Solutions elusive on LNG terminal location

  • 2013-03-06
  • From wire reports

JOB CREATOR: Kaja Kallas says putting the new LNG terminal in Estonia would generate jobs and investment into the economy.

TALLINN - Estonia’s MP and chairman of the parliamentary economic committee Kaja Kallas said that the proposed joint Baltic-Finnish liquified natural gas (LNG) terminal, part of the region’s efforts to develop an open gas market, should be located in Estonia on the southern shore of the Gulf of Finland, reports Aripaev. The terminal should be located either in Paldiski or Muuga, he said.
According to Kallas, an important feature is for the terminal’s operator to be independent from current dominant gas suppliers, meaning Gazprom.

Estonia and Finland are attempting to agree on the terminal location before March 6 and 7, when the Baltic Sea countries will be meeting to discuss energy issues. Kallas said that an LNG terminal would create jobs in Estonia and the cost of the project of about 500 million euros will be significant for Estonia’s economic development.
Gas companies Gasum in Finland and Vorguteenus in Estonia - both of which are partially owned by Gazprom - announced last week that they have chosen the Finnish town Inkoo for an LNG terminal.

Finno-Ugric solution
As Aripaev Online reported on Feb. 25, Finnish Economy and Employment Ministry Energy Department Head Esa Harmala argued that the best location for the Baltic States’ and Finnish common regional LNG terminal would be Finland. “I see no advantages. In that case, a bigger investment would be needed for the pipeline and there would be less business possibilities,” Harmala said, answering the question of how building the terminal in Estonia would look from the Finnish side.

Estonian Economy Minister Juhan Parts did not approve of the position voiced by Gasum’s and Eesti Gaas’ subsidiary Vorguteenused recently that Inkoo in Finland would be the best location for a regional terminal. Parts said in an interview to Bloomberg recently that such agreement of companies is legally invalid anyway, and that the governments of the two states will make the final decision.

In December, Latvian Economy Minister Daniels Pavluts said in an interview with that for practical considerations, the closer the regional liquefied natural gas terminal is to Latvia, the better, when asked which country mentioned by the European Commission consultants - Estonia or Finland - is more suitable for Latvia.
Pavluts explained that the goal is to achieve an alternative source of gas supply as soon as possible. From this point of view, a project which requires an undersea connection is definitely less attractive than a project which envisages building a nearby terminal, added the minister.

If the terminal is built in Finland, an undersea connection between Estonia and Finland - BalticConnector - will be required. From a technical point of view and in terms of time, the choice is simple. The goal is an open gas market, said the minister.

Pavluts, however, added that, if the project’s implementation rate and costs are set as priorities, Latvia’s solution is more attractive. “Of course, on international and regional levels there are also other considerations. We have our opinion, but I do not want to discredit the work of the consultants. I am very grateful to the European Commission that the study was carried out and a basis for discussions was created,” said the minister.

Keeping Gazprom out
Gazprom-owned companies should not be involved in any Baltic liquefied natural gas terminal because the project’s aim would be to cut the region’s dependence on Russian supplies, said representatives from Latvia and Estonia have said.

Both countries also expressed doubts about Gasum’s and Vorguteenus’ plans to promote the Inkoo idea.
“Being independent of the present monopoly gas supplier is an unavoidable prerequisite for Estonia’s support for the regional LNG terminal,” Estonia’s Minister of Economy and Communication Juhan Parts said, according to local reports.
Meanwhile, Estonia’s electricity transmission system operator Elering and the Estonian Economy Ministry have said that Gazprom lobbying is responsible for the change of heart regarding construction of a joint LNG terminal in the Baltics.
Elering head Taavi Veskimagi said the main argument made by the head of Estonia’s gas transmission system operator Sergei Jefimov on Feb. 26 - that the Finnish market is larger than Estonia’s - is an “abstraction.”

“There is no actual demand for LNG there, as all of Finland’s current demand is covered by take-or-pay agreements with Gazprom,” he told ETV. “As a result, until 2025, Finland will have a very small or non-existent market. The agreement between Estonia and Gazprom expires in 2015 and we need an alternative supply chain by that time so that a price reference would take shape and we could offer consumers a better gas price.”
Jefimov’s company, Vorguteenus is 100 percent owned by Estonia’s monopoly gas supplier Eesti Gaas. Gazprom is the largest shareholder in Eesti Gaas, with a 37 percent stake.

In Latvia, Economy Minister Pavluts agreed that the goal of the terminal project was to secure real alternatives to gas supplies for the region. “With that, only those solutions can be supported that are not connected with the existing supplier of natural gas,” Pavluts said to Reuters. The Latvian ministry said that talks on the optimal location for the terminal could take place “in the near future.”

The Baltic countries, however, have not yet agreed on which LNG terminal and pipeline project to support in the near term in order to boost their chances of getting EU funding to get the project started. Much of the discussion so far centers around solutions best for each country, not for the region as a whole.