Why floating storage brings innovation to the Baltic markets

Lukas Geležauskas's picture
Lukas Geležauskas, Business Developer, Klaipėdos Nafta
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Lithuanian LNG import levels are consistently among the lowest of the LNG importing countries due to the limited size of the Lithuanian gas and by extension, the LNG market. Yet, Klaipeda’s FSRU independence utilization rate sits comfortably above the European average. The Lithuanian LNG story lends credence to the proverb – necessity is the mother of invention given that Klaipedos Nafta had to circumvent unique regional market challenges resulting in many industry “firsts” along the way: multi-user mode, virtual LNG swap model and continuous small-scale reload service in an FSRU type terminal and FSRU integration with on-shore truck loading infrastructure.

The size of the Baltic market (4 bcm) and the corresponding absence of a single large gas consumer invalidated the single-user operating mode in Klaipeda, prevalent in many LNG import terminals. Born out of necessity, the third party access rule and virtual swap model, implemented for the first time in an FSRU based terminal, enabled multiple users to share the LNG stored in the FSRU tanks and have a regasification profile that is to a considerable degree independent of their cargo arrivals. Terminal users are able to borrow LNG by providing appropriate commercial assurance that their cargo will be delivered in time for the joint use by other customers. Traders are able to virtually store and utilize their volumes throughout the year. This ability to extend the service period facilitates deliveries into shallow markets, normally supplied by small traders with limited end client portfolios. In Klaipeda, three terminal users are sourcing LNG from four suppliers and managing their regasification volumes throughout the year with ease.

The Baltic gas consumption profile leaves sufficient terminal capacity to explore additional opportunities on top of the traditional regasification market. The increasing number of satellite import terminals along the Baltic coastline represent multiple demand nodes for commercial break bulking, prompting KN to study the compatibility of small-scale vessels and the terminal. Small technical changes to shipyard configuration were necessary to perform the first small-scale reloading operation. This marked the first practical implementation of continuous small-scale reload service from FSRU-type terminal and the first FSRU operating in multi-user and multi-service mode. From January 2017, KN has completed seven reloading operations, facilitating delivery of LNG to Norway, Sweden and Finland.

The off-grid and transport LNG markets are exhibiting steady growth. The combined Polish and Baltic LNG off-grid market stands at roughly 150 000 cubic meters annually. The market is still in its nascent stage, but there already are 90 LNG trucks servicing roughly 80 unique receiving points. Recognizing current and future commercial opportunities, KN integrated FSRU independence with on-shore infrastructure through investment in satellite truck loading LNG terminal and employment of a bunkering vessel for LNG deliveries. The first truck was loaded in November 2017 and KN has recently loaded the 100th truck. KN is contributing to the development of the regional small-scale LNG market and aims to load in excess of 500 trucks during the first full year of operation.

Unique regional market conditions pushed KN to innovate and unlock unconventional opportunities for an FSRU based terminal. KN is proud to be at the forefront of innovation and is actively looking for global development opportunities to leverage its know-how and accumulated experience in floating LNG assets.

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Image courtesy of Klaipedos Nafta