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HomeLNGEuropean Commission approves state guarantee for Klaipėda LNG terminal in Lithuania

European Commission approves state guarantee for Klaipėda LNG terminal in Lithuania

The European Commission has approved, under EU State aid rules, a Lithuanian measure to issue a state guarantee for securing a loan for Klaipėdos Nafta (KN), the operator of the LNG Terminal of Klaipėda. The state guarantee will serve to finance the purchase of the Floating Storage and Regasification Unit (FSRU) of the LNG terminal.

Already in 2013, the Commission had approved aid to support the construction and operation of the LNG terminal under EU State aid rules. In particular, the Commission found that the measure was necessary to ensure the security of gas supply in Lithuania. Under the 2013 decision, the leasing costs connected to the construction and operation of the terminal were exclusively financed through a fee levied on Lithuanian gas consumers, the so-called LNG Supplement.

“The EU has set a target for every Member State to have at least three alternative sources of natural gas supply in order to guarantee energy security and maximum price competitiveness, therefore the EC approval of Lithuania’s long-term access to LNG is crucial,” commented the Minister of Energy Žygimantas Vaičiūnas. “This stage of state aid coordination accomplishes the securing of funds needed to implement the project.”

In order to reduce the financial burden on consumers, Lithuania replaced part of the LNG Supplement with a loan guaranteed by the Lithuanian State, which was approved by the Commission in September 2019. After conducting a study, Lithuania concluded that the most cost-effective option for continuing the operation of the terminal while reducing the financial burden to gas consumers and guaranteeing secure gas supplies would be for KN to purchase the FSRU after the expiry of the original lease agreement in 2024.

“It opens an opportunity for us to take further actions, to invite international consultants to conduct a market research of the facilities of the same type as Independence, develop the LNG FSRU purchase and operation strategy, initiate the process of selecting the facility and get ready for the operation of the facility,” added Darius Šilenskis, CEO of KN. “All these stages are necessary to both implement the goal set by the state and KN’s aim to find the most cost-effective option that will allow further operation of available infrastructure, including the LNG terminal berth jetty and a connecting gas pipeline branch, into which we have already invested and keep on creating value for Lithuania as well as our country’s natural gas consumers.”

To ensure that the most cost-efficient option is selected, Lithuania intends to organise a public procurement process in the second half of 2021 for selecting the most advantageous offer. The State guarantee is necessary to obtain a loan which cannot exceed 160 million euros from a private financial institution as this amount should cover the costs of FSRU.

Lithuania has been currently importing natural gas by a pipeline from Russia through Belarus and the LNG terminal in Klaipėda. The third gas import source will be the GIPL gas connection between Lithuania and Poland to be accomplished by the end of 2021.

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