Photo: Courtesy of Klaipėdos Nafta

KN to assess capacity allocation and costs for Klaipėda LNG

Lithuanian Klaipėdos Nafta will initiate a study of long-term capacity allocation alternatives and pricing to identify the most suitable model for the Klaipėda LNG terminal.

KN to assess capacity allocation and costs for Klaipėda LNG
Courtesy of Klaipėdos Nafta

Oil and LNG terminals operator Klaipėdos Nafta plans to find the most suitable capacity allocation and pricing mechanisms model for the Klaipėda LNG terminal and it needs a market analysis to do so.

The company will first call for a public market consultation in order to obtain preliminary price indications for this study and to prepare for its purchase.

The results of the study are expected to answer which long-term capacity allocation mechanism could be applied in the LNG terminal, based on a cost-reflective tariff model.

“The de facto exploitation of the LNG terminal demonstrates its benefits not only for the national but also for the regional natural gas market and gas consumers. We believe, that together with the launch of the Balticconector connection between Estonia and Finland and further expansion of the natural gas transmission system in the region (GIPL connection with Poland), it will further stimulate the market participants’ interest in the long-term LNG terminal capacity allocation,” comments Darius Šilenskis, KN CEO.

The LNG terminal is a state-regulated activity of KN, operating under the principle of transparent and open third-party access. According to the current LNG terminal pricing methodology, the terminal’s operating costs are mainly covered by an additional supplement of the security supply applied to the price of natural gas transmission services. Part of the LNG terminal operation costs is paid by the LNG terminal users.

“Currently, the methodology is based on the principles of the transmission system pricing model, which aims to ensure equal prices for different transmission system entry points and to increase the market competition. The methodology is not based on the operating costs of the LNG terminal and covers only a part of the total estimated operating costs. We will seek to assess the possibilities of changing it, which could accordingly contribute to the reduction of the security supplement for the gas consumers,” said Šilenskis.

Following the public market consultation, the purchase of the study will be announced. An external expert will be selected by January 2022. The results of the study will be discussed with the market participants and other interested parties.