London — Lithuania's main gas importer, Lietuvos Energijos Tiekimas (LET), has agreed the terms of a new one-year Russian gas import arrangement with Gazprom, LET CEO Mantas Mikalajunas said Tuesday.
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Contract in closing stages, supply continues
Lithuania also has LNG import deals, access to storage
Previously paid among highest prices in Europe
Mikalajunas told S&P Global Platts that LET -- formerly known as Lietuvos Duju Tiekimas -- was close to finalizing the deal with the Russian gas giant.
LET, which is part of the state-owned energy holding company Lietuvos Energija, moved to a one-year supply option with Gazprom at the end of 2016 at what it described as "market prices."
"Lietuvos Energijos Tiekimas has agreed with Gazprom on the terms and conditions for gas supply in 2019 and the contract is in the closing stages," Mikalajunas said. "The supply is ongoing."
Mikalajunas declined to disclose the commercial details of the latest contract, including the purchase volumes.
Gazprom said in its third-quarter financial report that it had sold 900 million cu m of gas to Lithuania in the first nine months of 2018.
Until 2014, Lithuania had been entirely dependent on its gas imports from Russia and paid among the highest prices in Europe. The price Lithuania paid for Russian gas went up to around $500/1,000 cu m a few years ago from $85/1,000 cu m in 2003.
Lithuania -- whose gas demand is small at around 2.5 Bcm/year -- made it a strategic goal to reduce its dependence on Russian gas. The startup of Lithuania's LNG import facility at the end of 2014 led to Gazprom offering a significant discount on deliveries in 2015.
LET now has contracts with Norway's Statoil and US-based trader Koch for a combined 500 million cu m/year, but has also bought regular LNG cargoes on the spot market.
It also has access to the 4 Bcm/year Incukalns gas storage facility in neighboring Latvia after Riga opened up its gas market in 2017, giving LET three sources of gas supply.
The strategy to negotiate a short-term Russian gas supply deal could be indicative of a continuing gas market trend in Europe for less rigid contractual arrangements with Gazprom. In the past, Gazprom supplied Lithuania with Russian gas under the company's traditional long-term, oil-indexed contract model.
Lithuanian fertilizer producer Achema is also a major importer of gas, in addition to the gas purchases by LET.
--Stuart Elliott, firstname.lastname@example.org
--Edited by Jonathan Dart, email@example.com