At the sitting on Wednesday, the Government adopted a decision to construct a liquid natural gas (LNG) terminal in Klaipėda. The public company “Klaipėdos nafta” was chosen as the main terminal building tool. The proposed capacity for the LNG terminal would be 3 billion cubic metres a year.

“This decision is very important, however, it is not the only step in realizing the Government`s strategy to seek full energy independence”, Prime Minister Andrius Kubilius pointed out. He noted that the construction of the terminal was directly related to the implementation of the European Union directive known as third energy package in Lithuania, announced by the Government in May.

The third package calls for the separation of gas production and supply from transmission networks. The construction of the LNG terminal would be pointless without separating gas supply and distribution since Lithuania would fail to distribute gas shipped to Klaipėda as the state does not control the gas mains.

At this moment in time, gas supply and distribution is owned by the “Lietuvos dujos”, with Russian monopolist „Gazprom” being its main shareholder. In the Prime Minister’s opinion, a huge strategic mistake was made during the privatisation of “Lietuvos dujos” by A. Brazauskas’ Government: the main network of gas transmission was left in the hands of “Lietuvos dujos”, and the implementation of the third energy package is expected to correct this mistake. The Prime Minister stressed that nearly nothing specific had been done in the gas market to pave way for alternative gas supplies; on the contrary, the „Gazprom” monopoly was virtually left intact.

Other steps are being planned alongside with the construction of the LNG terminal and the implementation of the third energy package, ultimately leading to the opening of the Lithuanian gas market: the creation of gas exchange and construction of Klaipėda-Jurbarkas gas pipeline (thereby establishing a main gas transmission network ring in Lithuania).

The “Gazprom”has been taking full advantage of his monopolistic positions, hence the price it charged per 1000 cubic metre of natural gas for Lithuania was 100–150 U.S. dollars higher than the gas prices in Western Europe. Globally, gas prices dropped due to the growing oil shale gas consumption and the relevant decrease in liquid gas prices. The absence of alternative supply in Lithuania enables the Gazprom to keep prices high for the time being. “The third package and the terminal will translate into a higher degree of energy independence and lower gas price for Lithuanian consumers”, said the Prime Minister.

During his meeting back in March with Russian Prime Minister Vladimir Putin, Andrius Kubilius pointed out the need for modernisation of the Gazprom pricing policy, otherwise, Lithuania would be pressed for looking for gas supply alternatives.

In parallel, consideration is given to Belarus’ bid to build the LNG terminal in Lithuania. According to the Prime Minister, Lithuania understands Belarus’ determination to seek alternatives to Russian gas and it only confirms the regional character of the energy security problem. At the same time, it is noted that the terminal servicing Belarusian needs is considered separately from the terminal project for Lithuania.

Another important issue in the energy independence strategy is an independent electricity market and its redirection from Russia to the European Union (the previous governments had not done anything in this respect over the period of twenty years again). The immediate tasks of the current government in this area are the development of the Lithuanian power exchange, electricity links to Sweden and Poland, construction of NPP in Visaginas, and the ultimate accession to the European Union`s electricity distribution system.

The Government also promotes the development of alternative energy prospects, particularly with a view to the strategic objective of using only internal renewable sources for heat generation in the long run, bio-fuels in the first place. This would not only significantly reduce dependence on imported gas, but would also bring down the price for consumers. The government will continue to consistently seek to reduce heat energy consumption through public buildings and apartment houses renovation programme.

“The Government believes that in such a way we will manage to achieve a breakthrough in Lithuania in creating an independent, secure and transparent energy system, beneficial for people and integrated with European power systems”, said the Prime Minister.