Litgas and Statoil plan to launch LNG bunkering JV

Joint venture firm would supply LNG to ships and small terminals in the Baltic Sea, and transport LNG by trucks to onshore customers.



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Updated on 03 Jul 2015 13:55 GMT

Natural gas supply and trading company, UAB Litgas, part of Lithuania's state-owned energy holding Lietuvos Energija, and energy company Statoil, signed a memorandum of understanding (MoU) on Thursday to set up a joint venture company in Lithuania in order to carry out small-scale LNG bunkering services.

The new joint venture company is planned to be established later this year and would supply LNG as a fuel to ships, small terminals in the Baltic Sea, and transport LNG by trucks to onshore customers.

"This marks an important milestone in Lithuania's energy industry and will enable Litgas to diversify its activities internationally," General Manager of Litgas, Dominykas Tuckus said in a statement.

"Increased usage of the Klaipeda terminal will help to reduce infrastructure and maintenance costs incurred by the Lithuanian and Baltic gas consumers and position Klaipeda as an important hub in the Baltic LNG market," Tuckus added.

Geir Heitmann, Chief Origination Officer, LNG, Statoil, remarked: "We believe that the small-scale LNG market in the Baltic Sea has the potential to become commercially attractive business opportunity. The combined competencies of the two companies put the joint venture in a position to successfully develop this market and contribute to the usage of environmentally cleaner fuel in the Baltic region. Naturally, all relevant regulatory and corporate approvals will need to be obtained prior to the final investment decision."

Litgas said: "It is predicted that Baltic Sea small scale LNG market can reach from 0.5 to 1 BCM a year by 2020. The joint venture company would be well positioned to supply this growing market due to convenient logistical set-up capturing one of the shortest supply chains in the region and operational flexibility."

The joint venture company is expected to start its small-scale supply operations in the fourth quarter of 2017 or sooner.

Litgas added: "Securing vessel capacity is an important prerequisite for the joint venture company and dialogue has been initiated with shipping companies with the aim to secure vessel capacity from the time the joint venture company becomes operational and received the final regulatory approvals."

The possibility to cooperate on the joint development of small-scale LNG bunkering services was identified in a 5-year supply contract signed by Litgas and Statoil in August 2014.

As part of the agreement, from 2015 Statoil is contracted to supply an annual volume of 540 million cubic metres (cbm) of natural gas (approximately 950,000 cbm of LNG) to ensure continuous operations of the Klaipeda LNG terminal.