Klaipėdos nafta AB and Latvenergo AS strengthen energy security in the Baltic region
September 30, 2022
Latvenergo AS, having participated in the long-term liquid natural gas (LNG) terminal capacity allocation procedure organised by Klaipėdos nafta AB, has obtained the right to use the Klaipėdos nafta terminal's annual capacity of 6 TWh for the next 10 years for regular supplies of natural gas to Latvenergo CHPP generation and reliable supply of customers.
The agreement between Klaipėdos nafta and Latvenergo provides for the regasification of regular supply of 6 standardised LNG carriers, which will be selected, procured and contracted by Latvenergo on the open international market, and which will be transported annually from the terminal to Latvia – for the generation needs of the CHPP, for customers and for safety reserves. Latvenergo has systematically established cooperation with global suppliers to ensure that the company is well prepared for supply auctions. In the long-term capacity allocation procedure for the Klaipėdos nafta LNG terminal, 4 packages were offered, each with 6 TWh annual power, resulting in a total of 24 TWh awarded in the Baltic market, with Latvenergo gaining 1/4 of the long-term capacities.
The Baltic natural gas market is 40-80 TWh/year in scale, with interconnections between Poland and Finland, with active LNG terminals in Lithuania, Poland and soon in Finland and Estonia, with the valuable Inčukalns underground gas storage. All in all, a 6 TWh annual package is a very rational step for Latvia and Latvenergo, contributing to the development and expansion of the regional market in terms of logistics, storage and competition in procurement.
Europe as a whole is turning to LNG terminals as a desirable alternative to ensure a reliable supply of natural gas independently from Russia. As of 2023, Latvia will completely stop importing Russian natural gas. This has significantly increased the importance of the Klaipėdos nafta LNG terminal, which is currently the only gas supply alternative in the Baltic region, with demand for terminal capacity exceeding the supply. Klaipėda nafta LNG terminal operates efficiently and with the highest responsibility for operations and decisions, guaranteeing a safe and reliable infrastructure link for the Baltic region.
Guaranteed LNG terminal capacity is important for the whole Baltic region and is a critical necessity for the Latvenergo CHPPs and also Latvian gas consumers as it covers a part of the protected consumption and it should be taken into account that additional deals with all Baltic wholesale market participants and terminal developers will need to be agreed in the future.
The use of the terminal together with direct international procurement represents a qualitatively new step in Latvia's natural gas balance and Latvenergo's natural gas portfolio, and for security of supply guarantees a critical base volume that will be purchased on the international market from the world's leading LNG companies.