Still many uncertainties around Skulte LNG terminal construction

The cost of the Skulte LNG terminal project has tentatively increased by €28 million. The project developer is still looking for the most appropriate technical solution, and the environmental impact assessment process is still not in place. Minister for Energy and Climate Raimonds Čudars (New Unity) is currently waiting for a detailed economic justification for building a terminal in Latvia, Latvian Radio reported on January 11.

Last year, the government and the Saeima supported the creation of a liquefied natural gas (LNG) terminal in Skulte. It has the status of an object of national interest and requires the terminal to be completed by the autumn of next year. Renārs Miķelsons, Director-General of the project developer AS Skule LNG Terminal, acknowledged that there are challenges with an increase in construction costs.

“We previously declared that the total cost of the project was €120 million and then we had already chosen a supplier and started receiving signals in the second half of last year that costs were climbing. This supplier of equipment is from Sweden and has a ready-made certified platform that still has other customers, but its main problem is that overall costs are increasing, as demand is very high at the moment. We are currently working on another technical solution,” Miķelsons said, acknowledging that the increase in the project amounts to around EUR 28 million.

Building the LNG terminal platform and then setting it up at sea will take a total of about 16 months.

Miķelsons is convinced that the cost increase will not affect the deadline for the completion of the site.

Minister looks forward to the economic justification of the project

One strategic investor has now expressed his readiness to participate in the project. Miuķelsons explained that the government is planning to offer a number of forms of cooperation, including an agreement on state aid in the form of guarantees following the construction of the gas terminal.

“Neither the law nor any other Cabinet orders provide for these kinds of guarantees, then it is necessary to look at what is exactly the matter, and to analyze these proposals in order to take any decisions. At the moment, however, we do not have access to any kind of information on any kind of guarantees," said the Minister for Energy, Raimonds Čudars.

By law, the draft establishment of the Skulte terminal had previously been placed under the supervision of the Ministry of Economics (EM), but it has now been entrusted to the newly created Ministry of Climate and Energy. Čudars explained the role of the Skulte terminal in supplying gas to the Baltic States:

“For example, in the use of the Klaipeda terminal, it was the interests of Latvia that were specifically defended so that we received the notional possibility of transporting gas from Klaipeda – 6 terawatt-hours per year. We must therefore count on the fact that if the terminal is located in another country, the national interests of that country may prevail and may have a negative impact on gas supply. At the same time, it should be acknowledged that there is currently also a terminal in Finland, which has started in the test mode and is connected to the Baltic gas network, so that the availability of gas itself has increased,” the Minister said.

Čudars said the Skulte project is essential in terms of national security, but at the same time, the minister is currently expecting a detailed economic justification from the developer for setting up a gas terminal in Skulte.

“This justification relates to the overall role of this type of gas terminal on the Baltic market and the potential impact on prices in general. This is about detailed proposals that should be examined separately. At the moment, it is largely in the hands of the developer itself to offer the government an economic model that would be viable and economically justified. This should also be examined by the government in the near future in order to make final decisions at a later stage, together with the conclusion of the impact and environmental assessment,” Čudars said.

Full environmental impact assessment not yet started

Skulte gas terminal developers have not yet undertaken a full environmental impact assessment, said Sigits Duduris, board member of the Environment Consultation Office Ltd (Vides konsultāciju birojs).

So far, the project developers have only asked experts to investigate the bird population, because there is a Natura 2000 site in the Rīga Gulf of the Baltic Sea.

Duduris said the environmental impact assessment procedure would take at least another six months. Miķelsons said that it would be the most important study of the risks of the re-gasification process, and, like the increase in the cost project, the final environmental impact assessment procedure would not, in his view, have an impact on the deadline.

“The environmental impact assessment program requires a very detailed description of each technology. There must be a model of all the domino effects in the event of accidents, etc. It must therefore be very precise: what will the method of regasification be, how it will be combined, what emissions will be, what side effects, fuel consumption, etc. However, all this can be done in parallel, it does not prevent us from working in parallel with the platform. And then we still have enough time to build the pipeline itself, which needs another six months," explained Miķelsons.

Residents increasingly oppose terminal 

Part of the local population is still opposed to building a gas terminal in Skulte. Marta Timrota, spokeswoman for the coastal environment protection association. She said that the economic rationale for this object of national interest remains unclear because a study on it conducted under the previous government is not publicly available.

"We just want to know why this project is the most beneficial thing, and why it was decided that it should be implemented exactly in Skulte. We see there are also some opportunities in Liepāja and also in Ventspils, [..] We just want to see why and with what it is beneficial. And, of course, we are following the way the issue is moving, and we are not relaxing for a moment, because it is important to us," Timrota said.

According to the local government, information on the project is limited.

Limbaži municipality is one of the territories affected by the construction of a terminal and gas pipeline. The head of the municipality, Dagnis Straubergs, from the Regional Alliance, also confirmed that the small information on the project also prevents the City Council from discussing it.

Miķelsons, commenting on the economic rationale for the construction of the LNG terminal, pointed out that the cost of gas transmission benefits from the proximity of Skulte to Inčukalns underground storage, which will also affect the final tariff for consumers.

The Skulte LNG terminal developer will send a letter to the Ministry of Climate and Energy with detailed proposals this week.

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