At a meeting of the Cabinet of Ministers on Tuesday, the 21st February, members of the government reviewed the report from the Ministry of Climate and Energy on the cooperation conditions submitted by the developer and investor of Skulte LNG Terminal.
The proposed cooperation conditions were rejected by the Latvian government. The developer and strategic investor called this the government’s short-sightedness.
Advisor to the Minister of Climate and Energy Beate Barkāne reminded that the government had previously ordered the ministry to provide such a report. To ensure a high-quality analysis, the ministry requested the project’s developer to provide additional information in regards to cooperation conditions in the project. After receiving the requested information, the project’s capacity and costs, it was concluded that
the suggested conditions cannot be approved due to the volume of requested guarantees and regulatory advantages.
Currently the ministry, stresses Barkāne, continues its work – to monitor the situation in order to ensure Latvia receives sufficient gas supplies. Additionally, the ministry, based on the Law on Skulte Liquefied Natural Gas Terminal passed by the Saeima, continues assisting with the development of the project. The minister’s advisor reminds that the new ministry was formed as a result of reorganisation of the Ministry of Economics and Ministry of Environment Protection and Regional Development. Functions associated with the energy policy are performed by the new ministry.
On Wednesday, the 22nd of February, a statement was released by Skulte LNG Terminal’s Director General Renārs Miķelsons. «We believe this is short-sighted behaving from the government when it comes to Latvia’s energy independence and diversification of gas supplies away from Russian Gazprom. The reason given for the rejection was the excessive guarantees the developer demanded from the state. We would like to state that this is disinformation,» the statement mentioned.
Miķelsons also added what PM Krišjānis Kariņš said in his interview to Rīta Panorāma – about the demands from Skulte LNG Terminal – that «we have offered a model under which Latvian consumers would subsidize gas transmission costs for freight that goes outside of Latvia» is not true. The company, Miķelsons said, never presented such demands.
Skulte LNG Terminal instead views the involvement from the state in the form of «ceasing prioritising gas flows from Klaipeda and Inko, and instead adopting a market-based gas pumping for Inčukalns underground gas storage facility.» This would relieve Latvian consumers of the need to subsidise transportation of natural gas from Lithuanian and Finnish terminals to and from Inčukalns.
Miķelsons estimates that
the government’s involvement in ensuring influx of funding in the first years would be limited to EUR 2 – 5 million annually
(depending on the terminal’s load). Besides that, this amount would be compensated and later on reduced over a longer period of operations.
Involvement of the state is normal practice in other European countries, according to the company’s spokesman. «For example, the support provided by the Lithuanian state to Klaipeda terminal before the start of the war in Ukraine was estimated at around EUR 60 million annually. Inkoo terminal in Finland also received EUR 105 million to cover operational costs in 2022 and 2023. The involvement requested by Skulte LNG Terminal is nowhere near this large.» He stresses that it will cost the state far more to construct the terminal on its own, adding that he invites the state «to compose a qualified team for talks in order to commence negotiations with the developer as soon as possible.»
«The law provides for the construction of this terminal by September 2024. Non-compliance with this term could increase energy supply risks and they would become the responsibility of Latvian politicians,» the statement from Skulte LNG Terminal mentions.
In his interview to LTV programme Rīta panorāma on the 8th of February, PM Krišjānis Kariņš mentioned that if developers and the investor of Skulte LNG Terminal request unreasonable guarantees from the state,
it is possible the government may decide to build the terminal on its own.
The Ministry of Climate and Energy has evaluated all possibilities for the construction of the terminal, Kariņš claimed. The PM promised to prevent a situation when the investor could request unrealistic promises and guarantees from the state.
«Skulte terminal is like an anti-aid defence system. We are purchasing it for a lot of money, but we don’t know if it is functional,» explained Minister of Climate and Energy Raimonds Čudars, adding that potential developers have sent a with a proposal for future cooperation with «certain guarantees», which the government will review and decide if they are acceptable.
As previously reported, Skulte LNG Terminal has found a strategic investor. On the 13th of January the company submitted to the government a proposal for desired forms of cooperation. Proposals provide administrative solutions that are intended to improve the terminal’s competitiveness, as well as commercial contracts for the use of future output. There could be third-party exclusions that permit signing contracts for parts of output, as well as other forms of support based on European practices, as noted by the management of Skulte LNG Terminal.
The company’s director general Renārs Miķelsons did not reveal the investor. He only said it is a large company that has terminals elsewhere in the world. He also said the company’s shares are not quoted on the exchange. This company, he said, is prepared to reveal its name once a reaction from the government comes.
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