project,” the minister pointed out.

Norwegians are keen to build LNGT in Latvia

The Norwegians assess the price-tag of the Skulte project could be in the range of EUR 150 million. At that level, the project would be four-fold cheaper than the Lithuanian FSRU in Klaipeda.

“We are the world’s largest company that is engaged in transportation of LNG. We are looking for 40-50 alternative projects and the Latvian project is one of the most attractive. We have been working on this issue for two years. We had meetings with ministers in December, 2013 and January, 2014. They assured us that we can move forward with this project. We were slow as well, but now we have received an approval of the company that allows moving forward. We have allocated money for the continuation of the project,” said the general manager of BW Maritime Arnfinn Unum.

Norwegians also wait when Latvia will fulfill all requirements of the European Union’s Third Energy Package, obliging the Baltic country to reform its gas and electric power market – importantly for the project, divide Latvijas Gāze into few companies that will individually deal with gas’ trade, transportation and storage.

This process has been stalling and is thought can be completed only by 2019.

Urpena, of the Latvian Economics Ministry, said though that the general outlines of the project have already been presented to the municipal government and Skulte sea port authority.

“Our main task now is to ensure that the market in functioning properly and also meet the 3rd Energy Package requirements, foreseeing among other things third parties’ access to Latvian gas sector and unbundling gas operators. When these issues are solved, the Latvian market will be fully open for business possibilities in the field of natural gas,” Urpena said.

Asked why Latvia is not eager to use the Klaipeda LNGT capabilities, she responded that he decisions on the purchases are made by private companies, not the Latvian Government.

“Several Latvian companies have contacted the Lithuanian authorities in that regard as far as we know. We welcome the further co-operation on commercial terms,” she said.

Valdis Dombrovskis, the former Latvian prime minister, who now is deputy president of the European Commission, said in a recent interview that Latvia “has had all preconditions” for implementation of its own LNGT project.

“Look, the discussions between Estonia and Finland on the site of a regional LNG facility also ended with the conclusion that each of the countries has to build it,” he told.

Lithuania and Latvia could share Klaipeda facility

Meanwhile, some foreign experts insist the Baltic States lack unity in tackling their own and regional energy issues and that plays against their core economic and geopolitical interests.

“Indeed, Latvia’s prospects of getting its own FSRU are quite realistic now taking into account that the market price for construction such facility has fallen significantly lately. Latvia can strike a good deal with a FSRU builder out there. But it is hard to tell before-hand whether the Latvian floating storage and regasification unit will be competitive in the market,” Mikhail Krutikhin, a partner of RusEnergy, a Russian energy consulting company, told Natural Gas Europe.

“It would be a lot more suitable for Latvia to employ the capacity of the Klaipeda LNG facility. But for this, big efforts of coordination and bilateral diplomacy would be needed between Latvia and Lithuania. It seems it is missing now. This is not a good thing, as the Klaipeda terminal is not operating year-round. If Latvia and Lithuania agreed that one year the FSRU is used in the Lithuania and other be towed to a Latvian port in proximity of the Inchukalns underground gas storage facility, the issue would be solved and be in the best interests of the two countries. But I just don’t see the Baltic unity on the issue yet. This is disappointing,” Krutikhin pointed out.