Baltics: Regional Cooperation on LNG Infrastructure Integral to Energy Security
The lack of cooperation and common energy future vision undermines regional plans to build a large-scale liquefied natural gas terminal in the Baltics, energy executives and officials say.
On their pursuit of future energy independence and security, officials of the three Baltic States – Estonia, Latvia and Lithuania – publicly recognized that they need to boost regional cooperation to safeguard future gas supply in the area.
“We must find common ground to work on a long-term regional strategy, because at the moment we lack the clarity of future developments and that needs to be addressed,” Dins Merirands, Director at the Energy Department of the Ministry of Economics of Latvia said.
The three countries, which currently rely on Russian gas to cover their demands, aim at developing a more competitive gas market in the region by constructing much needed infrastructure. Until now, the three small Baltic countries have prioritized national interests rather than regional future perspective.
That lack of understanding between the Baltic countries is halting developments for a 4 billion cubic meters (bcm) infrastructure project that requires big funding and a large consumer base. Lithuania, Latvia and Estonia are currently waiting for a report from the European Commission on where best to place a regional LNG terminal. However, the EU has already stated that it will only help fund the project if the three countries reach an agreement, and that is yet to be achieved in questions such as the inclusion of Finland in the regional project.
The initial results of the report, which is due to be release in December, say that if a gas connection is built between Estonia and Finland, the future LNG terminal should be located in Estonia. Another possibility would eventually be to build the terminal in Finland.
“Estonia has many suitable location, but we prioritize a regional lead project, because that would enable the region to switch to a more competitive gas market. Financial support from the EU and economics of scale are essential to establish further cooperation and create common regional gas infrastructure,” Ando Leppiman, Deputy Secretary General at the Ministry of Economics of Estonia said.
While Lithuania and Latvia are determined to host the facility in their territory, Estonia hopes to bring Finland into the project. In parallel, Lithuania, which is still immerse in a post-political wrangling process and has yet to secure its new government, plans to install a Norwegian floating bunkering terminal at Klaipeda in 2014. Latvia has said the port in its capital Riga would be the best location for the future regional LNG terminal.
Birute Vesaite, a MP and member of the Lithuanian Social Democratic Party, who won the last general elections in the country, reinforces the idea that the upcoming government of Lithuania “supports LNG projects in the region as an alternative source of gas.
“The three Baltic countries need to sit down and agree on the development of common regional LNG infrastructure. The current project of an LNG terminal lacks of transparency in terms of funding, and potential gas purchase obligations are a matter of concern,” Vesaite added.
The Lithuanian MP, who believes that the Inculkalns storage facility should be used in the regional projects, for “it can easily serve the entire region,” says that broader regional cooperation is needed, including Poland and potential gas connections between this country and Lithuania. In this regard, Poland is currently developing its own LNG terminal after securing complete funding for the project.
The topic of the future development of the gas market in Baltic region and the potential location for the regional LNG terminal were the main topics of discussion during the first day of the 4th Baltic Energy Summit in Tallinn, Estonia.
During the conference, a representative of the Finnish government also pointed out that authorities in Finland are determined to support the project of the regional LNG. However, he clarified that they see the project as a tool to diversify their supplies – Russia has been the main gas supplier for Finland - rather than increase the share of gas in the country’s energy mix.
“Today, gas accounts for 10% of Finland’s primary energy demand, and it is mostly used for power generation and the industrial sector. However, we see regional projects as reliable way to diversify our gas supplies, as well as to make the Baltic gas market more competitive,” Esa Harmala, General Director of the Department of Energy of the Finnish Ministry of Economics said.