Lithuania, Poland to study gas pipeline

The national gas companies of Poland and Lithuania said this week they're moving ahead with a feasibility study for an interconnector between the countries. Poland's Gaz-System S.A. and Lietuvos Dujos of Lithuania announced Monday they had signed an agreement wherein Polish consulting company ILF would take the lead in assessing the potential of the proposed 350-mile gas line. "The management boards of Gaz-System S.A. and Lietuvos Dujos have decided to continue work on this strategic interconnection," Joachim Hockertz, deputy general manager of Lietuvos Dujos, said in a statement. "We are convinced that this project is of a great importance for the energy security and market integration of the Baltic States." The Gas Interconnector Poland-Lithuania envisions transporting up to 2.3 billion cubic meters of natural gas annually to the Baltic nations of Lithuania, Latvia and Estonia, with the possibility of expanding its capacity to 4.5 billion cubic meters. Backers say it's an important step toward the Baltic states' energy security as they seek to diversify away from their current total dependence on Russian supplier Gazprom. Lithuania is also planning to lease a floating liquefied natural gas import facility in 2014 to help in that regard. "In comparison with other diversification projects in the region, the interconnection between Poland in Lithuania provides a broader range of benefits, enabling access both to EU gas and global LNG markets and, through bi-directional flow capabilities, a higher security of supply for the connected countries," Hockertz said. The feasibility study, which should be available by the first quarter of 2013, is being co-financed by the European Commission through its Trans-European Energy Network Program, which seeks to integrate the continent's energy markets and diversify its natural gas supplies away from Russia. The proposed $594 million pipeline is also part of the EU's Baltic Energy Market Interconnection Plan, which has as its goal the full integration of the three Baltic States into the European energy market. Under the recommended route, the pipeline would run from the Rembelszczyzna gas compressor station near Warsaw to the Jauniunai station near Vilnius. The feasibility study follows earlier business case analysis of the project. "Gaz-System S.A. expects that a significant part of the investment will be financed from EU funds because this is a priority project in the scope of eliminating energy islands in Europe," added Jan Chadam, the Polish company's board president. Gazprom, however, owns 37 percent of the Lithuanian company (Germany's E.ON Ruhrgas owns the biggest share at 39 percent) and may try to block the project, the Russian business newspaper Kommersant reported in February. The Lithuanian state owns only 17 percent of Lietuvos Dujos but is battling in court to spin off its gas transmission operations into a separate company, which it hopes to establish by July 2013 and have operational by October 2014. Lithuanian Energy Minister Arvydas Sekmokas has repeatedly called for the state to own the transmission pipelines, the Baltic News Service reported.