Estonia to Build own LNG Terminal

Amidst geopolitical uncertainty, Estonia, the smallest of the three Baltic States, has announced it will start building an LNG terminal next year with the first natural gas sales slated for 2019.

Lithuania already operates a LNG facility off the coasts of the Baltic seaport of Klaipeda while Latvia mulls the idea.

Until now, Estonia has been expecting the European Commission to extend a helping-hand with the liquefied natural gas facility costs and provide 5-15 percent of the nearly $335 million terminal.

However, following Russia's threats in April to close the natural gas taps in Europe due to “political reasons,” Estonia decided not to take any chances with the Eastern adversary.

If the EU backs out from the project – the Union’s decision is expected to be known by the end of the summer, Estonian holding Alexela is ready to take on building such a terminal on its own. 

“By August it should be clear whether the European Commission approves of building a regional LNG terminal in the Gulf of Finland. On hearing the decision, we will make a final investment decision in September and declare an international construction tender... If the European Union does not support the construction, we will build it ourselves,” said Marti Haal, an Alexela Holding Board member.

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.

Unlike Lithuania, Estonia is largely self-sufficient in energy terms and is able to meet its electricity and heat needs from domestic sources.

Though the Lithuanian LNG terminal in Klaipeda can satisfy the entire Baltic regions gas needs, Estonia does not want to embrace the idea, fearing the Lithuanian facility might be “a short-term” thing.

Asked the question on reliance on the Klaipeda terminal, the re-appointed Estonian Prime Minister Taavi Roiv responded recently that the current 20 percent Estonia’s imports from the Lithuanian LNG are “too high” and insisted on the need for the three Baltic States of Estonia, Latvia and Lithuania to have a gas link with Finland.

“Accessing alternative LNG terminals gives us an extra security and an alternative supply. Thence, the idea of having the gas link with Finland is positive,” he said, referring to Estonian example in electric power market.

 Being 100 percent interconnected with the Scandinavian power market, Estonia enjoys the least electricity price in the region.

“So similarly with the natural gas links: the more we have them the better…If Finland opts out of the plan (to build a LNG), then Estonia will take on it,” PM was quoted as saying after the Baltic PMs’ summit in Vilnius in March.

The agreement with the Finns was signed last November by Roiv and  his Finnish counterpart Alexander Stubb.

Parties have agreed that a regional LNG terminal will be built in Finland and the countries’ gas markets will be linked by 2019 at the latest. But with Finland willing first to hear from the EU on the financing the costly energy project, the final decision is  believed to be in the air yet.

“The new Estonian government is standing behind it,” Rasmus Ruuda, the senior Communication officer at the Estonian Ministry of Economy confirmed to Natural Gas Europe.

This year, he says, with an approval from the EU, an application is to be submitted to CEF, the EU’s financial programme Connecting Europe Facility, for the first stage of financing construction of BalticConnector submarine gas connection between Estonia and Finland.

Meanwhile, the Estonian Government representative called the Lithuanian LNG project “a very good short term solution,” but insisted it is not yet clear whether the Klaipeda LNG terminal will also be available after 2025 when Lithuania ends paying the loans and when the Norwegian gas supply contract is over.

“We see room for more than one terminal in the region,” Ruuda insisted. 

Unlike Lithuania, Estonia sees its to-be LNG terminal of local importance.

“The share of gas is rather small, but we see it as an environmentally friendly fuel, a widely traded commodity. So to sum up, we see a role also for gas in the future,” the Estonian official noted.