Lithuania Signs LNG Deal with U.S. Company

Lithuania has signed a non-binding agreement with Louisiana-based Delfin LNG for the supply of liquefied natural gas. The Baltic state hopes to break away from Russian imports.

Lithuania has signed a non-binding agreement with Louisiana-based Delfin LNG for the supply of liquefied natural gas. The Baltic state hopes to break away from Russian imports.

State-owned Litgas and Delfin LNG established a preliminary agreement that would pave the way for additional imports from the United States into Lithuania. Delfin LNG has plans to build an LNG export facility for 2019, but the project needs government approval. The nation signed a separate deal last year with Texas-based Cheniere Energy, with the first shipment expected to commence next year. However, the Baltic nation’s desire to get away from Russian gas is not simply about finding cheaper gas.

Geopolitics Intertwines with Economics

Although Eastern European states have been looking to resist Russia’s energy monopoly for some time, concerns over the Ukraine situation has caused these countries to forge closer ties with NATO and the West. With Lithuania and Poland establishing export terminals, U.S. exporters are salivating at the opportunity. American leadership and energy producers believe it would be an excellent time to ship natural gas to the region to combat Russia’s economic influence, but a few problems stand in the way.

Government Regulation Slows Down Progress

Many in the natural gas industry have complained about the regulatory burden, which prevents companies from shipping natural gas overseas. Companies such as Cheniere Energy have conditional approval from the Department of Energy, but the permit process remains stringent. The government limits exports to protect consumers from skyrocketing costs. But critics contend that the shale energy boom is producing enough natural gas to support an export market, especially from the Marcellus Shale of the East Coast.

Lack of Infrastructure 

House Speaker John Boehner has said that the United States can be a competing force against Russian gas, but this is an empty promise. The United States is still a heavy importer of natural gas, and the Energy Information Administration predicts that America will finally be able to sustain its own natural gas needs by 2017.

The United States is also years behind on the infrastructure scale, and the ones that are being constructed are still in the baby stages. Lacking infrastructure is a another major reason why crude shipments to energy hubs like Cushing, Oklahoma have been sluggish, and critics have complained that pipelines and other networks are not in place to keep up with oil and natural gas transportation. Even though there has been infrastructure progress, U.S. leaders should slow down the rhetoric to avoid making promises they may not be able to keep.