Estonia and Finland Regroup Following Gasum Decision to Scrap LNG Terminal, Balticonnector

Finnish gas transmission network operator Gasum has decided to scrap plans to build a regional LNG terminal in the Gulf of Finland as well as an undersea gas pipeline with Estonia, the Balticconnector.

“Implementation of the projects requires them to be commercially viable. On the basis of the studies Gasum has conducted the Finngulf and Balticconnector projects are not regarded as commercially viable and there is not sufficient demand for them in the Finnish market. Therefore Gasum will give up the implementation of both projects,” the Gasum statement says.

Estonia, however, exerted great efforts for both, especially the Balticconnector, and says it is not distracted and will continue pursuing them - through other entities or, if needed, on its own.

“Yes, Gasum has abandoned the project, but Finland is to establish a new state company tasked with construction of the Balticconnector. So, the gas pipeline will be built in cooperation between the two countries. The LNG terminal is not a governmental project and could be developed by private investor,” Rasmus Ruuda, chief of the Public Relations department at the Ministry of Economic Affairs and Communications, told Natural Gas Europe.

Gasum noted in the statement that the Finnish gas market and its future outlook have changed “substantially” since 2008 when plans for the projects were drawn. Among the factors to be considered is fallen gas demand and lower gas consumption as a result.

For many years, Finland and Estonia were discussing the site of a joint LNG import terminal of capacity of 2.5 bcm/year by 2015 in Inkoo (Finland) or Paldiski (Estonia), which would supply gas to the neighboring country through the Balticconnector gas pipeline.

In March 2014, the countries finally agreed after missing a deadline to apply for EU financing on building two small-size LNG terminals on each side of the Gulf of Finland and to be connected by the pipeline by 2019. As the two LNG facilities were not eligible for European funding, the countries resumed discussions and struck an accord on erecting a regional LNG terminal in November 2014.

Gasum says it will continue pursuing active development of the Nordic gas market.

“In Finland there is demand for LNG, particularly among users outside the gas network and in transport, with LNG providing a competitive alternative to oil-based fuels. The Gasum subsidiary Skangas is constructing an LNG terminal in Pori, Finland, and Skangas is also a co-owner of the LNG terminal under construction in Tornio, Finland. The Pori and Tornio terminal projects will serve the growing needs of the market outside the gas pipeline network in industry, shipping and heavy-duty road transport. Additionally, the market for the biogas, which is 100 percent Finnish and renewable, is growing strongly and Gasum desires to be a forerunner in developing the market,” the Finnish company says on its website.

Gasum did not answer questions from Natural Gas Europe.

An October 2nd statement by the Finnish Ministry of Employment and Economy Affairs states Finland will apply this autumn for EU subsidies for a gas pipeline between Finland and Estonia.

The application deadline is said to be October 14th. For that purpose, a state-owned company will be established and empowered with the implementation of of the Balticconnector.

Minister of Finnish Economic Affairs Olli Rehn emphasizes that, when finished, Balticconnector will link Finland with European gas networks and make Finnish gas market competitive.

“When completed, the Balticconnector pipeline will link Finland with European gas networks and open the Finnish gas market to competition. The project cannot be implemented without substantial European investment funding. To carry out the project, Finland will need 75 percent from the Connecting Europe Facility of the European Union,” Olli Rehn, Minister of Finland’s Economic Affairs, is quoted as saying in the Ministry’s website.

Approached by Natural Gas Europe, Mikhail Krutikhin, a co-owner of energy consultancy company RusEnergy, says neither country is in “necessity” of the pipeline.

“Although Finland depends 100 percent on Russian gas, the supply is reliable and, importantly, cheaper than it would be from elsewhere. As far as Estonia is concerned, it does not feel any shortage of gas and the quantity it is getting fully satisfies its needs. They are pretty low, in fact, as the country does not use gas for electricity generation,” the gas market expert stated.

According to EU stats, Estonia is the least energy import dependent country of the 28 EU-member club but that roughly 10 percent of the Gazprom gas imports it continues to receive is a nuisance amid current geopolitical tensions.

Estonia’s energy imports also come from the Lithuanian LNG terminal, around 20 percent of the total foreign energy supply.