Lithuania May Not Extend Long-Term Deal with Gazprom

Lithuania may not extend its long-term natural gas import deal with Russia's Gazprom after the current one expires at the end of 2015, as it has gained access to global LNG markets, the state-owned energy group said on Monday.

Russian pipeline gas imports to Lithuania fell to 2.5 billion cubic metres (bcm) in 2014, down from 2.7 bcm a year ago, partly due to warm weather and increasing use of biomass in heat production.

But the opening of a floating liquefied natural gas (LNG) import terminal at the end of 2014, became a major game changer as Gazprom has lost its supply monopoly.

"In order to get gas (from Gazprom) in the past, you had to fix price and the volumes. The situation has changed, and we have a market today," Dalius Misiunas, the chief executive of energy group Lietuvos Energija said in a statement.

"We don't feel ourselves to be hostages anymore when speaking about a new supply deal and prices with Gazprom."

Lietuvos Energija acquired a majority stake in the country's gas supplier Lietuvos Duju Tiekimas (formerly known as Lietuvos Dujos), which buys gas under a 10-year contract with Gazprom.

Lietuvos Energija's subsidiary Litgas signed last year a five-year contract with Norway's Statoil (STO) to buy 0.54 million cubic metres (bcm) of gas per year delivered by tankers.

Gas consumption in Lithuania is expected to total about 1.1 bcm in 2015, the same as in 2014, excluding supplies to nitrogen fertilizers producer Achema -- the biggest gas user in the country, which has a separate deal with Gazprom.

"Therefore volumes to be bought from Gazprom are falling more than twice compared with the last year," Misiunas said, referring to the impact of the Statoil deal.

"Taking into account all circumstances, it would be rational to speak about a supply deal for a year or several years... We cannot take a risk by signing a long-term deal with Gazprom at a fixed price," he said.

The head of Lietuvos Energija also said that Lithuania could buy natural gas in the future from Latvia or from Poland.

Lithuanian and Polish gas grid companies plan to build the first link by the end of 2019.

Litgas said last week it was also considering importing LNG from the United States.

Reporting by Andrius Sytas