Statoil, Lithuania to Develop Baltic Sea LNG

Norway's Statoil and Lithuania's Lietuvos Energija plan to join forces to develop a small-scale liquefied natural gas (LNG) supply operation, competing with Finnish gas utility Gasum.

Litgas, an LNG arm of state-owned Lietuvos Energija, and Statoil signed a preliminary agreement on Thursday to establish a joint venture by the end of 2015, Litgas said in a statement.

Statoil has a contract with Litgas to deliver 0.5 billion cubic meters of gas per year to Lithuania's LNG terminal at Klaipeda port in 2014.

The terminal will be used as a hub to distribute LNG by smaller tankers around the Baltic Sea to fuel ships and for inland use where pipelines don't reach.

The joint venture plans to start operations in the last quarter of 2017 at the latest.

"This is a market in its infancy, but is expected to grow quite considerably in years to come", Geir Heitmann, Statoil vice president for LNG trading, said after signing a memorandum of understanding on the joint venture.

Finland's majority state-owned Gasum also plans to develop an LNG bunkering business in the Baltic Sea by opening several small LNG terminals on Finland's coast.

Gasum acquired 51 percent of Norwegian LNG distributor Skangass, saying the deal made it the largest operator in the Nordic LNG market.

The Baltic Sea small-scale LNG market is forecast to reach 0.5-1 billion cubic meters of gas by 2020 due to stricter environmental regulations for ship fuel, Litgas said.