Lithuanian minister of Energy Zygimantas Vaiciunas speaks about cooperation with Poland on multiple projects in Energy sector.
BiznesAlert.pl: We see each other during another Economic Forum in Krynica. What changed since last year in Polish-Lithuanian Energy relations?
Zygimantas Vaiciunas: There was a big change and it was positive. Last year we had a great conceptual talks on how to move with synchronisation. This year we had intensive work on multi and bilateral level. I am proud of our cooperation. Poland was active on every level. We see visible results on gas. On 24th of May there a final investment decision on Poland-Lithuania Gas Interconnector (GIPL) was signed. Talks started in 2010. European Comission granted CEF financing for 300 mln euros in 2014. We had a long discussion on technical issues. And now we managed to put this project into implementation phase. It is up to TSO’s now to make it happen. We will buy pipes until the end of the year, and are starting a real construction in spring 2019.
CEO of PGNiG said that FSRU in Lithuania will be a „healthy competition” to LNG terminal in Świnoujście. Do you agree?
Competition is always the best for the customer. Regional energy security is improving with every new project. We have new possibilities like small scale LNG. We opened a reloading facility last year. It is commercially attractive to a distance of 500 km. Northern Poland could get gas from reloading station in Lithuania. In future we will have much wider market, not only Poland and Lithuania, but also other Baltic States, Finland and Ukraine. There is enough place for LNG from both projects taking in to account that US LNG export is growing intensively. It will take 2-3 years until U.S. LNG grows from present 20 bcm annually to more than 100 bcm. According to our calculations, even with GIPL in place it would be rational to acquire the FSRU terminal after 2024.
Is there a decision to do it?
There is a principal decision of government commission to prepare a draft laws on this. Decision is expected in November-December 2018, including its’ approval by Parliament. It is very clear that GIPL will be important to gas supply. Its market share will not be enough for Baltic States and we still will need LNG option. We need to remember that LNG terminals are not used by 100 percent. Traditionally it is like 20-25 percent utilization and we are proud to say that Klaipėda’s LNG terminal is among the most efficient LNG terminals in Europe. That makes this terminal a real success story.
Do you think about stationary terminal like in Świnoujście?
We needed quick solution. We see that FSRU operational costs are higher but it gives bigger flexibility. In future, 2030-40, when the gas market will be decreasing, we could sell FSRU to growing market. In this way we can avoid stranded costs. Currently we are looking for any solution to decrease the OPEX. The decision to acquire LNG terminal after 2024 is most efficient way. Now OPEX is 66 mln euro a year and this decisions allows to decrease maintenance cost to 40-43 mln EUR a year.
Customers like Achema are afraid of paying costs of FSRU?
It is not the best time for fertilizer companies. We talked to Achema about options of OPEX reduction. FSRU buyout will have immediate effect to companies and will relieve them of financial burden. We always have this dispute with Achema. They are paying about ¼ of all FSRU costs, the security supply element, but they use about a half of gas from this terminal. Accordingly, Achema’s contribution to LNG infrastructure maintenance costs is rational and cannot be treated as overpayment. Government decided to reduce the costs for whole industry. Decision on boyout is an answer to fears of companies like Achema. Key principle is that you can not move costs from one company to another or put a burden on other consumers.
What is the scenario for synchronisation?
This is the second good news since last Krynica conference. Last time we were just discussing this issue. There was always a question of technical solution. On 28th of June we achieved a political roadmap for synchronization on highest political level from Poland, Baltic States and European Commission. There are three main elements: existing overland interconnector LitPol Link, underwater cable and some additional technical measures. During summer reliability of this scenario was checked by Polish scientists from Institute of Gdansk. Last week as agreed the study was finalized and it is a success. Next step is to give a green light on political level. It should be done no later than on 14 of September. After this political green light we will move to technical level – Baltic and Polish TSO’s will submit an application to ENTSO-E then. Poland will be a supporting party. We have all the neccessary grounds for realisation of this project.
Why LitPol Link 2 lost this competition?
It was about capital costs and environmental risks. All the member states wanted synchronisation as soon as possible. Second LitPol Link due to timing, costs and environmental assessement would not happen on time – until 2025. We looked for other solutions giving the same result and it turned to be synchronization through existing cable LitPol Link and new cable under the Baltic Sea.
Is it granting free flow of Energy in both sides?
The additional cable is asynchroneous. With some other technical improvements it will be helpful for synchronisation and to ensure the electricity flows. In general DC cable can be used for the market purposes but concerning the exact capacity technicians have the final world. Due to sychronization we will decrease existing capacity of LitPol Link but it will be compensated by underground cable. It is clear win-win solution.
Are you afraid of cut-off of Russian Energy supplies?
Other side is also progressing. At the beginning of March they opened new generation capacities in Kaliningrad. Synchronisation is the best and practically the only way to achieve security of supply. We are removing some of lines connected to Russia already now. All BRELL lines of the Baltic states will be cut off when we will be synchronised with Europe forever. Then we will not need them anymore. Currently there is no technical capacity for them to disconnect us. We are moving forward to be prepared for any scenario and not to be blackmailed by Russia.
Why is Ostrołęka Power Plant mentioned by Polish ministry of Energy as a project important to synchronisation of Baltic States?
We see that we will have a lack of capacity in Baltic States soon. There is no direct causal link between synchronisation and Ostrołęka, but any new stable generation increases security of supply.
Why do you need an act on control of strategic investment?
We investigated situation in Lithuanian Energy sector. We are living in times of increasing security threats. As a government we need to perceive potential threats. We had experience with Ignalina power plant. Some of the companies like NUKEM from Germany due to shift ot shares were under Russian influence. We need to have some mechanism to get information on potential contracts before they are signed. After discussions with Poles we agreed that not all contracts should be reviewed on the basis of this act. The border is a deal over 20 percent of the revenues from the last year. We have a special commission responsible to achieve information and give authorisation to such transactions. We have a very short calendar of approval lasting about 20 days. We have a clear path understandable for companies. Afterwards, in case everything is fine the contract is signed. We had a situation when it was not ok and company simply did not sign a deal. Of course, they have a right to go to the court. It was about companies interested in Lithuanian Railways and IT systems. They had relations to Russian companies. We have logic like U.S. sanctions but it is post factum. Our solution is preventive. All these instruments are the best way to prevent Lithuanian national security interests.
Will it apply to Chinese projects?
We work actively on cooperation with China on 16+1 format and others. We do not want to be hostile to any investment but there are some sectors which can not be open to foreign companies like transmission and distribution grids. We need to be careful and use opportunities for cooperation. We need a moderate approach.
Interview conducted by Wojciech Jakóbik