Estonia's LNG Plans Hit Reality Check

Estonia’s plans to have its own liquefied natural gas import terminal in the capital city of Tallinn will have to wait for funding, according to Netherlands-based Vopak EOS which hopes to develop it.

There is already a functioning and under-used terminal in Lithuania and using public funding for an additional one in Estonia would be hard to justify.

“It is obvious that the EU financing decisions will influence the Tallinn LNG terminal project. We are currently negotiating the final investment decision terms with the project partners and other involved parties and are considering a Connecting Europe co-funding (CEF) application for 2016,” a Vopak EOS spokeswoman told Natural Gas Europe.

But an advisor to Lithuania’s energy minister, Mantas Dubauskas, believes that the chances of an Estonian LNG Terminal look bleak.

“If Estonia built a LNG terminal – I am not talking about a small-scale facility but one vying for regional status – we would likely see a glut of the LNG capacities in the region,” the adviser told Natural Gas Europe.

“The company has to assess the impact of other projects and consider the position of policy makers to be able to make the project as feasible as possible... LNG markets in the region are still in a very early development stage,” Vopak EOS says.

The Tallinn LNG regional terminal project is on the EU’s list of Projects of Common Interest (PCI). The EU PCI list is part of the Baltic Energy Market Interconnection Plan (BEMIP) that will be part-funded by the CEF. The Tallinn terminal would hold 90,000 m³ of LNG to meet the needs of the Baltic states and Finland. “Once the final investment decision is made, the company is ready to start the construction,” Vopak EOS said.

“A regional LNG terminal in Estonia would diversify sources of supply and create a well-working gas market in the Baltics and Finland. Additionally for Estonia, Tallinn LNG Terminal would guarantee the security of supply of gas in Estonia, provide storage facilities and create a LNG hub for the regional needs. The Tallinn LNG Terminal would also unite the Estonian and Finnish gas markets through pipelines to the Finnish terminal projects. It means that an LNG cargo delivered to the regional terminal in Tallinn could be shared with other terminals in the region,” Vopak EOS said.

For many years, Finland and Estonia discussed the site of a joint 2.5bn m³/year LNG terminal in Inkoo (Finland) or Paldiski (Estonia), which would deliver gas to the neighbouring country by the so-called Balticconnector pipeline. In the spring of 2014, the two countries agreed to build two small-size LNG terminals on either side of the Gulf of Finland, connected by the Balticconnector by 2019.

As the two terminals in proximity could not expect European subsidies, the neighbours have agreed to build a single terminal in Estonia. In the autumn last year, Finland’s Gasum opted out of the project and handed it over to Estonia. The Finns asserted that the projects were not commercially viable and that there was not sufficient demand for them in the Finnish market.

Estonia was to establish a new state company tasked with building the Balticconnector, but the LNG terminal project was left up to private investors. Estonian energy concern Alexela, the other project partner, also bowed out as it could not secure funding.

There is a general feeling that another terminal is not necessary. “I am convinced that Estonia just does not need it. It does not undergo any deficit of gas and the quantity it is importing is insignificant in the country’s energy total and fully meets its needs. They are pretty low, as the country does not use gas for electricity generation,” Mikhail Krutikhin, a co-owner of Moscow-based energy consultancy company RusEnergy told Natural Gas Europe.

According to EU statistics, of all 28 member states, Estonia has the lowest dependency on energy imports and Gazprom gas imports make up just 10-15% of the Baltic country’s total energy supply.

Linas Jegelevicius