Gazprom launches new stretch of Kaliningrad gas line

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Sept. 11 -- Russia’s state-owned natural gas monopoly OAO Gazprom, meeting the demand of the Russian government, has completed the construction of the second stretch of the 139-km Minsk-Vilnius-Kaunas-Kaliningrad gas pipeline.

“The Russian government tasked Gazprom with guaranteeing the supply of 2.5 billion cu m of gas to the Kaliningrad region in 2010,” said Gazprom Deputy Chief Executive Officer Valery Golubev.

“The existence of the two-stretch pipeline and a compressor station, which will be commissioned near Vilnius next year, allows us to say that the set goal will be achieved,” Golubev said.

The pipeline expansion is part of a Russian government action plan aimed at increasing supplies to Kaliningrad—a Russian enclave between Lithuania and Poland.

Besides the pipeline, the plan also calls for the upgrading of gas metering stations and for construction of a compressor station near Vilnius and an underground gas storage facility at Kaliningrad.

“The new gas pipeline will also increase the reliability of gas supplies to Lithuania, open up new prospects for more intensive development of gas-distribution networks in the republic, and increase gas deliveries to Lithuanian consumers,” Golubev said.

Pipeline ‘essential’
Viktoras Valentukevicius, head of Lithuania's gas company Lietuvos Dujos, 38.9% owned by Gazprom, said the pipeline was essential for his country.

“Natural gas will become a key energy resource for our country for decades. This line is very important for Lithuania as a guarantee of stable energy supplies from Russia,” said Valentukevicius.

In December, Lithuania will close its Soviet-era reactor in Ignalina, which will transform country a net energy exporter to an energy importer.

Since Lithuania has no direct link to Europe’s electric power grid, it has no choice but to import more energy from Russia—a matter that leaves many Lithuanians apprehensive, especially given Russia’s recent decision to cut off supplies to other countries in the region.

“Vilnius should not forget that the Kremlin is using Gazprom not only as [an] economic [tool], but also a very efficient political tool,” said Raimundas Lopata, director of the International Relations and Political Science Institute in Vilnius.

While acknowledging the concerns of Lithuanians about the reliability of Russia as a supplier, analyst IHS Global Insight felt the new line represents a step in the right direction for the country’s energy security.

“The additional gas supplies that can be delivered via the new string of the Minsk-Vilnius-Kaunas-Kaliningrad pipeline will be a net benefit to Lithuania, even if the Baltic state is not yet entirely convinced,” IHS Global Insight said.

LNG to Lithuania
Meanwhile, Golubev said Gazprom is prepared to supply LNG to Lithuania if a regasification terminal is built at the Baltic Sea port of Klaipeda.

"We regard this project as a very interesting, promising direction. It is needed now. We have discussed this issue and we believe that it is very good that countries are building such terminals," said Golubev, who added that Gazprom believes it is necessary to build a gas pipeline link to Klaipeda.

In September, Lithuania and the US agreed that the US Trade and Development Agency (USTDA) would provide an $800,000 grant to conduct a feasibility study for an LNG import terminal in Lithuania.

The study will determine the possibility of building a terminal with a capacity of 1.5-2 billion cu m of LNG and will evaluate three potential sites, including one offshore.

According to current plans, the terminal will be 80% state owned, with the remaining 20% to be held by AB Achema, a private producer of nitrogen fertilizers and chemical products.

According to a statement by a Lithuanian economy ministry official, construction of the terminal could start 3-4 years after the completion of the feasibility study, which is expected in 2010.

Lithuania’s Energy Minister Arvydas Sekmokas recently said his country is looking for a strategic investor in the terminal from a foreign country “rich in natural gas.”

Contact Eric Watkins at hippalus@yahoo.com.

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