Lithuania becomes first ex-Soviet state to buy US natural gas

Klaipėda LNG terminal Lithuania

Lithuania became the first former Soviet state to import a shipment of US natural gas on Monday, at a time when Washington has promised to help weaken Europe’s reliance on gas supplies from Russia.The liquefied natural gas cargo aboard the Clean Ocean tanker is highly symbolic, as Lithuania looks to cement ties and backing from Washington following Moscow’s annexation of Crimea in 2014.

Rising shipments of US natural gas, made possible by the shale revolution in the country, are increasingly pitching into regions Russia’s state-backed gas company, Gazprom, has long considered its own backyard.Lithuania has already been importing LNG from Norway since it opened its first terminal for the supercooled fuel in 2014, but is keen to show Moscow it has a variety of options, including from the world’s largest economic and military power.

“This shipment of US LNG is historic and symbolic as Russia sees Lithuania as it’s backyard and traditionally one of Gazprom’s monopoly markets,” said Agnia Grigas, an Atlantic Council fellow in Washington DC and author of ’The New Geopolitics of Natural Gas’.“

It’s also a signal from the US LNG industry showing that they can go to any region and challenge Gazprom, while Lithuania hopes to deepen commercial ties with the US to ensure Washington’s commitment and support.” Gazprom believes that its pipeline supplies can compete with US LNG on price and Moscow has criticised the US for targeting pipeline projects with possible sanctions.

Lithuania’s energy minister Zygimantas Vaiciunas said on Monday that the shipment from Cheniere Energy’s export terminal on the US Gulf Coast to the floating Klaipeda terminal in the Baltic state was, however, done at a price that was competitive with gas delivered on Russian pipelines, without revealing terms. “We are happy to reach a point where importing gas from U.S. is not only politically desirable but also commercially viable,” Mr Vaiciunas said. Alaska aside, Cheniere is the first US company to export LNG from the mainland, and has sent out more than 160 cargoes since operations started in February last year.

The majority of these are on long-term contracts though it has a number of cargoes available for sale in the spot market through its London-based trading arm. Most of Cheniere’s cargoes have gone to Latin America and Asia, but European countries have also been taking occasional shipments with US LNG reaching Spain, Italy, UK, Netherlands and Poland in the last 18 months.

US President Donald Trump said in a speech in Poland in July that US gas exports to the continent would increase, knowing US natural gas exports have found a particularly warm welcome among pro-Nato politicians in central Europe and the Baltic states.

Both sides have talked up raising shipments further. Jack Fusco, president and chief executive of Cheniere said on Monday that the company was looking “forward to continuing that relationship” with Lithuania.

LNG supplies are expected to grow almost 50 per cent between 2015 and 2020.make further inroads globally as supplies ramp up from the US and Australia as well as other sources. That is linking up regional natural gas markets and is expected, in the long run, to make the super-cooled fuel trade more like oil, with more reliance on spot deals to set prices, and giving traders a bigger role in the market.

Commodity trade house Gunvor on Monday secured a ten-year offtake deal with Equatorial Guinea to market cargoes coming out of its Fortuna Floating LNG project, which is expected to start up in 2020.

 

 

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