LNG – Way Forward for Diversification

of Energy Supply: Lithuania’s Case Study

Platts 7th European Gas Summit

September, 2013

Vienna

Rokas Masiulis

CEO, Klaipėdos Nafta

Content

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1. Gas supply challenges in the Baltics

2. Introduction of the LNG terminal in Lithuania

3. Commercial possibilities of LNG in the region

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1. Lithuania’s Country Profile

• Population: 3.0m

• Land area: 65,300 sq. km

• Capital city: Vilnius (pop. 0.54m)

• Ethnic groups: Lithuanian (84.2%)

• Polish (6.6%)

• Russian (5.8%)

• Others (3.4%)

• Official language: Lithuanian

• Currency: Litas (LTL), pegged at 3.4528 LTL/EUR

• GDP 2011: € 32,9bn

• GDP per capita: € 11 000

• Neighbors Latvia (land border – 588 km)

• Byelorussia (border – 677 km)

• Poland (border – 104 km)

• Russia (Kaliningrad) (land border – 255 km)

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1. Gas Supply Challenges

THREE main challenges

Market

Source

Price

5

1. Gas Supply Challenges

• Currently there is no gas

market between the Baltic

states and Finland

• The interlinks between

countries are weak

• There are major

infrastructure projects to

enhance the situation

Existing pipeline

Future projects

Annual gas

consumption

Market

Source

Price

Project list

1. Baltic Interconnection

2. Interconnection Lithuania-

Poland

3. Underground Gas Storage

in Syderiai

4. LNG terminal in Klaipėda

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1. Gas Supply Challenges

• Currently only one source of

gas – extreme dependency

on a single supplier

• Low energy security level on

the regional scale

• One of the last “Energy

Islands” in Europe

Market

Source

Price

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1. Gas Supply Challenges

Market

Source

Price

Source: European Commission

Price in €/MWh, July 2013

Rank Country

1. Lithuania

2. Czech Republic

3. Greece

4. Latvia

5. Estonia

TOP 5

Comparison of EU wholesale gas prices

2. Impact

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Market

Source

Price

Unrestricted access

will spur competition

The terminal will

help to diversify

energy sources

Ensures security of

energy supply

Import prices will

reflect the global

market price level

2. FSRU Independence

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Tech specs

Technology FSRU

Location Southern part of Klaipėda

sea port

Supplier Hoegh LNG

Storage

capacity 170 000 m3

Loading

capacity

9000m3/h through flexible

hoses

Annual

capacity

Up to 4 bcm of regasified

NG, up to 11 mln. m3 per

day

2. FSRU Independence

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Tech specs

Leaving

shipyard February, 2014

Manufacturer Hyundai Heavy Industries

Flag-Registry Singapore

Class Det Norske Veritas

Length 294 m

Width 45 m

Draught 12.6 m

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Construction of FSRU

“Independence” Construction Procurement

2011 2012 2013 2014 2015

Construction of the Jetty

Construction of the

Pipeline

Start of operations – 3rd of December

Arrival

Operation

Testi

ng

Creation the Terminal

Operator and Regulation

Construction Procurement

Construction Procurement

Law on LNG Terminal

License

• The LNG terminal will be

fully operational since the

3rd of December, 2014

• Project timeframe – less

than 3 years

• Such speed is possible

because of:

- the FSRU technology

used

- agreement with FSRU

supplier – Hoegh LNG

- creative project

planning

- government support • Terminal usage manual

• Volume capacity auction

The terminal will open access for gas trading companies

2. Project Timeline

2. Participating Companies

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LNG Terminal

Infrastructure Gas Trading

Key financials (2012, mln, EUR)

Revenue 40,2

EBITDA 20,2

EBITDA margin 50%

Assets 129

Key financials (2012, mln, EUR)

Revenue 811

EBITDA 157

EBITDA margin 19,4%

Assets 2.984

2. Financing of LNG Infrastructure

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Required financing Financing sources

130 mln. EUR

• Infrastructure

• Project management

43 mln. EUR

FSRU guarantee

130 mln. EUR

• Loan from EIB (signed,

87mln. EUR with state

guarantee)

• NIB, commercial banks

• AB “Klaipėdos nafta“ own

funds

• Compensation via gas

transmission tariff

43 mln. EUR

Guarantee from a commercial bank

Total: 174 mln. EUR Total: 174 mln. EUR

Costs of FSRU are channeled through gas transmission tariff

3. Business Model

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Reserved capacity supply 13%

Available for the market

87%

LNG Terminal

Infrastructure

Gas Trading

Sells regasification

capacity to companies

13% of capacity is

reserved for 5 years

for “minimum

utilization” of the

Terminal

Capacities of LNG Terminal will be open for suppliers to fill demand in:

• Domestic Lithuanian market

• Baltic market (+Finland)

• Small scale activities

Up to 4 bcm

of NG annually

Gas trading volume capacity

3. Small-scale LNG

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LNG Feeder Vessel

LNG trading

Infrastructure for small-scale LNG activities

The LNG terminal will offer business

opportunities:

LNG storage

3. Value Proposition

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1. The first full scale terminal in the Baltics and Nordic countries

operational from the end of the next year

2.

3.

4.

5.

Operational all-year round at an ice-free port

Unrestricted access will ensure competition on national and, possibly,

on regional level

Infrastructure for small-scale LNG activities

More than 40 years of safe and efficient terminal operational

experience

Contacts:

Rokas Masiulis

CEO

SC Klaipėdos nafta

Buriu 19, P.O.Box 81

LT-91003 Klaipeda

Lithunania

Phone: +370 (46) 391772

Fax: +370 (46) 311399

www.oil.lt

www.sgd.lt

Thank you for your attention.