Tuesday

27th Sep 2016

Focus

Taking on Gazprom: Lithuania's battle for energy independence

  • Klaipeda: Lithuania hopes to become more energy independent with a liquefied natural gas terminal (Photo: Marina & Enrique)

When it joined the EU in 2004, Lithuania was given one key task: closing down its nuclear plant in Ignalina.

The Soviet-era plant used the same technology as the one that exploded in Chernobyl, Ukraine in 1986 causing a human and environmental catastrophe.

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Lithuania did as it was told. In 2009, it shut down the plant, even though it covered 77 percent of its electricity needs. The flipside was that its gas and electricity imports from Russia grew exponentially. Lithuania is currently 90 percent dependent on Russian energy.

According to the Lithuanian authorities, Gazprom - the Russian gas giant - charges among the highest prices in Europe.

It also co-owns the pipelines crossing Lithuania - a situation Vilnius is trying to change using EU rules that require energy companies to separate ownership of the transmission networks and the sale of electricity or gas.

"We are pioneers of this European policy because Europe is trying to show it needs competitive relations in the gas sector and we are trying to have it," Lithuanian President Dalia Grybauskaite told EUobserver in an interview in May.

"It is difficult because Russia still uses energy resources as instruments of political pressure. This is not only in the Baltic states. Also in Bulgaria we see very clearly that energy is used as an instrument to influence national politics. And this is very bad. It's very old-fashioned, Soviet-style relations," she said.

The European Commission meanwhile said it is "continuing to support Lithuania in its negotiations" with Russia on giving up ownership of the gas pipelines.

It is also aware of Vilnius' attempts to negotiate a better gas price with Gazprom, but it stays out of those talks as they are "commercial gas contract negotiations."

Lithuanian energy minister Jaroslav Neverovic in a phone interview said "it is not acceptable and not justified from our point of view to pay such a high price for gas."

One important negotiating chip is the opening of a liquified natural gas (LNG) terminal in the Baltic port of Klaipeda in 2015.

"Technically speaking it could cover the whole capacity of Lithuania, but we are realistic. The first step is to cover public heating and electricity, the rest will be bought based on the market situation," the minister said.

"We have nothing against Gazprom if the price is competitive. And we think there will be a significant potential for savings when the LNG terminal comes online," Neverovic added.

EU energy commissioner Guenther Oettinger has also publicly encouraged Lithuania to make use of the LNG terminal and become more energy independent.

Controversial alternatives

Other avenues the government in Vilnius is exploring are shale gas and nuclear energy.

A non-binding referendum last year however showed the public is against having another nuclear reactor in the Baltic state.

Only 35 percent voted in favour of plans to build a new plant at Visaginas, close to the old Ignalina site.

Japanese company Hitachi had signed up to execute the construction, but funding problems occurred as the plant is supposed to service all three Baltic states.

Neverovic said the nuclear plans are not completely off the table, but that Latvia and Estonia must step up their contribution.

"We need to evaluate the project, the financial model and the participation of the other countries involved. We made calculations of the current financial model and some questions were raised about whether it will ensure competitive electricity prices," the Lithuanian energy minister said.

The question of where to store the nuclear waste - under current plans, in Lithuania - also needs to be revisited, according to the minister.

"We need a solid and equally responsible decision among all partners on where the nuclear waste should be stored," he noted.

Environmental concerns are also an issue when it comes to the other option Lithuania is exploring to boost its energy independence: shale gas.

Extraction via the so-called fracking method uses a high-pressured mix of toxic chemicals and water to crack open the bedrock and release natural gas within.

Speaking in Vilnius in May, commissioner Oettinger said during a press conference: "I am sure that to have some shale gas option is a good instrument for our long-term negotiations [with] Gazprom and Russia."

But Neverovic said there are no scientific studies yet on how much gas there actually is in Lithuania. "It's all very theoretical so far. We need to investigate and if it proves commercially viable, after ensuring all environmental concerns, we should go ahead with exploration and extraction of shale gas."

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