Lithuania Offered LNG Cheaper Than Gazprom Natural Gas

Lithuania, one of four European Union nations fully dependent on Russia for their natural gas, would pay less for shipments from countries including Qatar than for pipeline supplies from its eastern neighbor.

The Baltic state will be able to start importing fuel via a new floating regasification terminal in January and partly replace deliveries from Russia, for which it now pays the highest price in the EU, Lithuania’s Energy Minister Jaroslav Neverovic said yesterday in an interview in Katowice, Poland.

Lithuania relies on OAO Gazprom for all of its natural gas and is battling the Russian pipeline gas export monopoly to cut prices it says are at least a quarter more than other European buyers pay. A final agreement on lower prices and other supply terms seems likely this month, Prime Minister Algirdas Butkevicius said last week.

“The terminal will allow us to diversify supplies and act as a virtual pipeline that will provide a price benchmark, which our monopoly supplier will not be able to exceed,” Neverovic said. “The offers we’re getting from suppliers are lower than the price we pay Gazprom.”

Lithuania is in the final stage of negotiations with short-listed LNG suppliers, including Qatar Liquefied Gas Co., the world’s biggest producer of the fuel. The company is a “serious candidate” for the contract for 0.5 billion cubic meters of gas per year for five years, Neverovic said. Gazprom sold Lithuania 2.7 billion cubic meters of gas in 2013, according to the company’s financial report.

“We plan to have the contract in place in time to start receiving gas in January, so we’re flexible, and we don’t need to complete talks by the end of June,” Neverovic said. The main supply agreement would probably be accompanied by a number of smaller spot contracts, he said.

German Prices

Lithuania pays about 1,200 litai ($484) per 1,000 cubic meters of Russian gas, the Verslo Zinios newspaper reported last month. That’s at least a quarter more than other European buyers, President Dalia Grybauskaite said in February.

Gazprom has improved the pricing formula it uses through 2015 to charge Lithuanian gas utility Lieutovos Dujos AB, which may reduce the price paid by 21 to 23 percent, and the government will continue talks with the Russian company on gas supplies, Butkevicius said today.

The German gas price with a reduced fee for transport given Lithuania’s proximity to the source of supply should become a reference point for the cost of Russian deliveries, Neverovic said.

“How much we’ll be buying from Gazprom will depend on the price for Russian gas,” he said. “In the short term, the German price can be a benchmark, while in the long run the market will become more liquid with supplies from the U.S. and Australia and other countries, and will become more of a buyer’s market.”

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