Estonia, Finland Set to Announce Much-Argued LNG Terminal Construction Site

Amid the spat over location of a new liquefied natural gas (LNG) terminal Estonia’s Economy Minister Juhan Parts has proposed to Finland that the two countries, disagreeing which of them should take on building a LNG terminal, would strike a compromise by building one each.

The minister insisted that the proposed sites in both countries would be big enough to handle offloading LNG vessels.

Parts also proposed the two countries could manage the extra LNG terminal construction costs by putting off planned construction of the Balticconnector, an underwater gas pipeline that in 5 years would, as planned, connect the two countries and significantly reduce dependency on gas from Russia’s Gazprom.

Some experts, however, affirm that the region’s gas demand necessitates only one LNG import terminal as building two separate terminals may not secure sufficient amounts of natural gas for each country, and the construction costs could be unreasonably high.

A single LNG terminal is estimated to cost roughly $680 million and is thought to provide an alternative option for gas supplies from Russia. A pipeline that would allow Finland and Estonia to share the imports would cost around $130 million.

The European Union (EU) has hinted it could chip in up to 40 percent of the cost of a regional terminal provided it serves the interests of more than one country.

 There are other Baltic Sea states vying for EU funds for construction of a LNG terminal in its waters - Lithuania for example.

The EU interfered in the row between Estonia and Finland, claiming it would announce winner of the bid by the end of last summer. The European Commission (EC) named Muuga and Paldiski in Estonia, and Inkoo in Finland, as possible locations for the terminal.

But with accusations of impartiality against the European Union flaring- supposedly, it was to announce Finland as the winner- the EC has decided to leave it to Estonia and Finland to decide on the site.

Estonian commentator Endel Lippmaa, for example, vehemently argued that by agreeing to leave the decision up to the European Commission, Estonia would essentially hand over its bid for a planned LNG terminal to a whole lot more economically stronger and politically more influential Finland.

“Finland has the required economic adeptness and their dependence on Russian gas is the greatest,” Lippmaa told an Estonian newspaper. He added: “It would be more useful for Estonia to find a friendly agreement with the Finns that would secure us getting some work in the terminal and pipeline construction…Let’s not forget that Estonia can store at least some of gas reserves in Latvia’s underground repositories while Finland does not even have such facilities…”

Finland and the three ex-Soviet Baltic states of Estonia, Latvia and Lithuania consume about 10 billion cubic meters of gas annually, all of which is currently supplied by Russia’s gas giant Gazprom.

With the Estonian Economy Minister unexpected proposal out, the country’s Prime Minister Andrus Ansip appeared to be irked with the upstart Minister’s announcement and said he would be given a chance to explain the position for the Government Cabinet.

“I personally do not think it is a good idea…I am convinced that the basis for integration is pipeline connection Balticconnector and I personally don’t want to give that up easily,” said Ansip.

 He said that Estonia and Finland have three options regarding the LNGT project: that a terminal will be built in Estonia and the Finns will get a pipeline connection; that the terminal will come to Finland and in this case Estonia would get the pipeline connection and finally, that each side leaves empty-handed.

 “The proposal that the Economy minister made doesn’t foresee building a pipeline but two terminals. I don’t think it is a good idea as it doesn’t integrate markets. In fact, gas markets will stay separate after these terminals are finished …” Ansip said.

In January’s European Commission hearing, Estonian and Finnish representatives agreed that both sides will come up with an agreement on the site of construction by the end of February.

“Finland, Estonia and the EC have struck a compromise that the decision will be passed by the end of February at latest,” said Herkko Plit, Energy Department head at Finland’s Economy ministry.