Skulte LNG Terminal

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Skulte LNG Terminal, also known as Skulte FRU, is a proposed floating regasification unit (FRU) for LNG import in Latvia. In April 2023, the Latvian government cancelled plans to support the project.

Location

The floating terminal will be located 2.5km offshore from the port of Skulte, Latvia.

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Project Details

• Owner: JSC Skulte LNG Terminal [80%]; Virši-A [20%]
• Parent company: JSC Skulte LNG Terminal [80%]; Virši-A [20%]
• Location: Skulte, Latvia
• Coordinates: 57.315, 24.367 (exact)
• Capacity: up to 3 mpta, 4.1 bcm/y
  • Formerly 4.6 mtpa, 6.2 bcm/y
• Status: Proposed
• Type: Import
• Cost: €110 million (US$125 million)

• FID Status: Pre-FID
• Start Year: 2023 or 2024

Note: mtpa = million tonnes per year; bcfd = billion cubic feet per day; bcm/y = billion cubic meters per year

Background

The project seems to have first appeared around September 2019, and this is considered the proposal year and month.

This terminal was an EU Projects of Common Interest (PCI) candidate, but has not obtained final status. The terminal would be a floating regasification unit (FRU) and would not require LNG cold storage tanks as the nearby Inčukalns underground gas storage (UGS) would be used for this purpose. The proposed Skulte LNG Terminal Pipeline would connect the FRU to the Inčukalns UGS.

The terminal plans include an import capacity to 17 million cubic meters per day (6.2 bcm/y). According to Food and Water Europe's 2019 profile on gas use and development in Latvia, this is "more than 4 times the entire country’s highest ever annual gas demand. It is clear that Latvia does not need infrastructure to import four times what it consumes in a region already hosting one LNG facility [the Klaipeda LNG Terminal, already able to import close to the total of the regional demand...Klaipeda LNG Terminal already provides 80-100% of the three states' gas demand and is far from being used at full capacity. The promoter of Skulte justified the terminal with the argument that the operation of the Klaipeda terminal would not be secured after 2024, but in 2018 the Lithuanian government approved the terminal's acquisition after 2024, which makes clear that these import capacities would be available until beyond 2024 if needed."

The project is reapplying for PCI status under the 5th round of PCI projects to be decided by the European Commission by the end of 2021 and, according to Latvian media reporting, this may require repurposing of the project to handle biomethane and hydrogen instead. As of the end of 2020, an environmental impact assessment is under way.

The Latvian government is promoting the terminal as a national priority project. However, if the project does not officially receive national significance status, there is speculation that the developers will fail to obtain the consent of the residents of the resort town of Saulkrasti and other involved municipalities. A 39.5 km pipeline is also proposed to transport gas from Skulte Port to the Incukalns underground gas storage facility outside the Latvian capital Riga.

The project has been designated as a Latvian priority project seeking funding assistance under the Three Seas Initiative.

The LNG terminal was not included in the 5th PCI list published by the European Commission in November 2021. Enhancement of related infrastructure, the Inčukalns underground gas storage, did make it on to the list and is estimated to cost €88 million.

In March 2022, ahead of a visit to Latvia by Canadian prime minister Justin Trudeau, Latvia's ambassador to Canada, Kaspars Ozolins, said that, via the proposed Skulte terminal, his country would welcome Canadian LNG shipments to help reduce Latvia's dependence on Russian gas following Russia's invasion of Ukraine. Canada continued to face difficulties in exporting LNG overseas, with only one export terminal – the Shell-led LNG Canada Terminal – under construction as of the first quarter of 2022. It was also reported that investors from Latvia, the US and the Middle East had expressed interest in constructing the terminal. Latvia's Minister of Economics Jānis Vitenbergs commented: "There are companies in Latvia that are considering such an opportunity and have shown interest, we will also go to America to inquire about the possibilities of building such a terminal on commercial principles, and let's talk to our neighbors as well. Because, as I said, it is important that such a terminal is in the region and that it is economically justified and based on economic principles."

In April 2022, Latvia's prime minister Krišjānis Kariņš said that the government had "conceptually agreed" to begin construction of an LNG import terminal, and both the Skulte and Riga LNG Terminal sites were under consideration with a decision expected to follow by the end of the month after discussions with potential investors. Minister of Economics Jānis Vitenbergs also pointed out that his ministry's position continued to be that the project should be implemented on commercial terms with limited state involvement, though he conceded that potential private investors were in favour of certain state guarantees such as subsidies to help cover the terminal's operational costs. Regarding concerns raised about the utility of a new Latvian LNG terminal when a floating terminal is already operational in Lithuania and a further floating terminal has entered construction in Estonia, the government continued to stress that a Latvian import facility could be the cheapest and most economical option in the medium-term for the Baltic region due to the proximity of the Inčukalns UGS facility.

The Latvian government subsequently set the Economics ministry a deadline of May 31, 2022, to prepare a report on the potential location of the terminal. Jānis Vitenbergs said, "We will propose to the state the most optimal and cost-effective solution to ensure supplies of natural gas. From the perspective of the state it is important to ensure such projects are implemented with the lowest possible involvement from the state. Project implementation time is also a major issue." It was also announced that, given the ongoing delays in Latvia's planning for an LNG terminal, the government had decided to participate in the Paldiski FSRU Terminal with Estonia and Finland. Latvia may take a 30% stake, requiring an investment of €30-40 million, in the project.

In May 2022, Latvian fuel trader Virši-A acquired a 20% stake in the project from developer Skulte LNG Terminal. In announcing the deal, Virši's CEO Jānis Vība indicated that the terminal would have sufficient capacity to supply Latvia and neighboring countries including Estonia, Lithuania, Finland and Poland.

On 11 April 2023, the Latvian government cancelled plans for the terminal because it was commercially unfeasible, and Latvia can instead use capacity from Estonia's Paldiski FSRU under construction. A Baltic News Network article clarified the government's stance: "At the same time, the minister explained this terminal could be built if one of the developers completes the evaluation of the effect on the environment and constructs this terminal on commercial terms."

Opposition

In 2019, more than 2,000 signatories demanded that the terminal's development be stopped.

In spring 2022, local residents set up the Coastal Environmental Protection Society to prevent the siting of Latvia's proposed LNG terminal in Skulte. Juris Piziks, founder of the Coastal Environmental Protection Society, said, "There are several places in Latvia where it would be possible to build the terminal, more suitable places where there is an industrial zone and the environment is intended for it". "We want to see the comparison for all these potential terminal projects. We want to see a real technical-economic rationale," said Marta Timrota, spokeswoman for the association. A board member of the Skulte LNG Terminal company said that the project would be able to meet the requirements of an environmental impact assessment, but that hadn't yet happened as there had been no location authorisation from the Latvian government.