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How Lithuania cuts ties to ‘toxic’ Russian gas – POLITICO

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Twelve years ago, Lithuanian company administrator Rokas Masiulis got a new job with an ambitious goal: to end his country’s dependence on Russian gas.

In his new position as head of Klaipėdos Nafta, a state-controlled oil terminal operator, Masiulis was tasked with overseeing the commissioning and commissioning of a floating liquefied natural gas (LNG) terminal off the Lithuanian Baltic Sea coast

The ship – which was named Independence and entered service in 2014 – was built to ensure that Lithuanian consumers could still get gas even if political relations with Russia deteriorated so badly that supplies from the east were halted have to.

Earlier this month, as the brutality of Moscow’s invasion of Ukraine became increasingly evident, the Lithuanian government flipped that switch. to announce that it had become the first European country to stop all imports of “toxic” Russian gas. Independence has proven itself and Lithuania’s gas supply has remained stable.

“I was excited about the Independence project when we took it on, but I couldn’t imagine how big the deal would eventually be,” said Masiulis, who later became Lithuania’s energy and transport minister and now heads a state government. controlled power grid operator.

Useful case study

Curbing Russia’s lucrative gas supplies to the West is a key challenge for European leaders as they engineer their response to Moscow’s attack on Ukraine and seek to drain the Kremlin’s war chest.

“My country made decisions years ago that allow us today to painlessly sever energy ties with the aggressor. If we can do it, the rest of Europe can do it too!” tweeted Lithuanian President Gitanas Nausėda. The country also said it would stop buying Russian oil, although it remains connected to Russia’s power grid.

A special focus is on Germany, the industrial center of Europe, which generates around 15 percent of its electricity from gas and obtains around half of its gas from Russia.

German Climate and Economy Minister Robert Habeck said it would take until 2024 for Germany to wean itself off of Russian gas, leaving lawmakers in Kyiv increasingly frustrated.

“As long as the West continues to buy Russian gas or oil, it will support Ukraine with one hand and the Russian war machine with the other,” said Ukrainian Foreign Minister Dmytro Kuleba told Reporter in Brussels in early April.

“We don’t understand how money can be made from blood,” said President Volodymyr Zelenskyy told the BBC.

Lithuania’s independence, known as a Floating Storage Regasification Unit or FSRU, could provide a useful case study for those looking to steer away from Russian gas. LNG is pumped from a transport vessel onto the ship where it is converted back into gas for use or storage.

FSRU systems can be built relatively quickly – project lengths are estimated between one and three years – and generally require fewer building permits than a permanent onshore equivalent. They can be moved from place to place and relatively easily swapped out for larger or smaller units as needed.

Importantly, they also allow a country to choose where its LNG supplies come from: Lithuania currently sources most of its LNG from Norway, the US and Qatar.

FSRU projects are considered good solutions for smaller countries like Lithuania, which consumes about 2 billion cubic meters (Bcm) to 3 billion cubic meters of gas annually, said Zongqiang Luo, a gas market analyst at Norwegian consultancy Rystad Energy. Lithuania got about a quarter of its gas from Russia last year.

For a country like Germany, which needs about 90 billion cubic meters per year, such a system could still be useful as part of a wider range of solutions that could also include gas pipelines Norwegian and Dutch gas fields and energy saving measures.

Italy, the Netherlands and Estonia have said they are considering FSRU projects, while Berlin is planning three such blocks that could supply 27 billion cubic meters of gas per year.

Habeck recently visited Qatar to discuss LNG supplies.

“It can work,” he said told Broadcaster DW after the visit.

Latvia and Estonia also said they will end Russian gas imports. The region is not yet connected to the EU-wide gas network, which will happen in May when a connection to Poland is partially completed.

Although Lithuania no longer buys Russian gas for domestic consumption, Russian gas still flows through its pipeline network to the Russian enclave of Kaliningrad.

troubled story

Tensions between Russia and Lithuania over energy supplies date back to the early 1990s, when both countries were trying to rebuild their economies after the collapse of the Soviet Union.

In the winter of 1992, in one of several attempts to exert political pressure on Vilnius, Russian President Boris Yeltsin halted oil supplies to its Baltic neighbors after disputes over payments.

In the years that followed, Vilnius accused the Russian gas giant Gazprom of abusing its monopoly position by charging Lithuanian customers excessive prices.

Ultimately Lithuania lost a long-running damages case before a Stockholm court over this claim, but at the same time the leadership of the Baltic state developed another way to regain power for Gazprom: the independence project.

In 2010, former Energy Minister Arvydas Sekmokas brought Masiulis to his office on the tree-lined Gedimino Avenue in the capital, Vilnius, and offered him the top job at Klaipėdos Nafta, which he accepted.

Lithuania’s contract with Gazprom expired in 2015, and Masiulis was aware that by that time a new FSRU unit had to be moored in the port of Klaipėda and ready for action.

Masiulis began looking for companies with the know-how to source an FSRU vessel.

In early 2012, Norway-based Hoegh LNG announced that it had won the Lithuanian contract and hired South Korean shipbuilder Hyundai to work on the Independence.

A range of specialist equipment was also ordered for the $330 million project, including a regasification system from China and a docking system from Denmark. In Lithuania itself, public and private sector stakeholders have been pushed hard to ensure the project meets its deadline, decisions are made quickly and long hours are worked.

The pace continued until October 27, 2014, when Independence finally docked at her new jetty Klaipėda is received by Masiulis, who a month earlier had been appointed Energy Minister by then-President Dalia Grybauskaitė, a staunch supporter of the project.

“We are now an energy-secure state,” she said.

As the gas began to flow from the ship, Vilnius lawmakers noticed a secondary benefit they hadn’t anticipated.

The new competition from independence not only gave them more energy security, but also pushed Gazprom in fall the price of the gas it sent to Lithuania by about a fifth.

“It was both a political and an economic victory,” said Masiulis.

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