Lithuanian Trader Buys US LNG

Lithuania’s natural gas supply and trading company Lietuvos Duju Tiekimas (LDT), subsidiary of the state-controlled Lietuvos Energija energy holding, signed a gas supply contract with US Cheniere Marketing International at the end of last week and purchased a LNG cargo swiftly afterwards.

“The company took advantage of the surplus of LNG and lower gas prices on international markets as well as low-cost gas storage conditions in Latvia’s Incukalns underground natural gas storage facility. However, only part of the US cargo will be stored in it. The delivery is slated to arrive at the Klaipeda seaport in the coming weeks,” LDT told NGW. “The gas comes from the US,” it said. The agreement is non-binding and will apply on a case-by-case basis.

“The price we’ve paid Cheniere is more competitive than that proposed by the other bidders,” LDT said, without elaborating. Gas traders have complained of high storage charges at the Incukalns facility, but the official claimed they were “acceptable for now” for LDT.

This year, LDT has also a valid gas supply contract with US Koch Industries – its supplies are expected to account for over a third of LTD's 2017 gas needs – and with Gazprom.

Koch is expected to sell 2mn MWh in 2017 – this amounts to about two gas carriers. LDT would have bought LNG gas from Statoil last year, but stopped because the price was too high. Lithuania has stated in the past that the quality of American LNG does not correspond the requirements by Lithuania – possibly because it was too rich, low hydrocarbon prices making it not worthwhile extracting gas liquids from the shale gas as it leaves the producer for separate marketing. “The fact that we are able to accept it now means it is up to standard,” LDT said.

This will be one of the first times that a Baltic States gas supplier has been able to take advantage of the global LNG market and the synergy opportunities of the regional infrastructure – an LNG import terminal and a big storage facility – for commercial purposes.

“Being a part of Lietuvos Energija Group and having an opportunity to take advantage of gained experience, we are successfully expanding our geography of acquisitions and attracting new LNG suppliers to Lithuania. This purchase is a part of our constant striving for optimal diversification of sources of supply exploiting market opportunities and seasonal price fluctuations. This allows LDT to offer customers in Lithuania and other Baltic States competitive prices and flexible conditions of supply,” LDT CEO Mantas Mikalajunas, commented on the deal with Cheniere Marketing International (CMI).

Lietuvos Energija CEO Dalius Misiunas noted among other things that US natural gas suppliers’ increased scope of gas supply to the global market contributed to the “competitiveness of Lithuania” and was beneficial for natural gas consumers seeking to reduce energy expenses. Poland has already imported US LNG.

LTD is the only natural gas supplier in the Baltic States keeping significant reserves of gas in Incukalns natural gas storage and importing gas from several sources: pipeline gas from Russia and LNG. However, it was Litgas, another subsidiary of Lietuvos Energija that back in early 2015, signed the first contact between a Lithuanian company and CMI.

“The agreement has not been translated into a business, besides the company’s main activity is to secure the proper functioning and supplying gas to the LNG jetty Independence,” LDT told NGW. “Litgas is not likely to start buying commercial quantities of gas in the future,” he added.

Linas Jegelevicius