Gas projects stuck in mire of differing interests

Andres Reimer
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Photo: Pm

Russia’s attack against Ukraine made EU more generous regarding financing energy projects linked to the Baltic Sea, but special interests of Finnish energy company Gasum – with Gazprom as major shareholder – block the way forward.

«The situation in Ukraine has made the European Commission more inclined than before to support our projects,» noted economy minister Urve Palo. «For Balticconnector, the commission has promised at least 75 percent worth of financial support. For the LNG project, only 5 percent of symbolic support was initially allotted; now we hear the support may be raised in light of events in Ukraine.»

Currently, Estonian Competition Authority is waiting for business plan by Gasum and EG Võrguteenus, to provide assessment on the Balticconnector gas pipeline to pass under the Baltic Sea.

«At the end of February, Gasum and EG Võrguteenus entered into a protocol of intent to build Balticconnector,» said Competition Authority director-general Märt Ots.

«We are still waiting for the business plan, though we have urged the entrepreneurs to be on time with applications for the EU financing round.»

The gas pipe project group of Gasum and EG Võrguteenus had not submitted the document to Competition Authority, needed to apply for EU money, because Gasum and Alexela haven’t, in their turn, reached a clear agreement regarding building the LNG terminal.

«The Balticconnector business plan was submitted to Competition Authority last October according to the then view that there will be one large regional LGN terminal at the Gulf of Finland, from which the amount of gas prescribed by business plan would be flowing between the countries via  Balticconnector,» explained EG Võrguteenus chief executive Sergei Jefimov.

«According to the memorandum signed in February, developers of Estonian and Finnish LNG terminals are now planning two terminals – both in Estonia and Finland. The details will be agreed by end of may, they say.»

«With terminals built on both sides of the gulf, the amount of gas to be transported through Balticconnector will be smaller than initially planned, as both countries can use the capacities of their own LNG terminals. In that case, the Balticconnector project business plan needs to be reviewed, and adjusted to the new situation,» he explained.

European Commission named Balticconnector a priority, as the pipe would connect the isolated Finnish gas market to the Baltic States. Thus, the Finnish gas system will gain access to Latvian underground gas storages, significantly boosting supply security for the Finns.

While operating on an isolated market, the Finnish gas seller Gasum could own pipelines, according to an exception to energy directive; when connecting to the Baltic States, the Finns will need to find owners for the pipelines independent from the sales company.

Also, Balticconnector needs to get an owner independent from Gazprom. Currently, the Russian gas giant has a significant holding in the companies developing the gas pipeline: 25 percent of Gasum, and 37 percent of EG Võrguteenus. So far, the Finnish state has not tackled the task of finding a new owner for pipelines.

The Finns are entangled by gas supply contract with Gazprom valid till 2015, based on the take-or-pay principle. A contract like that is not the best incentive to build an LNG terminal allowing alternative supplies.

The former economy minister Juhan Parts achieved a cooperation protocol for Alexela and Gasum to start considering a joint project, building a common terminal operating on both sides of the Gulf of Finland. Even so, Gasum is yet to issue a single confirmation that they indeed desire a solution like that.

On the company website, Inkoo and Paldiski LNG-terminals are currently talked about as two mutually exclusive companies. «The companies will map options for cooperation by end of May 2014,» said Gasum press department, in response to inquiry by Postimees.

In order to advance with the gas projects proclaimed a priority by the European Union, chancellors of Estonian and Finnish economy ministries and executives of Alexela Energia, EG Võrguteenus and Gasum will meet in Helsinki, this Friday. The meeting must do away with the current differences, as projects of both LNG terminal and Balticconnector must be «printed out» within one month, to get the EU financing.