On Tuesday, January 8, Gazprom officially put into operation a floating regasification terminal (FSRU) Marshal Vasilevsky in the Kaliningrad region. A few days before the launch ceremony, the enclave in the test mode was completely transferred to the autonomous gas supply (January 6, according to Entsog). The new terminal makes it possible to fully meet the demand of the Kaliningrad region for gas through deliveries by sea, said Alexey Miller, Chairman of the Board of Gazprom, to Russian President Vladimir Putin.
“We understand that the delivery of gas by a pipe is more economically viable and cheaper, but for the Kaliningrad region it is most likely reserve capacity, which significantly minimizes, or rather, reduces all transit risks to zero. Reduce them to zero. Without the use of gas pipelines through the territories of neighboring states, ”Putin said in response (quoted by Interfax).
Until today, the only channel for gas delivery to the Kaliningrad region was pipeline transit along the route Minsk-Vilnius-Kaunas-Kaliningrad. In 2018, a little more than 2.4 billion cubic meters were supplied to the enclave through Belarus and Lithuania. meters of gas, follows from the data system Entsog. Marshal Vasilevsky allows regasifying up to 2.7 million tons of LNG per year, which is equivalent to 3.7 billion cubic meters. m of gas.
The current transit contract between the Lithuanian gas transmission operator Amber Grid and Gazprom was calculated until the end of 2025, a representative of the Lithuanian Energy Ministry told Vedomosti. The agreement stipulates the condition “download or pay”, which insures the operator against possible financial losses in the event of a transfer of the Kaliningrad region to autonomous gas supply. Temporary shutdown of transit for testing "Marshal Vasilevsky" companies agreed in advance. “Short-term changes in transit volumes are possible during testing, it will not have a negative impact on our company,” said a representative of the Ministry of Energy. “It’s common practice to validate the capabilities of the FSRU.” Revenues from gas transit (to Kaliningrad and Latvia) in the total share of Amber Grid revenues amount to about 10% (6.9 million euros in 2017). The company does not disclose separate data on income from transit to the Russian region.
As long as the existing pipeline route through Latvia remains available for Gazprom, the use of FSRU to supply gas to Kaliningrad will be economically unviable. The difference in the cost of 1000 cubic meters. meters of gas between today's quotations on European gas hubs and a regulated price for domestic consumers (4840 rubles per 1000 cubic meters) is about $ 200. Thus, the full autonomy of the Kaliningrad region at the current level of consumption will cost Gazprom about $ 480 million annually.
Most likely, the gas in the Kaliningrad region will continue to flow in transit, suggests Fitch Corporation Director Dmitry Marinchenko. “The installation, if it will be used, will only occasionally be part of technical measures in order to keep it in working condition. To supply Russian gas to the Kaliningrad Region is several times cheaper than to buy LNG, ”says Marinchenko.
The decision to build a regasification terminal in the enclave was taken in 2013 against the backdrop of plans announced by Lithuania to place its own FSRU in Klaipeda. The intention of the Baltic state to reduce its dependence on Russian gas supplies was apparently regarded as a potential threat to transit through the territory of this country, although the latter is regulated by a separate contract. The project will be implemented "very quickly," Miller quoted Interfax.
The construction of the FSRU and the necessary infrastructure was sent to a little less than $ 1 billion. The cost of the vessel with the regasification unit ordered by the South Korean Hyundai Heavy Industries was $ 295 million (about 19 billion rubles at the current exchange rate). In the amount of about 21.2 billion rubles. the construction of a berthing wall with a breakwater, 5 km from the shore, which should ensure the safety of the facility during the storm season, was to manage. But in 2018 the value of this contract was increased to 39.05 billion rubles, follows from the materials of the public procurement system. The construction of the facility was done by Stroytransneftegaz, co-owned by Gennady Timchenko.
From a direct answer to the Vedomosti question, to what extent the investments in the presidential administration consider these investments, Putin’s press secretary Dmitry Peskov declined, but said: “Today the president said that the terminal will not stand idle.” “This gas, of course, is more expensive than pipe, but it is necessary for ensuring the energy security of the westernmost region of Russia,” said Peskov.
The project is political, it is useless to consider its economic expediency - there can be no talk about recoupment, says Marinchenko. “To some extent, these investments are a payment for a short-sighted foreign policy, as a result of which Russia opposes itself to the rest of the world and is forced to duplicate many processes that it is more expedient and cheaper to implement in coordination with partners and neighbors,” the expert shares.
The Kaliningrad region is a region of strategic importance, and the construction of a regasification terminal was initially a matter of national security, not economic efficiency, said Alexei Grivach, deputy director of the Energy Security Fund. “The risks that gas transit through Lithuania may become a lever of pressure in negotiations on any issue, at a certain point, have become non-zero. This is already a lot. Let me remind you that Lithuania is going to leave the Electric Ring of Belarus, Russia, Estonia, Latvia and Lithuania (BRELL), which is also very important for the energy supply of the enclave, ”says Grivach.
To reduce the operating costs of maintaining the FSRU in reserve, Gazprom can use it for bunkering, suggests Grivach. “After tightening the emission requirements for ships, a similar service in the Baltic will be in demand. Another question is that in this market the company will be waiting for high competition. An additional effect could be an increase in demand for LNG as a motor fuel, ”says Grivach.
The potential increase in gas consumption by the enclave is largely associated with the construction of new power generation facilities. The energy system of the Kaliningrad region is part of BRELL, but the European partners have already spoken about their desire to withdraw from the agreement and to stop the supply of electricity to the Kaliningrad region. To avoid a shortage, 970 MW of additional capacity will be created in the enclave by 2020, Putin said.
New power plants and gas facilities are being built to ensure the energy security of the region, says Sergey Pikin, director of the Energy Development Fund. “Kaliningrad will live separately with its energy system, it is a matter of time, and soon. Additional generation facilities are needed in case of repair of the Kaliningrad CHP-2 and in case of emergency situations, ”Pikin suggests.
“We understand that the delivery of gas by a pipe is more economically viable and cheaper, but for the Kaliningrad region it is most likely reserve capacity, which significantly minimizes, or rather, reduces all transit risks to zero. Reduce them to zero. Without the use of gas pipelines through the territories of neighboring states, ”Putin said in response (quoted by Interfax).
Until today, the only channel for gas delivery to the Kaliningrad region was pipeline transit along the route Minsk-Vilnius-Kaunas-Kaliningrad. In 2018, a little more than 2.4 billion cubic meters were supplied to the enclave through Belarus and Lithuania. meters of gas, follows from the data system Entsog. Marshal Vasilevsky allows regasifying up to 2.7 million tons of LNG per year, which is equivalent to 3.7 billion cubic meters. m of gas.
The current transit contract between the Lithuanian gas transmission operator Amber Grid and Gazprom was calculated until the end of 2025, a representative of the Lithuanian Energy Ministry told Vedomosti. The agreement stipulates the condition “download or pay”, which insures the operator against possible financial losses in the event of a transfer of the Kaliningrad region to autonomous gas supply. Temporary shutdown of transit for testing "Marshal Vasilevsky" companies agreed in advance. “Short-term changes in transit volumes are possible during testing, it will not have a negative impact on our company,” said a representative of the Ministry of Energy. “It’s common practice to validate the capabilities of the FSRU.” Revenues from gas transit (to Kaliningrad and Latvia) in the total share of Amber Grid revenues amount to about 10% (6.9 million euros in 2017). The company does not disclose separate data on income from transit to the Russian region.
As long as the existing pipeline route through Latvia remains available for Gazprom, the use of FSRU to supply gas to Kaliningrad will be economically unviable. The difference in the cost of 1000 cubic meters. meters of gas between today's quotations on European gas hubs and a regulated price for domestic consumers (4840 rubles per 1000 cubic meters) is about $ 200. Thus, the full autonomy of the Kaliningrad region at the current level of consumption will cost Gazprom about $ 480 million annually.
Most likely, the gas in the Kaliningrad region will continue to flow in transit, suggests Fitch Corporation Director Dmitry Marinchenko. “The installation, if it will be used, will only occasionally be part of technical measures in order to keep it in working condition. To supply Russian gas to the Kaliningrad Region is several times cheaper than to buy LNG, ”says Marinchenko.
The decision to build a regasification terminal in the enclave was taken in 2013 against the backdrop of plans announced by Lithuania to place its own FSRU in Klaipeda. The intention of the Baltic state to reduce its dependence on Russian gas supplies was apparently regarded as a potential threat to transit through the territory of this country, although the latter is regulated by a separate contract. The project will be implemented "very quickly," Miller quoted Interfax.
The construction of the FSRU and the necessary infrastructure was sent to a little less than $ 1 billion. The cost of the vessel with the regasification unit ordered by the South Korean Hyundai Heavy Industries was $ 295 million (about 19 billion rubles at the current exchange rate). In the amount of about 21.2 billion rubles. the construction of a berthing wall with a breakwater, 5 km from the shore, which should ensure the safety of the facility during the storm season, was to manage. But in 2018 the value of this contract was increased to 39.05 billion rubles, follows from the materials of the public procurement system. The construction of the facility was done by Stroytransneftegaz, co-owned by Gennady Timchenko.
From a direct answer to the Vedomosti question, to what extent the investments in the presidential administration consider these investments, Putin’s press secretary Dmitry Peskov declined, but said: “Today the president said that the terminal will not stand idle.” “This gas, of course, is more expensive than pipe, but it is necessary for ensuring the energy security of the westernmost region of Russia,” said Peskov.
The project is political, it is useless to consider its economic expediency - there can be no talk about recoupment, says Marinchenko. “To some extent, these investments are a payment for a short-sighted foreign policy, as a result of which Russia opposes itself to the rest of the world and is forced to duplicate many processes that it is more expedient and cheaper to implement in coordination with partners and neighbors,” the expert shares.
The Kaliningrad region is a region of strategic importance, and the construction of a regasification terminal was initially a matter of national security, not economic efficiency, said Alexei Grivach, deputy director of the Energy Security Fund. “The risks that gas transit through Lithuania may become a lever of pressure in negotiations on any issue, at a certain point, have become non-zero. This is already a lot. Let me remind you that Lithuania is going to leave the Electric Ring of Belarus, Russia, Estonia, Latvia and Lithuania (BRELL), which is also very important for the energy supply of the enclave, ”says Grivach.
To reduce the operating costs of maintaining the FSRU in reserve, Gazprom can use it for bunkering, suggests Grivach. “After tightening the emission requirements for ships, a similar service in the Baltic will be in demand. Another question is that in this market the company will be waiting for high competition. An additional effect could be an increase in demand for LNG as a motor fuel, ”says Grivach.
The potential increase in gas consumption by the enclave is largely associated with the construction of new power generation facilities. The energy system of the Kaliningrad region is part of BRELL, but the European partners have already spoken about their desire to withdraw from the agreement and to stop the supply of electricity to the Kaliningrad region. To avoid a shortage, 970 MW of additional capacity will be created in the enclave by 2020, Putin said.
New power plants and gas facilities are being built to ensure the energy security of the region, says Sergey Pikin, director of the Energy Development Fund. “Kaliningrad will live separately with its energy system, it is a matter of time, and soon. Additional generation facilities are needed in case of repair of the Kaliningrad CHP-2 and in case of emergency situations, ”Pikin suggests.
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