Private Finance Needed for Estonian LNG Terminal

Estonia’s Alexela Group failed to secure EU funding for its planned LNG import terminal in Paldiski in last year's round of EU calls for energy proposals. Nevertheless the group, majority-owned by Estonian businessman Heiti Haal, plans to go ahead with the project using private investments.

There are already four LNG terminals on the Baltic coast – two large ones in Lithuania and Poland, and two smaller ones in Sweden and Finland – while pipelines are being built interlinking the national grids of Poland, Latvia, Lithuania, Estonia and Finland. So dependence on Russian gas is now generally weaker than before.

The European Commission (EC) told Alexela that the terminal was not going to get financial support at this point, Alexela said. The company was seeking a grant of close to €344mn, or 39%, of the cost of the project from its Connecting Europe Facility (CEF).

The news came as bitter disappointment to Alexela. It had argued that if Estonia and Finland were to build the BalticConnector linking their two grids, then Paldiski LNG terminal would be the “only possible supplier of gas” to both markets, apart from Gazprom, were there a sudden break in gas supply.

The terminal planned by Vopak at Muuga does not have this ability, Alexela has said. The EC allocated €187.5mn in July 2016 from the CEF to Estonia and Finland to the Balticconnector subsea pipeline project between the two countries.

Alexela Group's board member Marti Haal told the Estonian press that the announcement was to be expected in light of Lithuanian PM Saulius Skvernelis’ recent statements in which he expressed doubts about the need for an LNG terminal in Estonia.

Alexela filed an application for €344mn with the EU in October 2015; the company had by that time already invested close to €10mn in the project.

Meanwhile Vopak EOS, part of the Dutch-owned Vopak and the largest independent oil product terminal operator in the Baltics, which also wants to build a LNG import terminal in Muuga, east of Tallinn, has not yet handed in its application for EU support to the EC.

A feasibility study is still being carried out and, at the point, I cannot tell when we could lodge such a request with the EC,” the company told Natural Gas World. It might be a small operation for trucking and bunkering services, rather than for improving security of supply for the onshore grid.

Linas Jegelevicius