The Board of KN (AB „Klaipėdos nafta“), the Oil and LNG Terminal Operator, adopted decisions to secure long-term LNG import to Lithuania by acquiring liquefied natural gas (LNG) storage unit “Independence” or another floating liquefied natural gas storage unit (FSRU) by the end of 2024. A decision has also been passed to contact the National Energy Regulatory Council (hereinafter – NERC) immediately to optimize terminal costs thereby reducing the cost of LNG terminal infrastructure for consumers by EUR 27 million per year from 2020.
“Estimates show that the LNG terminal will provide economic benefits for Lithuania and gas consumers of the region after 2024. As a reliable alternative for gas import, the LNG terminal will ensure competition in the gas market and contribute to the energy security of the state. In turn, this provides Lithuania with opportunities for regional leadership in the energy sector and for KN to further actively develop the cross-border LNG chain of value,” says Arūnas Molis, the director of KN Klaipėda LNG.
Final decisions on the specific choice and conditions of the floating liquefied natural gas storage vessel will be approved by the Board of KN, and this decision is expected to be made by the end of 2022.
In order to implement the decisions on the reduction of the security component, which could be implemented already from 2020 onwards by reducing the security component by about EUR 27 million, the company plans to borrow up to EUR 135.5 million from the Nordic Investment Bank (hereinafter – the NIB). This loan would be used to finance the rent payable for the LNG storage unit. The loan repayment would be secured by a state guarantee, which has already been agreed with the European Commission (EC) and will also have to be approved by the Seimas.
“The decisions passed are extremely important as they provide the basis for the company to initiate specific actions to optimize LNG costs as quickly as possible. Of course, this is only one element in the state’s overall goal to reduce the security component. Smooth cooperation between decision-makers, including the NERC, will be crucial for its quickest possible implementation,” says A. Molis.
A. Molis emphasizes that KN will propose to the NERC to reduce the security component upon the condition that an agreement with the NIB for the necessary loan is finalised and the State guarantee for this loan is activated. In addition, the Company’s management is committed to agree with financial institutions regarding financing for the acquisition of FSRU by the end of April 2020, and to ensure the respective state aid clearance for these loans by the end of May 2021.
“We strive to implement the actions set forth in the Law on LNG as quickly and efficiently as possible. The entire process of achieving the overall goal of securing long-term LNG supply to the country remains extremely complex, so at this point we are keeping all decisions focused within KN and we are focusing on the next, but no less important phase related to the acquisition of the LNG storage unit,” says A. Molis.
The decisions of the Board of KN must be approved by the shareholders of KN at the General Shareholders Meeting.
Caption: FSRU Independence – Image courtesy of Buggi Porschien