U.S. Firm Delivers First LNG Shipment to Post-Soviet State; Received at Lithuania’s Klaipeda Terminal
On August 21, U.S. firm Cheniere Energy made the first delivery of U.S. LNG to Lithuania’s strategic terminal at Klaipeda, marking the first time that U.S. gas has been exported to a post-Soviet state. U.S. LNG was, however, delivered earlier this summer to Poland in another significant first that highlighted the potential role of U.S. natural gas exports in Europe’s efforts to diversify its sources of supply away from Russia.
The floating LNG terminal at Klaipeda has been a game-changer for the Baltic states, creating a near-instantaneous ability to bring quantities of natural gas into the country that defrayed the monopoly leverage previously held by Gazprom. Investment in interconnectors with Latvia and Estonia, however, have remained necessary for the Baltics, more broadly, to fully exploit this development. Additional supply solutions are being developed that will further reduce Russia’s formerly dominant position, such as a subsea pipeline from Norway as well as connectors to Poland and another linking Estonia to Finland.
Of particular note regarding this U.S. shipment to Klaipeda, was the claim by Lithuania’s Energy Minister and the CEO of national energy company, Lietuvos Energia, that the U.S. LNG shipment was priced cheaper than gas being received from Gazprom. Even with the clear strategic value of bringing in alternatively sourced supply, it has generally been presumed that Russia would maintain its edge on price. There is skepticism regarding this claim out of Russia, however, and Cheniere has not, itself, disclosed the terms of the sale. If true, however, it would be a major shot across the bow with regard to Gazprom’s efforts to maintain (and increase) market share and the significant price drops it has been affecting to make this happen.
Despite half of Lithuania’s gas now being imported from non-Russian sources via Klaipeda (thus far, primarily being delivered by Norway’s Statoil), the other half is expected to be received via pipeline from Russia during the course of 2017.
With NATO enhancing its military commitment to the Baltics, the display to Russia of a U.S.-owned company stepping into the economic domain — particularly the energy industry, where Russia has long enjoyed significant leverage — is likely to be a source of consternation at the Kremlin. Indeed, the implications go beyond the Baltic states, extending also to the broader diversification effort taking place in Europe, including at either end of the North-South gas corridor being constructed that is intended to link LNG terminals located at either end: at Krk, Croatia (still in development) and Świnoujście, Poland.