LITGAS and Statoil signed an amended designated supply contract

Natural gas trading company LITGAS, which is owned by Lietuvos Energija group of companies, signed an updated designated supply contract with Norwegian company Statoil yesterday. Contract amendments will help reduce costs of Klaipėda liquefied natural gas (LNG) terminal by more than a third while reducing energy price to the final consumers.

“We are happy to find mutually acceptable agreements, which allow to reduce the maintenance costs of the terminal as well as energy prices and helps ensure a continuous operations of the terminal”, said Dr. Dalius Misiūnas, Chair of the Management Board and Chief Executive Officer at Lietuvos Energija. “Based on the current situation in the market and the latest outlook, we estimate that, after the contract conditions change, the annual expenses of natural gas consumers, experienced due to LNG terminal price component, can be reduced by more than a third, which is EUR 33,8 million.”

“Flexible and benevolent attitude shows a mutual expectation to maintain a long-term cooperation based on trust, which is already bearing fruit. Lietuvos Dujų Tiekimas has purchased gas from this company at a competitive price. Our Group helped establish relations and has significantly contributed to the successful transaction between Statoil and Achema as well as can offer its competencies to other gas consumers in the region who want to diversify their supply. Additionally, we are planning to develop a joint small scale LNG supply operations in Lithuania together with Statoil”, said Dominykas Tučkus, Member of the Management Board and Director of Operations and Services at Lietuvos Energija.

Changes in the contract, which ensure the regulated minimum gas supply volume required for the terminal, include annual gas volume supplied to the LNG terminal, contract period and pricing. The Government of the Republic of Lithuania has agreed to the amendments.

Considering the decreasing demand for natural gas in the energy sector, which is committed to consume gas via LNG terminal, decrease in annual volumes by a third – from approximately 5.5 TWh (approx. 540 million cubic metres) to approx. 3.6 TWh (350 million cubic metres). The contract period was extended to the end of 2024 and will align with the lease contract period of the LNG terminal “Independence”.

Price formula was also changed, the LNG price supplied by this contract is now closer to the prices of gas supplied via pipelines. According to LITGAS estimates, an average LNG import price for 2016 may be around EUR 16–21 per MWh, compared to last year, when it reached EUR 29.04 per MWh.

Due to lower infrastructure costs, heating consumers should spend EUR 11.3 million less, electricity consumers – EUR 9.8 million less, industry consumers – approx. EUR 7 million less, while residential and company gas consumers – EUR 2 million and EUR 3.6 million less, respectively.