The State Energy Regulatory Council (VERT) agreed to invest in the acquisition of the vessel after the expiration of its lease from Hoegh LNG in Norway in 2024.
The aim is to ensure an uninterrupted gas supply in Lithuania after the expiration of the ship lease agreement with Hoegh LNG in Norway in 2024. Lithuania plans to use the ship for another 20 years – until 2044.
“The aim of the project is to ensure the continuity of the LNG terminal and the implementation of the National Energy Independence Strategy while maintaining the benefits of the LNG terminal for Lithuania: increasing energy independence, increasing the competitiveness of energy markets and granting access to global natural gas markets to Lithuanian and regional natural gas importers”, stated in the document of the council meeting.
Rimas Volungevičius, Chief Adviser of the Gas and Electricity Department of VERT, sounded the remarks received by Achema Group on 5 January. These include criticisms of the lack of more detailed information, the size of the storage vessel, the continued operation of the vessel, and international tender procedures.
According to the concern, only “subjective” information of Klaipėdos Nafta is provided in the VERT certificate and the assessment of investments by the council is not provided.
“We note that energy companies, not the council, prepare projects and provide justification to VERT, which performs their validity and assesses compliance with legal requirements. The calculations performed by Klaipedos Nafta and the assumptions applied in them have been agreed with the Council, ”said R. Volungevičius.
According to him, the terminal operator informed the council that certain information, which is currently not disclosed due to confidentiality, will be available during the first half of this year.
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The Achema Group is asking, among other things, why no consideration has been given to buying or leasing a smaller vessel.
“In response to this statement of the company, we believe that in 2018 an amendment to the Law on the Liquefied Natural Gas Terminal was adopted, which obliged the company (Klaipedos Nafta) to acquire a storage vessel and for these reasons the alternative of leasing was not considered. And the analysis of the alternatives itself was carried out before the amendment of the law, therefore, in our opinion, the company carried out all actions in accordance with a transparent public procurement procedure, ”said a representative of VERT.
“We would also like to point out that the acquisition of a smaller FSRU (floating storage and regasification unit) does not mean that it will be the most cost-effective,” he added.
The group complained that the cost-benefit analysis of the project had not been carried out, and it was not known how much the modification of the quays would cost, and what effect the acquisition of a smaller FSRU would have.
“A cost-benefit analysis has been carried out, which shows that although there is a negative financial net present value in the absence of a security component, the economic benefits of this project are one billion euros,” said R. Volungevičius.
Irmantė Kimienė, General Manager of Achema Group, said that the decisions regarding the redemption of the ship were early. At the same time, it would be worthwhile to analyze how the project costs would change if the ship was operated by Klaipedos Nafta itself and not by a third party.
“In our opinion, the decision is too early, and the project, whether it is really optimal and reasonable, would not be possible today (…) . (…) And it should probably be done now: it is an assessment of the efficiency of the terminal management itself and a comparison of options, ”said I. Kimienė.
“Since its (project) value is very significant, and since we also represent the main gas consumer (Jonava fertilizer producer Achema), we think that discussions with gas consumers would be purposeful when considering such a project,” said I. Kimienė.
Mindaugas Navikas, Commercial Director of Klaipedos Nafta, states that a longer delay with the projects would pose a risk to the continuity of gas supply.
“Given the complexity of the project itself, the time it takes to process both the acquisition of the storage vessel itself and the operation after it, in our opinion, that period is not too early. If we delay this process, we would not be able to ensure the import of liquefied gas after December 2024 as a company, ”M. Navikas said at the meeting.
Jonava “Achema”
© DELFI / Laimonas Jankauskas
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VERT chairman Renatas Pocius said the board had raised the issue of choosing alternatives to the Independence ship from the start, and the regulator said the process was “well-structured.”
“VERT has basically been one of the key issues for Klaipedos Nafta from the very beginning, namely the selection of alternatives and the establishment of a transparent path for those alternatives, which means that all stages have been implemented through public procurement and public consultations (…). It was really a very detailed discussion with all market participants “, – R. Pocius.
In 2018, on behalf of Klaipedos Nafta, international consultants assessed that Lithuania must maintain access to global LNG markets. The authors of the study stated that the greatest economic benefit from the analyzed alternatives is created by the acquisition of the storage vessel after 2024, and not by further leasing.
„Klaipeda oil“In the international tender announced at that time set a maximum of 160 million. The purchase value of the LNG storage vessel is estimated at the amount of the loan received by the company from the Nordic Investment Bank for the purchase of the vessel (not necessarily the vessel Independence).
At the end of the tender, it was decided to acquire Independence. This has been identified as the most cost-effective bid, as no bids have been received in an international tender, and Independence is specifically tailored to the existing quay. Other reasons for this decision were also mentioned.
The VERT certificate states that after completing the tender procedure and deciding to acquire Independence, Klaipėdos Nafta intends to negotiate with the current owner of the storage facility on specific conditions for the acquisition and takeover of Independence.
It is planned to inform Hoegh LNG about the company’s choice to exercise the right of redemption of Independence and to conclude a contract for the purchase of this storage vessel by December 2024.
Independence arrived in Lithuania in October 2014.
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