Klaipedos Nafta – An Alternative Supply

Klaipedos Nafta (KN) has played an important role in the LNG supply chain, but recent events have made the business even more strategically significant.

KN is an oil and LNG terminals operator based in Klaipėda, Lithuania.

“We play a strategically important role, operating critical infrastructure in Lithuania,” says Linas Kilda, Chief Business Development Officer for the company. “We have global expansion plans and today we are glad we have already begun our first long-term involvement abroad, as the terminal operator in Acu port, Brazil.”

Strategic Importance

Recent events have only made KN’s position even more strategically important, but to meet these new demands the company will need to adapt. Fortunately, KN is no stranger to adapting to new circumstances.

“We have 60 years of operations in the oil sector, but it is a reality that all business sectors can become less appealing over time, and since 2011 we have also been part of the floating LNG terminal market,” Kilda recalls. “We focus on the LNG infrastructure development and that is our niche market. We are a developer and operator of such infrastructure, and we are already among the biggest operating today, globally. Our vision is to become one of the top three floating LNG terminal operators globally.”

It is a sector KN has flourished in, and when we speak with Kilda the company’s LNG terminal in Klaipėda is fully booked for the entire year of 2022, with the firm starting to look at long-term availability over the next decade or more. But while demand like that would be the envy of any business, Kilda is the first to acknowledge that this demand springs from tragic events elsewhere in the world.

“The reason we are so booked today is because of the war in Ukraine. Lithuania and our neighbours have made a political decision to get rid of Russian gas, which is self-explanatory,” Kilda acknowledges “We do not want to finance Russia’s war in Ukraine with fuel supplies to our region. When that decision has been made to get rid of Russian natural gas the only other route of supply was our own energy terminal, so all-natural gas traders expressed an interest in booking our capacity.”

As even more countries follow that path to become completely independent of Russian natural gas, KN’s importance as a facility is critical not just to Lithuania and its neighbours, from Finland to Poland, including Estonia and Latvia. This is not just an immediate concern either, but a long-term realignment of the entire Western energy market.

Responsibility and Capacity

KN, alongside energy suppliers across Europe, faces the need to supply natural gas to the entire region, with no let-up.

“The responsibility on our shoulders today requires operation excellence Natural gas users and traders have made a commitment. We take that responsibility very seriously,” Kilda insists. “While we can process 3.8 billion cubic metres per year, that is not sufficient to cover the entire Baltic region across Finland or Poland. There is a big pressure from traders for us as a company to find ways to increase capacity and thus enable increased deliveries to the region.”

The company is currently in the process of considering how to increase regasification volumes of the infrastructure on economically viable and sustainable terms. Where there are bottlenecks in the supply chain, including limited pipelines and other transmission systems, KN tries to resolve them. But in the end, the only solution to higher demand is higher supply.

“As sole gas supply infrastructure operator to the region, we are also looking at our neighbour countries to potentially develop similar infrastructure of their own,” Kilda says. “We want to support our neighbour countries in building similar infrastructure to result in alternatives, just in the case of doing maintenance and increase the diversification of natural gas supply. We are very interested in floating LNG facilities in Europe, such as Finland, Germany, and Poland.”

A Global Perspective

Beyond the war in Ukraine, Kilda believes KN has a critical role to play in establishing Europe’s net-zero goals.

“My vision for the company’s future is to be the biggest floating LNG terminal operator and developer, which we’re well on the way to doing that,” he says. “But what is for sure is that natural gas is a transitional fuel towards net-zero goals for countries and regions across the EU and even the world. Therefore, we are cooperating with ship owners, looking at carrying out carbon capture and storage while helping industrial companies to deal with their CO2 emissions.”

KN has plans to complete feasibility studies into this sector by the end of the year, while also looking at the demand for hydrogen and other green fuel marine terminals.

These plans are part of a broader strategy to see KN build on its work in Lithuania and its neighbours, to become a truly global player.

“We have a strategy which was defined in 2019, envisaging how we should utilise and apply our knowledge in similar developments globally,” Kilda says. “Today we are very much interested in floating terminal operations in Europe, our home market and Latin America and Southeast Asia.”

Of course, these ambitious plans have faced unexpected obstacles, not only in the form of Ukraine war but also a global pandemic.

The pandemic had an adverse effect both on us and the entire industry,” Kilda says. “With the war in Ukraine, the entirety of Europe has realised that alternatives are needed, which is what we realised in 2011.”

Even when there was a way of fuel supply from Russia, KN recognised the need for an alternative.

“Today there are at least ten projects in Europe based on new solutions. Here at KN, we are looking at those alternatives, which bring us additional opportunities to use our knowledge and experiences,” Kilda says. “In the European Union today there are three FSRU terminals in operation. In Lithuania, we have been part of development as sole developer and investor, while acting as advisor and support for a terminal in Croatia. We have a very strong position in the European market. We are sharing our knowledge with developers that want to develop facilities with fast-track solutions.”

While the field is more crowded than it was, KN still stands out from the crowd.

“Most of the 34 floating LNG terminals built so far have experienced significant delays, which bring additional costs,” Kilda tells us. “We are proud that our project was delivered on time and to budget.”

More like this