US LNG from Sabine Pass Reaches Lithuania

Lithuania's gas trader Lietuvos Duju Tiekimas (LDT) took delivery of its first cargo of LNG from the Sabine Pass terminal, Louisiana, August 21, on board the tanker Clean Ocean. The LNG will be reloaded into the floating storage and regas unit Independence and is expected to reach gas consumers soon afterwards. Some of the gas will be stored in Latvia’s gas storage facility at Incukalns and supplied to clients in Latvia.

This marked the first-ever shipment of US LNG to the Baltic countries and one of the first US LNG shipments to eastern Europe.

Lithuania’s Litgas, a gas trading arm of Lietuvos Energija which owns LDT, signed a deal with Cheniere Energy in early 2015, but the expected American gas deliveries never followed as the gas was too rich for the gas system.

When asked at the celebrations what had changed, LDT CEO Mantas Mikalajunas did not elaborate whether or how the issue had been solved, but said the composition of Cheniere's gas now is “consistent” with the Lithuanian standards. Last June, LDT signed a contract for around 140,000 m³ of LNG with Cheniere Marketing International, a subsidiary of US Cheniere Energy.

One solution is to install nitrogen injecting facilities at the reception terminal – this was the approach taken in the UK Isle of Grain terminal for example; another is to strip out the butane and other liquids before liquefaction takes place. High liquids content has been a problem for US LNG plant operators, as low liquids prices have meant it is not worth while extracting them at source.

More to come

Lithuania expects another US LNG batch in mid-September under a contract signed between LDT and Gas Natural Fenosa in July. LDT also signed a deal last year with Koch Supply & Trading, another US gas trader, for LNG supplies throughout 2017. The company has this year delivered two LNG shipments, each of 150,000 m³, one from Norway and one from Nigeria.

Although more shipments of US LNG to Lithuania are expected to follow, market participants doubt if Lithuania can drive out Russia's Gazprom from the local gas market. Gazprom boasted last week of having increased gas sales to Lithuania in the first half of this year, compared with the same period last year. After a slip in previous years, Gazprom has bounced back to the top position on Lietuvos Energija’s gas supplier list.

"This is the first, but certainly not the last US shipment. Given the market situation and the development of the market, we can expect an increasing amount of these shipments…The US LNG  we received is currently cheaper than Gazprom's gas,” Lithuania's energy minister Zygimantas Vaiciunas said, choosing his words carefully when asked a question on Gazprom at a news conference in Klaipeda. According to the minister, the US cargo will further increase the energy independence of Lithuania and the whole region.

Not 'Liberty LNG', but commercial sense

“Events like this deserve a separate entry in the pages of energy history. In addition to being the most important strategic partner of Lithuania, today the US also becomes a reliable LNG supplier for the whole region. This strengthens the partnership and energy independence and also intensifies the competition between gas suppliers, which will warrant even better gas prices for the consumers of Lithuania and the whole region,” Vaiciunas emphasised.

Howard Solomon, deputy chief of mission at the US embassy in Vilnius, underlined that the gas supply contract between LDT and Cheniere Energy was commercially based. "The US government was not involved in this specific deal," he noted.

Dalius Misiunas, the CEO of Lietuvos Energija, says that it is a sign that, in the global LNG market, Lithuania with Lietuvos Energija Group is considered a reliable partner and an attractive market.

“We have been observing the situation of the USA that has a high LNG potential since 2014. We are glad that Lithuania received one of the first US cargos of LNG in the eastern and central Europe. This recognition will help us to diversify the supply and offer the best prices for our clients in Lithuania and other Baltic states,” he reportedly said.

The CEO of terminal operator Klaipedos Nafta, Mindaugas Jusius, underscored that irreversible changes have hit the LNG market sooner than expected. “If six, five or even two years ago we used to think that in the near future the US could become the exporter of LNG, possibly to Lithuania as well, this way ensuring the energy security of Lithuania and competitive prices in the Lithuanian gas market, today we can state for a fact that the global LNG market has irreversibly changed due to Cheniere. The Baltic natural gas market has been equally irreversibly changed by Klaipeda LNG terminal: it created energy independence, opened the Baltic gas market, and ensured an alternative energy source option at competitive market prices,” Jusius said.

Asked by NGW to specify the costs of the Cheniere's gas transportation from Louisiana to Klaipeda, Frederik Smits van Oyen said no more than that it was competitively priced.

To the question whether Cheniere Energy will deliver more natural gas to Lithuania this year, he replied he could not say it, but added: “The more we bring, the better it will be. We got lots of energy to sell everywhere…We can compete with anyone in the world, Gazprom, too – Europe is very close and we expect a lot of LNG to go to Europe, long-term as well.”

He did not, however, go into details with regards to the gas volumes to be delivered to Europe. With the exception of the very small Kenai, Alaska plant, Sabine Pass is the only LNG export operation, and it is wholly-owned by Cheniere. It sold off nearly all its capacity on 20-yr contracts, retaining a small percentage for its own use and for flexibility. “We started the exports early last year. Now we’ve got 30.5mn mt/yr online and we’ve delivered over 150 LNG cargoes,” Smits van Oyen said.

Lithuania's foreign minister Linas Linkevicius also hailed the US LNG shipment, noting that it strengthens the partnership between the two countries. "# US & # LT strategic partnership stronger every day. 1st # LNG shipment from US arrives today in Klaipeda. Crucially important for whole region," he tweeted August 21.

Linas Jegelivicius