LTV's De Facto looks at Skulte LNG terminal developments

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In the coming weeks, the future of the Skulte liquefied natural gas (LNG) terminal project could be decided. The government will have to decide whether to provide guarantees to the investor for covering losses if the terminal's load turns out to be too low, the De Facto broadcast of Latvian Television reported on February 13.

Movers of the idea of the Skulte Terminal promise that it will be more beneficial than its competitors in Klaipeda and Inko. While Lithuanians and Finns rent expensive vessels capable of storing and converting liquid gas, the Skulte project is intended to place the regasification plant at sea on a platform, with no storage tank, since the natural gas storage of Inčukalns is located 40 kilometers away, to which a pipeline would be constructed. The cost would therefore be several times lower.

There are few gas terminals like that worldwide, mostly all use vessels like Klaipeda and Inkoo, or regasification takes place ashore.

Renārs Miķelsons, Director-General of the company "Skulte LNG Terminal", said that the Skulte-type projects are not widespread because they rarely have suitable conditions: “There is also a situation in Germany where the underground gas storage is located 30 kilometers from the sea, but there cannot be a direct connection, because the population is very dense. It's just unique to us that we can.”

The company noted that a strategic investor had been found willing to build the terminal for its own money and become its operator. The cost would be around €150 million. However, in a letter to the Government, it has been indicated that State guarantees are also needed, which means, in fact, compensating for losses if the terminal is used poorly.

Renārs Miķelsons said: “Anyone who wants to build the terminal must have confidence that it will be used. It is a perfectly normal thing that the state is involved in setting up the terminal. If we look at European practice, there is the state involved in some way all the time. We look at Finland – there is a state guarantee."

The Ministry of Climate and Energy is expected to complete its assessment soon and the government is scheduled to decide on aid and forms of cooperation at its meeting on February 21: “I would like to emphasize that the Government's objective is not to introduce another OIK [mandatory procurement component] or OIK type payment. It's off. At the same time, a full analysis is needed in order to make further decisions," said Raimonds Čudars, Minister for Climate and Energy.

After the evaluation, it would be clear how costly the required guarantees can be. Skulte LNG Terminal is now preparing additional information for the ministry. Prime Minister Krišjānis Kariņš (New Unity) last week criticized the project for missing certain calculations in the letter on guarantees and forms of cooperation.

Meanwhile, political support for the project has dropped since the Saeima elections, with arguments that the project has not shown any real progress in five years and that it was five years ago when it was actually necessary. 

Climate and Energy Minister Čudars has yet to reveal how the ministry will advise the government to proceed.

However, he also acknowledged that when the government decided on the need for the terminal, the concern about the availability of gas was much higher:

"If in the past we had limited access to Klaipeda, this availability in the northern part is significantly different now than it was a year ago. These factors should be taken into account when considering the future direction of the project."

At the same time, Čudars said the terminal was still needed.

If the government decides to meet the investor and the guarantees will be given, it is unlikely that the project will be completed by its deadline on September 15 next year. Miķelsons said that there is now high demand for terminals in the world, so the equipment manufacturer could only supply the platform in two years' time.

The project has also yet to do an environmental impact assessment. Miķelsons said that it was now being actively worked on, and it was already concluded that the impact on nature would be small, but the pipeline's location would have to be changed somewhat because of the habitats. Developers hope to complete the assessment in five months. The special status of the terminal project allows procedures to be carried out more quickly than usual and the affected municipalities will not be able to object. Even after the assessment, the final decision on permission to build the terminal will only be in the hands of the government.

Prime Minister Kariņš and other politicians have also proposed that the terminal might not be constructed by a private investor, but by the state, for example, by the transmission operator Conexus Baltic Grid. The company's chief executive, Uldis Bariss, said that if the government so decided, the company would build the terminal, but in his opinion, it would be better to build such projects on market terms. It should also be borne in mind that, due to public tenders, the creation of a terminal would take more time for the public sector.

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