Lithuania, Statoil Revise LNG Import Deal

Norwegian oil company Statoil (STO) and Lithuania have agreed to a revised deal to supply liquefied natural gas (LNGLF) (LNG) to the Baltic state, Prime Minister Algirdas Butkevicius said on Monday.

Statoil had agreed to lower its gas price by 15-20 percent, the head of Lithuania's state-owned energy group Lietuvos Energija Dalius Misiunas told Reuters, after a joint press conference with Butkevicius.

The contract will be extended to 10 years from five, and annual sales volumes will fall from 540 million cubic metres (mcm) to 350 mcm as gas consumption in Lithuania declines.

Statoil will supply 3.7 billion cubic metres (bcm) during the period, instead of 2.7 bcm in the original contract.

The new price, forecast to be in a range of 16-20 euros per megawatt-hour (MWh) this year, would be close to that of natural gas supplied by Gazprom, Misiunas told reporters. The updated pricing formula will remain indexed to prices at the British National Balancing Point hub.

"Gazprom updated its price formula on January 1 and made its gas more expensive. We are not forced to accept that, because now we can choose between the two sources," Misiunas said, without elaborating.

Lithuania's supply contract with Gazprom ran out at the end of 2015, but Lietuvos Energija has said that under the old contract it can buy a certain amount of gas from Gazprom in 2016.

The price of globally-traded LNG has been falling since February 2014 due to rising supply and weakening demand from traditional buyers Japan and South Korea, while Chinese consumption also slowed in line with a cooling economy.

Litgas, an LNG import arm of Lietuvos Energija group, initiated the contract revision last year, as it was expected to end up with a gas surplus of 280 mcm.

Reporting by Andrius Sytas