Archive for July, 2011

Memel City will be an immensely attractive seafront development in the Klaipeda harbour, at the Dane River mouth.

Memel City is a new ‘city’ planned built in the port of Klaipeda at the very sea front. A fantastic, amazing project that well might change the face of Lithuania!

The area where the new 'city' will be built is still a part of the port area. Here are still cranes and old production halls, and there are still ships at the dock. But in a few years this will be the most exciting town imaginable in this country. It is even likely to be Lithuania's only seafront project ever.

Memel City will be located at the mouth of the Dane river. On the other bank is planned another project with some similarities to Memel City, though in a smaller scale. The projects will be tied together by a new bridge over the river, and they will together constitute a truly unique development for Klaipeda and Lithuania.

Memel City will include several new quarters with apartments, business, offices, shops, restaurants, a hotel, night clubs, SPA, casino and much more. The quays and the closest sea area will be available for small boats and yachts.

The whole territory covers 6,87 hectare, whereof 5,3 will be occupied by buildings and the rest remain as open green space, squares, outdoor restaurants and more – for joyful use and relaxation by visitors and inhabitants of the new ‘city’.

The ‘city’ will also include a seaside hotel with wonderful view to the Curonian Spit, the Lagoon, the Baltic Sea and Klaipeda city. The buildings will be constructed with 4 - 7 floors.

On the opposite side of the River Dane there is a newly renovated riverfront yacht harbour, old architectural buildings, the historic Klaipeda Castle, the cruise ship harbour - all attractive elements contributing with additional value and charm to the project.

Planned floor space:
Residential – 32.326 sq.m
Offices – 25.355 sq.m
Commercial – 19.308 sq.m
Hotel – 18.412 sq.m
Conference halls – 2.100 sq.m
SPA centers – 4.213 sq.m
Casino – 1.030 sq.m
Restaurants and cafes – 1.192 sq.m
Other – 2.389 sq.m
Reconstructed buildings – 453 sq.m

Klaipedos Nafta has one of the most up-to-date oil terminals in Europe

Rokas Masiulis, General Manager of Klaipedos Nafta

Rokas Masiulis interviewed by Aage Myhre
aage.myhre@VilNews.com

Rokas Masiulis has huge challenges, both behind and in front of him. As head of the giant oil terminal belonging to Klaipedos Nafta, he has had good success, and has this year also delivered remarkable economic performance for the company that in essence is owned by the Lithuanian State. Now it's planning and development of the increasingly well-publicized LNG terminal that lies in front of him. The president and the government have decided that the LNG venture will be a project of national concern, and as I’m in the process of writing this interview, the President herself is on a visit to Mr. Masiulis to ensure that the planning of the terminal proceeds 'by leaps and bounds'. 

In the middle of the storm's eye Lithuania's oil-director still found time to answer my questions. His capacity is compelling...

“From your Klaipedos Nafta web page I have read that your company was founded in 1994, that it was entrusted the functions of reconstruction executive of the oil terminal which had been in operation since 1959 in the Klaipeda Seaport, and that your company became operator of the new terminal when reconstruction of the old terminal started in 1995, a reconstruction that was completed in 2002. The web page also tells that today Klaipedos Nafta is one of the most up-to-date oil terminals in Europe. Anything you would like to add about the company’s history? And please explain to our VilNews readers what the functions of an oil terminal like yours are all about?”
“SC Klaipėdos Nafta is a strategic enterprise of the Republic of Lithuania capable of unloading different oil products from rail tank cars into tankers and, when necessary, from tankers into storage tanks. SC Klaipėdos Nafta transports close to one third of all the cargoes shipped via Klaipėda Port. Our company is well known in handling so called “dark petroleum products” (fuel oil, vacuum gasoil) loading of which require special heating equipment. Our company also serves as a backup route for petroleum products import to the country in case supplies are cut from the east.”

“The Lithuanian State is the major shareholder of Klaipedos Nafta. Who are the other shareholders, and why are they involved?”
“The other shareholders comprise of joint stock companies and private persons, from which the largest is AB Achema, owning more than 9% of AB Klaipedos Nafta shares. The minority shareholders play a role as investors through shares free flow in Nasdaq OMX Vilnius.”
“You claim on your web page that experts from British Petroleum have reported positively about;

a. labour safety,
b. environmental protection
c. fire prevention means

of your Klaipedos Nafta Terminal, every year since 2001. After last year’s catastrophe in the Mexican Gulf, BP’s judgements are probably not that worthy anymore, but what can you in general say about the environmental and fire risks having a an oil terminal of this size located so close to a rather large city centre as Klaipeda is?” 

“The Terminal focuses much of its attention on environment protection. Automatic fire detection and extinguishing system, computerized control system of the transshipment process, air, soil and water pollution prevention technologies fully satisfying the European standards have been introduced.  Oily waters from the tankers being serviced at the Terminal are collected and treated in the modern mechanical and biological waste water treatment facilities.”

“SC Klaipėdos Nafta also pays great attention to the measures preventing air pollution with hydrocarbons. Vapour, emitted during technological process, recovery and combustion unit has been installed and is in operation where up to 98 per cent of volatile organic compounds, collected from the tanks of the vessels handled at Company’s jetties or from rail tank-cars during their loading, are being burnt. An advanced close discharge system is in operation. During loading – discharging of oil products tank-car hatches are covered with special caps with valves preventing hydrocarbon emissions into the air. Floating roofs, mounted in the storage tanks, reduce product evaporation and thus environment pollution.”

Klaipedos Nafta claims to operate one of the most up-to-date oil terminals in Europe, with the core activity to transship exported oil products from rail tank-cars into tankers, provide Lithuania with imported crude oil and oil products which are shipped to Klaipеda port by tankers.

“Last week you informed the Vilnius Stock Exchange that your profit rose 57 percent in the first half of this year due increased sales and dropped intermediaries. Net income rose to LTL 27.7 million ($ 11.4 million) from LTL 17.6 million for the first half of 2010. These are impressive figures?”

“Yes we can say a great job done through the first half of 2011. Increase of revenues during the first half of 2011 was influenced by significant factors such as successful functioning of the business model - operation without intermediaries, and after termination of a non transparent cooperation with UAB „Naftos grupe“ the Company gained about LTL 5 million (EUR 1,4 million). Additional earnings were achieved by applying increased transhipment tariffs; plus an implemented structural reorganization in the commercial sphere which added LTL 4 million (EUR 1,2 million) earnings from additional services rendered to the clients as well as successful sales in June of oil products recovered from bilge waters that brought LTL 5,7 million (EUR 1,7 million).” 

“Your Lithuanian Government and President say they are ready to build a floating LNG (liquefied natural gas) terminal close to the Klaipeda port by 2014 to cut dependence on Russian gas and obtain access to the gas spot market. But I understand that the Latvians and the other Baltic neighbours are not all that convinced and will potentially decline to cooperate on this?”

“This question should be addressed to Lithuania Government and President but the main purpose to build LNG terminal in Lithuania’s security of supply which means we’re thinking of local terminal to cover Lithuania needs.”

“Your Klaipedos Nafta is in charge of the LNG terminal project. Last week you signed an agreement with Fluor Corporation , the largest publicly traded U.S. engineering company, as lead advisor on the planned terminal. You said that they will take over the project's management from July, expected to prepare the technical development plan and assist in selecting technologies, as well as working out a business plan for the terminal. The contract (so far undisclosed) with Fluor covers a period up to 2014, when you expect the terminal to come online. Please tell me more about the size and extent of this contract with Fluor and what they are supposed to accomplish?”

“Our selected lead adviser Fluor will cover financial, environmental, risk&safety, engineering and project management advice, as well as election of main parameters and support in negotiations to acquire FSRU, EPC contract. The LNG supply will be at their responsibility as well. As you see from activities listed above, Fluor will lead us through the whole project implementation period, i.e. 4 years. The contract price with them is EUR 9,229 million (excluding VAT).”

“You’ve also said in an email that Klaipedos Nafta plans the terminal to have a capacity of 2-3 billion cubic meters of gas per year, and that it will cost some EUR 200-300 million to build. Can you elucidate more on these figures? Maybe also exemplify a bit on how many gas tankers (ships) that will represent per year, etc.? And what about the environmental risks, pollution etc. having the LNG terminal located so close to Klaipeda city?”

“The main parameters are so far preliminary, so this is not the time to speculate. In 3-4 months, with Fluor advice, we will determine the main parameters and then we will have a vision of the business plan. Environmental impact assessment will determine any existing environmental risk, pollution and other risks. It is planned to have EIA report ready by the end of 2012. At the first glance it shouldn’t be a negative risk. There are several examples in the world where terminals are located very close to a city, i.e. Barcelona (Enagas).”

“The Government of Lithuania last week gave the projected LNG terminal the status of national importance, and the Cabinet approved the implementation plan, that will provide for speedier procedures  of all the institutions involved in the project. This will force other departments to be more active in solving the issues related to land plots, EIA assessment and the involvement of the sea port in the project. The decision came after President Dalia Grybauskaite earlier had criticised the slow pace of the project. Does this represent lack of trust in Klaipedos Nafta’s handling of the project? What else can you say about your cooperation with the Government and the President?”

“We have to do pre-work to enter the more visible movement of the project implementation. I mean, there are lots of procedures and research to be done before engineering and EPC contracting can start, for example. SEIA, development plan, territory planning, marine research, EIA etc. have already been started. We are in close cooperation with the President, Government and other related institutions as we have at hand an ambitious national importance project.”

“How do you see the future for Lithuania’s energy supplies on the backdrop of the above? Do we really need a new nuclear power station, or will the LNG terminal and other sources be sufficient enough for this country by 2020?”

“It’s not our competence to comment on national energy strategy.”

Principle for the planned LNG terminal in Klaipeda

An FSRU (floating storage and re-gasification unit) will be moored to a pier (jetty) and every
arriving LNG carrier will be moored to the FSRU, side by side.

WITH BOTH OIL AND LNG IN KLAIPĖDA:

Environmental risks?

The Kiaules Nugara (Pig’s back) island in the southern part of the Klaipeda port, at the border between the port and the Curonian Lagoon (to the left in the above illustration) is the most likely place to build Lithuania’s planned LNG terminal. This means that it will regularly sail large LNG tankers through the narrow strait between Klaipeda city and Neringa (which is now designated as one of the country’s national parks). How risky can it be to get a gas terminal and such a heavy sea traffic close to the big city that Klaipeda after all is? What about the explosion and fire risk? What about emissions and other forms of pollution? Is the water, beaches and fisheries in the Curonian Lagoon at risk? May Neringa and Klaipeda city be at risk?

There are currently 235 liquefied natural gas (LNG) tankers in operation worldwide. New LNG tankers have an average capacity of three billion cubic feet, costing approximately EUR 180 million each. LNG tankers differ from traditional oil tankers in that their cargo, liquefied natural gas, must be cooled to extremely low temperatures (-160°C) and has slightly different characteristics than oil (including a higher propensity to burn). LNG tankers might be dangerous for environments and communities claims a new movie and web page: http://timrileylaw.com/LNG_TANKERS.htm

Principle for the planned LNG terminal in Klaipeda

An FSRU (floating storage and re-gasification unit) will be moored to a pier (jetty) and every
arriving LNG carrier will be moored to the FSRU, side by side.

Klaipeda port area is now very idyllic. Klaipedos Nafta's oil tanks (left in above photo) have certainly somehow changed this picture over the latest years, but that will be trifles in comparison to the situation that will be applicable when the LNG  terminal at the inner end of the strait is completed in 2014. Let's just hope that all possible precautions are taken, and that  neither LNG, oil, nor the tankers carrying the gas and oil will have negative or risky effects for Klaipeda,  the sea or the beautiful, surrounding landscapes.

Aage Myhre, Editor-in-Chief

KLAIPĖDA FREE ECONOMIC ZONE:

A magnet for international companies

The Klaipėda Free Economic Zone (Klaipėda FEZ) was established in 1996 and opened officially in 2002. FEZ offers tax incentives to qualified investors that invest at least 1 million euros. In 2008, due to overcrowding the zone was expanded from 205 hectares (510 acres) to 412 hectares (1,020 acres) of developed land. As of March 2008, before expansion, FEZ had 22 investors: seven were operating, one just finished construction, six were under construction, and others in development stage. Web page: www.fez.lt E-Mail: info@fez.lt

The Klaipeda Free Economic Zone (FEZ) was the first and is still the only fully functioning free economic zone in Lithuania. The two companies that first started operations in the zone was the Japanese company Yazaki Wiring Technologies Lietuva, and the Danish company A.Espersen A/S, which opened their fish processing factory here in January 2003. FEZ was established to provide favourable conditions for the development of business activities by offering a prepared industrial site with a ready physical and juridical infrastructure, support services and tax incentives.

The 412 hectares area is located in a strategic position, close to the port of Klaipėda and with well developed connections to rail and road. Palanga International Airport is located only 30 km from the FEZ.

The Klaipėda FEZ has signed agreements with 20 foreign and Lithuanian capital firms, of which 16 are already operating. Since its inception, there has been invested more than LTL 792 million and created more than 1.000 jobs in the zone. The Klaipeda FEZ is recognized an ‘importance for the state project’.

During the last eight years, approximately 400 million Euros has been invested here. Business is carried on here by 16 companies from countries of Western Europe, Asia, and Scandinavia. Another four companies have already commenced construction or design works.

The Klaipėda FEZ has been recognised as an economic project of state importance. Such status of the zone ensures a favourable attitude of authorities in solving any issues that may arise.

In 2010 the Klaipėda Free Economic Zone took part in a world ranking for free economic zones, organised by the “FDI Magazine” belonging to the “Financial Times” group of publications. Out of 700 world free economic zones, which participated, the Klaipėda FEZ took 20th place. In the category ‘facilities’ the zone took 5th place.

The first in Lithuania
Klaipeda Free Economic Zone is the first and leading free economic zone in Lithuania. The advantages of setting up a business here became especially apparent after Lithuania joined the European Union in 2004. Based within the security of doing business within the EU it provides an excellent point from which to explore the vast Eastern, Western, Scandinavian and Russian markets.

Tax incentives
Companies investing in the Klaipeda Free Economic Zone will have considerable benefits in terms of no or reduced profit tax, no tax on dividends for foreign investors and no real estate taxes. These tax incentives in the Klaipeda Free Economic Zone are regarded as state aid for regional development, and therefore comply with European Union regulations.
• 6 years’ exemption from corporate income tax following made investment and 50% discount for the following 10 years –for companies that have invested more than €1 million
• No real estate taxes
• No taxes on dividends paid on foreign investments

Management
The Klaipėda FEZ is managed by a separate company that provides clients with all the necessary services in order to make the process of setting up easier and faster. The company provides the following services:

– consultations on establishing and registering enterprises and setting up businesses in the zone; 
– issues permits for activities in the zone; 
– informs about EU structural support opportunities for the client’s investment projects
– helps the clients’ construction and other project vs. authorities
– provides temporary start-up offices and services
– provides contacts to reliable and verified service providers and contractors.

Director Eimantas Kiudulas of the Klaipeda Free Economic Zone (FEZ).

How to become a Klaipėda FEZ enterprise? 
• Contact the FEZ management company by e-mail at marketing@fez.lt  or by phone at +370 46 312163. Complete the investor’s questionnaire at www.fez.lt. 
• Introduce your investment project, agree on the terms and conditions of doing business in the zone and sign an agreement with the Klaipėda FEZ Management Company. 
• Obtain a permit for activity in the zone from the zone management company. 
• Register a zone enterprise in the register of enterprises. 
• Take on a sublease from the FEZ management company for a land plot or lease premises for doing business in the zone. 
• Present to the tax administrator an auditor’s report, proving the amount of capital investment as prescribed by the law.

Current companies established in the zone
Klaipeda FEZ has signed agreements with 20 companies, of which 16 are operating. Their activities cover production of plastic pellets, logistics and storage, bio-diesel, electronics, appliances, architectural glass, steel constructions and a range of services. 

Four new companies are now preparing their business activities in the zone:
Fortum, Heidelberg Cement, AB Ship and Nordetanolis.

Currently based in the Klaipeda FEZ are the following companies:

 
Western Shipyard’s General Director Arnoldas Šileika started to work as foreman
in the yard 22 years ago, when it still was under Soviet rule. He has been head of this
huge company since 2001, leading the transformation from Soviet times and thinking.

Western Shipyard’s General Director Arnoldas Šileika interviewed by Aage Myhre
aage.myhre@VilNews.com

I've been here before. I recall this as I pass through the guard building and the strict access control point that is the entrance to this huge shipyard furthest to the west in the Klaipeda port area. And well within the shipbuilding area, memories start flowing. I'm starting to remember details from my visit here 20 years ago, when the shipyard still was very 'semi-Soviet'.

I see the tremendously long, Soviet-like buildings, and walk along the one that is supposed to be the administrative headquarter. I finally get to the building’s end, closest to the sea, with a feeling of having gone back in time. But this feeling gradually fades as I get inside, climb the stairs to the 4th floor and walk into the corridors which are now colourful and nicely renovated, with pictures of new, modern ships and platforms on the walls. The pictures of Lenin and other communist symbols have miraculously disappeared since my last visit…

The secretaries in front of the general director's office still sit in the same reception room as by then. But now the dark, gloomy desktops are replaced with light, modern furniture, and the Soviet weightlifter-ladies have been replaced with beautiful and inviting young women, even speaking English very nicely…

And, believe it or not, the door to the general director's office is wide open! This time, there is no secretary humbly approaching the boss in his highness’ fortress behind armoured doors to ask if he graciously could accept to receive the visitor. No, now it’s the boss himself who comes smilingly out of the huge director-room, with an outstretched hand and a jovial 'welcome to our Western Shipyard! "

Hmm ... Times have obviously changed...

Western Shipyard started operations in 1969. The plan was that 9.000 people would work here.

Arnold Šileika pulls me into his office and offers a seat at the conference table in front of his desk. The tables are as large as they were 20 years ago, but now in modern, bright design. He offers me coffee, and I accept. But then I come to think that the last time I got coffee here I was served a strange sweet-sour mixture of sugar, water and coffee grounds that were almost impossible to mix into the water no matter how vehemently I used the teaspoon. Hairs rise on the back of my neck just by the thought.

But, of course, what is now being placed in front of me is obviously produced by an Italian coffee machine, and the scent is unmistakably genuine freshly brewed aromatic coffee. 

My first question to the Director is related to the shipyard's history. 

History – from Soviet colossus to European greatness
And Arnold Šileika is willingly telling me that the history of AB ”Vakarų laivų gamykla“ (VLG) – the Western Shipyard – started in 1966, when the construction started for a specialized ship repair yard very much directed towards Soviet’s huge fishing fleet.  According to the project the yard would be the biggest and the most modern in Soviet’s northwestern region, also the biggest one in Klaipeda – with a 50 hectares territory, 3 km of quays, 100.000 square meters of production workshops and 9.000 employees.

The official opening of the Western Shipyard took place in 1969, and the first ship was put in a dock for repair that same summer 42 years ago.

The shipyard never became as big as forecasted, and in 1975 the company still had ‘only’ 2.600 employees repairing trawlers, refrigerators, plants, and fishing vessels.

After the downfall of the USSR, the huge fishing fleet became a burden for Lithuania. Ships were sold or written down to scrap. In 1993 the company restructured its activity and turned to repair of vessels from Western countries. Since then the company has been constantly strengthening its position in the markets, first of all in Western Europe. 

AB "Vakarų laivų gamykla" was bought and privatized by the Estonian BLRT Grupp Concern in 2001. In 2003 the company was reorganized into the AB "Vakarų laivų gamykla" group with 23 companies within the activity fields of ship repair and modification, ship building, stevedoring and storage services, metal construction production, metal processing, hot galvanization, transport services, procurement, and more. 

 In 2010, Danish Odense Steel Shipyard sold its Baltijos Shiprepar yeard in Klaipeda to the BLRT Group, giving the group additional capacities, enlarging BLRT’s technical and logistical levels in developing shipbuilding in Lithuania and Estonia.

In 2007, Western Shipyard and the Norwegian company “Fiskerstrand Verft” established the joint company ”Fiskerstrand BLRT“ to deal with ship building, marketing, project management and more. The shipyard has since built several vessels for Fiskerstrand , together right now in the process of completing the construction of world's largest gas-powered ferry – for 600 passengers and 242 cars – for the Norwegian company Fjord1, one of the Norway's largest transport groups operating 63 car ferries, more than 500 busses and goods vehicles. This is one of the largest shipbuilding projects ever in Lithuania, with a total value of LTL 163.6 million (EUR 47,3 million).

Today - dramatic lack of workforce in Lithuania
Arnold Šileika has been working in the Western Shipyard since 1989, first as foreman, then as the company’s General Director for the last ten years. The company has now 2.000 employees, plus 1.000 more working on the territory for the shipyard on contract basis, totally 3.000 persons.

"You have, in other words, seen the whole transition from having been Soviet-ruled to becoming a Western company," I state.

And the director responds, still just as open and straight forward, that the biggest challenge has been to get workers to change their mentality from eastern to western ways of thinking.

"But now, today, the biggest challenge is actually to find people who want to work here," he says. "This despite the fact that we pay almost twice as high wages as what the labour market in Lithuania in general offers. We actually have had to start to bring in workers from Bulgaria and Romania to fulfill our obligations," he says.

Great importance for Klaipeda and Lithuania
The meeting with Arnold Šileika is nearing its end, and he invites me for a drive around the area that the shipyard  disposes. The area is simply too big to cover on foot...

Aha, I think, now it’s probably soon time to again experience an authentic Soviet, black Volga with plush seats and curtains for the windows. The memories from 20 years ago have not let go yet, and I foresee a drive among rusting,  sinking ship  wrecks  and a yard area full of old iron scrap, oil spills, creaking quay cranes and thousands of workers who are yelling at each other under the supervision of foremen who would make even the most hardened Soviet colonels to  look bleak.

The director's car is a new Lexus, hybrid version ... The yard is dry, clean and tidy. The docked or moored vessels are all freshly painted and beautiful, almost exclusively from Western European countries. Nobody is yelling...

It finally begins to dawn on me that the Soviet times are over. That Lithuania has become a country with modern industry and service companies fully on a par with western countries.

The director's calm and professional voice reinforces this impression as he drives me around, explaining that my home country Norway is the most important partner for his Western Shipyard, but that he also supplies ships and other equipment to Denmark, Sweden, Finland, Germany, Netherlands, Italy and Russia. He says that the yard each year  builds 10-12 vessels for these countries - ferries, tugboats, fishing and cargo vessels, plus boats and structures for  offshore projects, and much more. He mentions especially a truly unique project that the yard completed two years ago; to build the jackup vessel Windlift 1 for an offshore windmill park. This was the largest project ever throughout the history of the Western Shipyard.

The shipyard also repairs different kinds of vessels, 100-120 every year.

The Jackup vessel Windlift I, completed in 2009, is the largest project ever throughout the history of Western Shipyard.

The General Director also tells me that Western Shipyard is the largest company in Klaipeda, also one of Lithuania's  largest. He says that 90% of what the shipyard produces is exported, and that the company therefore is very important for the country’s trade balance and more. That also Klaipeda city enjoys very good benefits from the yard, that many families have their incomes from here, and that numerous shipyard partners in the west come here and leave important money in hotels, restaurants and shops.

“We are ready to accept many more contracts from Europe and other continents within vessel building or repairs. We can guarantee that we are competitive pricewise and that our quality is very high,” concludes General Director Arnold Šileika of Klaipeda’s Western Shipyard as he parks his Lexus just behind my car to see me off.

And I believe him. My initial expectation of finding a small Soviet spot here is gone. The director has convinced me that the company I now leave behind me is top modern, fully on par with shipyards in USA, Asia or Europe…

Western Shipyard’s General Director Arnold Šileika has reason to be proud of his company’s accomplishments.