Fluor Awarded Contract for Lithuania Floating LNG Terminal

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--When operations begin at a new floating liquefied natural gas (LNG) terminal in Klaipeda, Lithuania, in 2014, the initial capacity of 1.5 billion cubic meters of gas will represent half the country's current annual demand.

Lithuania's state-owned oil company Klaipedos Nafta AB (KN) has awarded Fluor Corporation (NYSE:FLR) (Irving, Texas) a contract to provide engineering and business support services for the import terminal. Fluor will provide KN with engineering, technical, risk management, safety and environmental advisory services. As lead advisor on the project, Fluor will prepare the technical development plan, assist in selecting technologies and develop a business plan for the terminal.

Fluor has previous experience in Lithuania as the engineering, procurement and construction (EPC) contractor for the Butinge oil terminal project in 1999. In the early 1990s, the company conducted a feasibility study and developed siting plans for the country's energy ministry for the expansion of its Klaipeda oil terminal.

A motivating factor driving the terminal project is to lower dependence on the gas from Russia's Gazprom (MCX:GAZP) (Moscow). Amid some contention in the Lithuanian parliament and some nervous glances in the direction of Russian Prime Minister Vladimir Putin, amendments to Lithuania's laws on natural gas were passed at the end of June. This will split the gas supply company Lietuvos Dujos (LD) into three entities. The gas transmission pipelines will be transferred to the ownership of the Lithuanian state after mid-2013, although the transfer date could be delayed by problems in the negotiations with the current owners: E.ON Ruhrgas (38.9%), Gazprom (37.1%), Lithuanian state (17.7%) and minor shareholders (6.3%). The companies have expressed a strong desire to see current gas transmission undertakings maintained.

The parliament's decision implemented the European Union's Third Energy Package (TEN) of 2009, which aims to liberalize the E.U.'s energy markets by splintering big utility groups that have the status of monopolies, and allows gas suppliers unhindered access to E.U. infrastructure. Currently, Gazprom is the only supplier of gas to Lithuania, reports The Baltic Times.

Gazprom's gas supplies to the country come at a price 15% higher than those for the other Baltic states of Finland, Estonia and Latvia, which postponed implementation of TEN to avoid gas price repercussions from Russia.

A leading Lithuanian industrialist pointed out that the price of 1,000 cubic meters of Gazprom gas for the country in June was $426 and would rise to $486 in the coming December, whereas the current price in Latvia was $349 and was forecast to rise to $425 in December. Doubts were expressed that splitting up LD will bring gas prices down in the short term.

Around the time the new floating terminal at Klaipeda comes into operation in 2014, an E.U.-sponsored pan-Baltic LNG terminal in the Latvian capital Riga is scheduled to come on-stream, and Gazprom's possible participation in this project worries some observers in LIthuania.

National pride and the desire to be free of any Russian domination is also a strong mover of Lithuania's gas and power strategies.

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