Lithuania’s KN selects Hoegh LNG to operate Klaipeda FSRU for five years

Lithuania’s KN, the state-owned operator of the country’s first LNG import facility in Klaipeda, has selected a unit of Norway’s Hoegh LNG to operate and maintain the 170,000-cbm FSRU Independence for five years.

Last year, KN exercised its option to buy the FSRU Independence for $153.5 million, excluding VAT, from Hoegh LNG at the end of its current lease deal in 2024.

The FSRU has a regas capacity of 3.75 bcm but there are plans to boost the capacity up to 6.25 bcm due to very high demand.

In October last year, KN launched a tender for operation and maintenance services of the FSRU after its lease contract with Hoegh LNG ends in 2024.

Following completion of the tender, KN selected Hoegh LNG Klaiptda to serve as the FSRUs technical operator for a minimum of 5 years, with the possibility to extend it for an additional five years, it said in a statement issued on Friday.

This company belongs to the Hoegh LNG group, which is the current owner of the FSRU and has been taking care of its operation and technical maintenance since 2014, KN said.

In total three international shipping companies that passed the initial selection stage participated in the tender, including Wilhelmsen Ship Management and Mitsui O.S.K. Lines. (MOL), KN said.

“The bid of Hoegh LNG Klaipeda met the requirements, the most important of which are the price and quality of the service,” it said.

Lower costs

Until now, the share of the operator’s services was included in the total price of the time charter party agreement price, KN said.

After FSRU Independence becomes the property of Lithuania, the services will need to be purchased separately.

KN estimates that after taking over of the FSRU, the total annual terminal costs will be about one third lower than if the lease is extended under the terms of the current agreement.

The firm says that the operating costs of the FSRU will consist of fixed and variable parts.

About a third of the amount, i. e. 4.85 million euros ($5.19 million) per year, will be a fixed part: vessel management fee and crew costs, excluding taxes applicable in Lithuania.

Variable costs will depend on the FSRU need for repairs, regasification volumes, and the price of emission permits directly related to them, as well as other components, KN said.

Energy security

“Klaipeda LNG terminal is strategically important for the energy security of both Lithuania and the Baltic States, it is the main regional alternative to the import of Russian natural gas. This became especially important after Russia’s large-scale invasion of Ukraine,” KN’s CEO Darius Silenskis said in the statement.

“The tender that we announced attracted a lot of interest, which ensured the competitiveness of the bids and allowed us to choose the most favorable option for Lithuania”, he said.

According to Silenskis, it is also important that the operator, who won the tender, will maintain the vessel, which will be flying the flag of Lithuania.

Once the FSRU becomes the property of the country, it will be registered in the Register of Seagoing Ships of Lithuania and will be subject to the local legislation, and all taxes from salaries of sailors will supplement the country’s budget, he said.

It is estimated that the alternative to the import of natural gas created by the terminal allows Lithuania to save about 140-150 million euros annually (without the cost of the terminal upkeep), Silenskis said.

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