Study on Potential Role and Benefits of Liquified Natural Gas Import Terminal in Latvia

Abstract

Abstract Natural gas is relatively clean energy source, which emits less greenhouse gases (hereinafter – GHG), compared to other fossil fuels, such as hard and brown coal, and therefore it may be the most feasible resource to ensure smooth energy transition towards Europe’s climate neutrality by 2050. Traditional natural gas can be easily transported and used in liquefied (hereinafter – LNG) or compressed form. As for biomethane, in future it also can be used in liquefied (hereinafter – bioLNG) and compressed form, as well as transported by means of the current natural gas infrastructure. It can also significantly enhance regional and national energy security and independence, which has been challenging for the European Union (hereinafter – EU) over at least several decades. Issue on energy independence, security of supply, alternative natural gas sources has been in a hotspot of the Baltic energy policy makers as well. Now, considering Russia’s invasion in Ukraine, since late February 2022, a problem of the EU natural gas dependency on the Russian Federation has escalated again and with force never before experienced. The European natural gas prices also hit records, as the natural gas prices in the Netherlands Title Transfer Facility reached 345 euros per megawatt-hour (hereinafter – EUR/MWh) in March 2022. Therefore, LNG import terminal is the only viable option to reduce national dependency of the so-called pipe gas which in some cases, due to the insufficient interconnections, may be delivered from very limited number of sources. The European policy makers and relevant institutions are currently working towards radical EU natural gas supply diversification, where LNG deliveries coming from outside of Russia will certainly take a central stage. In case of Latvia, the potential benefits of the LNG terminal development in Skulte were evaluated in order to reduce energy independence of the Russian natural gas deliveries in the Baltic region and to introduce new ways and sources of the natural gas flows to the Baltics. LNG terminal in Skulte could ensure significant capital investment cost reduction comparing to other projects proposed for Latvia in different periods, due to already existing natural gas transmission infrastructure and the relative closeness to the Incukalns underground gas storage (hereinafter – UGS). Various aspects, such as technical, political and economic ones, were analysed to assure that Skulte LNG terminal would be a real asset not only to customers of Latvia, but also to those of the whole Baltic region, where in future it would be possible to use biomethane for efficient utilisation of existing and developing natural gas infrastructure.