KN calls a tender for acquisition of FSRU

KN (AB Klaipėdos nafta), operator of oil and liquefied natural gas (LNG) terminals, is implementing the project on ensuring the long-term operation of the LNG terminal in Lithuania and announces the public procurement of a FSRU (floating storage and regasification unit). Offers from potential suppliers will be compared to the redemption (option) value of the FSRU ‘Independence’, selecting the most economically advantageous offer, as required by the Law of LNG Terminal.

The procurement results will show whether there are any better alternatives on the market than the option of the acquisition of ‘Independence’ as it is provided in the FSRU lease, operations and maintenance agreement with Norwegian company Hӧegh LNG signed in 2012. This agreement expires at the end of 2024. By December 2022, Lithuania has to decide on the acquisition of the FSRU.

“For Lithuania LNG terminal is one of the success stories of energy security and strengthening of the independence of the state. Thanks to it, today we have secured alternative natural gas supply, price competitiveness and we can choose from where and under what conditions we will buy natural gas. Our goal remains to ensure efficient operation of the terminal and the best price for consumers. The terminal, as an important component of the regional natural gas market, will become even more important when the gas pipeline between Lithuania and Poland becomes operational, joining the continental natural gas network,” says Minister of Energy Dainius Kreivys.

With the implementation of respective decisions, the KN share of the security supplement has already decreased from EUR 361.84 Eur for MWh per day per year (2017) to EUR 151.38 for MWh per day per year (2021).

Prior the tender for the acquisition of the FSRU, KN has engaged external experts, i. e. three foreign companies providing legal, commercial and technical consulting services selected through public procurement procedure, which have carried out an LNG market research and public market consultation. During this procedure, market participants, i.e. potential FSRU suppliers, were presented with draft public procurement documents and technical specification. Market participants and other stakeholders could provide their comments and suggestions for these documents. This process was initiated by the tender organiser in order to prepare for the procurement with maximum quality and allow the market participants to familiarise themselves with the preliminary subject-matter of the procurement. In course of these stages, the perspective of LNG and the expectations of the LNG terminal users were assessed, essential technical conditions were determined as well as the FSRU parameters and supplier qualification requirements were defined.

From a formal aspect, to fulfil the statutory obligation to select the most economically advantageous tender, the performed market consultation, market research and data collected thereby is sufficient for selecting the FSRU supplier. The public procurement procedure is the FSRU selection method preferred by the company. The objective of this process is to provide the most favourable conditions for all market players to participate in the FSRU selection process and to propose their solutions. Applications are expected within one month of the start of the tender.

‘We announce public procurement in order to achieve maximum openness and transparency of the FSRU selection procedure, thus we urge market participants to submit their tenders for the acquisition of FSRU. Tender ranking model was created with special diligence, by engaging competent external experts. Even though the price of the FSRU is an important criterion in the selection process, the final decision will also depend on other important components: age and size of the suggested vessel, regasification capacity, expected operational costs, as well as certain technical solutions. In other words, the company will evaluate not only the price, but also the FSRU life cycle costs, technological and market compliance, thus ensuring the criterion of economic efficiency and validity of the future selection’, emphasizes Darius Šilenskis, the CEO of KN.

According to D. Šilenskis, after the extensive FSRU and natural gas market research, discussions with current and potential users of the LNG terminal, as well as during the formal pre-procurement consultation, it became once again clear that the demand for LNG and such infrastructure required for the import thereof would remain both in Lithuania and in the region.

‘Orientation capacity of the FSRU should be at least 150 thousand cub. m (in comparison, current FSRU capacity is 170 thousand cub. m). Users of the LNG terminal expect other parameters of the FSRU to be at least equivalent to those of the current FSRU ‘Independence’. Both the comments provided by the users of the terminal and the global FSRU market trends were taken into account while formulating the requirements for the future FSRU. However, it is also important to understand that the range of the FSRU suppliers is rather narrow and the market considered as niche due to high and specific requirements for technology, its flexibility, efficiency and reliability, thus the number of possible alternative offers on the market may be sufficiently limited’, says the head of KN.

The public procurement of the FSRU is a part of the project on ensuring the long-term operation of the Klaipėda LNG terminal, which started three years ago. Prior to the announcement of public procurement, KN has implemented several stages of ensuring long-term operation of LNG, among which one of the most important is decreasing the security supplement, included to the natural gas price and paid by natural gas consumers.