European Commission approves Lithuanian LNG terminal aid

European Commission approves Lithuanian LNG terminal aidImage courtesy of Klaipedos Nafta

The European Commission has approved the compensation granted by Lithuania to Litgas for supplying a mandatory quantity of liquefied natural gas to the LNG terminal in Klaipėda.

In November 2013, the Commission approved under EU State aid rules an aid scheme to support the construction and operation of a liquefied natural gas (LNG) terminal at the Klaipėda seaport in Lithuania.

In June 2018, Lithuania notified the Commission of certain changes to the aid scheme approved in 2013, namely, to ensure the security of supply, the LNG terminal must be kept operational, which requires continuous deliveries of liquefied natural gas and its constant regasification.

Therefore, in January 2016, Lithuania decided to modify the initial scheme and to entrust Litgas, a liquefied gas supplier with a public service obligation to ensure the supply of a mandatory quantity of liquefied natural gas to the LNG terminal in Klaipėda.

In exchange, Litgas receives a compensation from the Lithuanian State to cover the costs incurred for performing this public service obligation. The compensation is financed via a ‘security supplement’, which is an additional fee paid by all gas transmission system users.

Additionally, as part of the support scheme approved by the Commission in 2013, when the LNG terminal started its operations, Lithuania introduced a ‘purchase obligation’ whereby heat and electricity generators were obliged by law to purchase a certain quantity of gas from Litgas.

However, taking into account the developments on the gas market, Lithuania considers that, as of January 2019, the purchase obligation will no longer be necessary and can be abolished. As a result, Litgas will sell its gas directly on the market.

The Commission said in its statement it assessed the changes to the Lithuanian aid scheme under the EU State aid rules on services of general economic interest (SGEI). It found that the modifications to the initial scheme, in particular, the removal, of the purchase obligation, will contribute to enhancing competition in the Lithuanian gas market.

The Commission has approved both the scheme currently in force for the period from 2016 until the end of the year 2018 and the modified scheme for the period from 2019 until the end of 2024.

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