European Commission approves support for Lithuanian LNG terminal

The European Commission has approved under EU State aid rules the compensation granted by Lithuania to LITGAS for supplying a mandatory quantity of liquified natural gas (LNG) to the LNG terminal in Klaipeda.

Back in November 2013, the commission approved an aid scheme to support the construction and operation of an LNG terminal at the Klaipeda seaport in Lithuania. The LNG terminal has, since its construction, played a vital role in the security and diversification of gas supplies in Lithuania.

In June 2018, the Lithuanian government notified the commission that changes had been made to the aid scheme approved in 2013.

The government claimed that it had a public service obligation of LITGAS, and that in order to ensure security of supply, the LNG terminal must be kept operational, which requires continuous deliveries of LNG and its constant regasification. Therefore, in January 2016, Lithuania decided to modify the initial scheme and to entrust LITGAS, a liquefied gas supplier with a public service obligation to ensure the supply of a mandatory quantity of LNG to the LNG terminal in Klaipeda. In exchange, LITGAS receives compensation from the Lithuanian state to cover the costs incurred for performing this public service obligation. The compensation is financed via a security supplement, which is an additional fee paid by all gas transmission system users.

As part of the support scheme approved by the commission in 2013, when the LNG terminal started its operations, Lithuania introduced a purchase obligation whereby heat and electricity generators were obliged by law to purchase a certain quantity of gas from LITGAS. However, taking into account the developments on the gas market, Lithuania considers that, as of January 2019, the purchase obligation will no longer be necessary and can be abolished. As a result, LITGAS will sell its gas directly on the market.

“We have found that the modifications to the initial scheme, in particular the removal of the purchase obligation, will contribute to enhancing competition on the Lithuanian gas market,” announced the commission, adding that “We have approved both the scheme currently in force for the period from 2016 until the end of the year 2018 and the modified scheme for the period from 2019 until the end of 2024.”

Sharing energy across European borders via a connected modern energy grid creates a system that is more secure, sustainable and affordable.

The Klaipeda seaport and the LNG terminal are of huge importance to the EU as it will contribute to the EU’s Energy Union objective to reduce energy import dependency by diversifying supply and creating a fully interconnected EU wide energy market.

Additionally, in August 2018, Lithuania received its first LNG shipment from the US, in line with the joint statement by EU President Jean-Claude Juncker and US President Donald Trump in July to strengthen EU-US strategic energy cooperation.