Finland-Estonia LNG Project Canned

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland) - Finland's efforts to reduce its total reliance on Russian gas imports have ground to a halt after Finnish gas utility Gasum postponed plans to build a liquefied natural gas (LNG) import terminal.

The Finngulf import terminal was part of a plan to connect the gas grids of Finland and Estonia via the Balticconnector, a proposed pipeline under the Gulf of Finland. The planned terminal, Finngulf, located at Inkoo in southern Finland, would have had the ability to supply 1 billion to 2 billion cubic metres (bcm) of gas per year after commissioning in 2019. Finland imported just more than 3 bcm of Russian gas last year.

Gasum said that it and its Estonian energy counterpart Alexela Energy could not reach an acceptable commercial agreement with the European Commission (EC).

"Gasum and Alexela conducted their studies on alternative collaboration models concerning the LNG import terminal planned for the Gulf of Finland, at the request of the European Commission," Gasum stated. "In the studies conducted, no commercially viable collaboration model could be found for a terminal at the level of the investment aid indicated by the European Commission."

Gasum CEO, Johanna Lamminen, explained: "The negotiations were conducted in good spirit, but unfortunately we were unable to reach a financially viable solution with the level of EU investment aid available. To be realised, all of the presented models would have required significant EU investment aid, which was not available. There is a need for an import terminal in southern Finland to ensure and diversify our customers' access to LNG in this region for shipping and industry alike. Once completed, the terminal would also enable alternative sourcing for pipeline gas."

Gasum said that it will now continue to further its own terminal project independently but said that the final location of the terminal, the amount of investment and the scheduling will have to be revised.

The news was greeted with dismay by Finnish and Estonian politicians. "It is regrettable that... the regional LNG solution will be postponed," said Esa Harmala, a senior official at Finland's economy ministry speaking to Reuters.

"The representatives of the European Commission, Finnish Ministry and the LNG project met in Tallinn and explored options to move forward on the basis of the February 2014 Memorandum of Understanding, which looked for ways to form a joint enterprise of Alexela and Gasum and the building of regional terminal," said Timo Tatar, head of Estonia's Ministry of Economic Affairs and Communications' Energy Department. "It was admitted in the meeting that the negotiations for a co-operative enterprise have so far yielded no results and we will move on independently, having a large terminal either on one or the other side."

The increased conflict between Russia and Ukraine has placed energy security at the top of concerns for the EU. Russia supplies around one third of Europe's gas demand, and half of that comes through Ukraine.

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