Estonia in position to turn off winter gas for Russia


European Commission’s fear of Mr Putin putting an end to gas exports this winter serves Estonian interests: for us, this is extra argument against Finland to have an LNG terminal built in Paldiski. 

The threat of Russia’s president Vladimir Putin closing winter gas taps for Estonia in wintertime sounds exactly as realistic as claiming that Estonia may turn off gas for St Petersburg. Theoretically, both scenarios are an option as the gas route supplying North-Western Russia and St Petersburg in winter runs thru Estonia, at a village named Misso.

The warning issued by Brussels last week as if Estonia is the least energy-secure state in Europe is erroneous. The slip seems to be due to energy commissioner Günther Oettinger’s ardent advisers not quite in the know of how Europe’s gas pipes run, and how the routes of these pipes relate to the threat uttered by Mr Putin.

In Estonia, the rubbish may have been amplified by a deep soc dem desire to show the former economy minister Juhan Parts (IRL) as an idle good-for-northing. In reality, the opposite is true: Mr Parts did a good job and Estonians need not fear the winter cold.

Unaffected by Ukrainian pipes

Having annexed a large part of Ukraine, Mr Putin might indeed cut gas supplies to all European countries in a matter of days – should he launch against us a traditional war. Though for over a year the Kremlin treats Europe not as a strategic partner by as a hostile competitor, it has not yet come to a direct threat of war. 

In the five-day 2008 Georgia war, night-time Tbilisi was all lit up by electricity bought from Russia. Also: the gas tap is not in Mr Putin’s office, and the main pipe runs not through Kremlin’s basement. Meanwhile, Mr Putin staying on his throne is directly linked to the money paid by European gas consumers to Gazprom – to Mr Putin’s regime – for warmth in their homes.

The message by Mr Putin to Europe was about cutting amounts of gas pumped into Ukrainian pipelines in case the latter will start using gas meant for Europe.

A large part of Europe does get the survive-winter-cold gas via pipelines coming through Ukraine. Whether claims concerning Ukraine’s alleged gas thefts are true or fabricated, the states at the other end of said pipes will certainly be shivering.

Meanwhile, tinkering with the tap on Ukrainian border will play zero role in supplies security for Estonia for we get out natural gas from the other end of the giant pipe network. Only the Latvians or their gas company Latvias Gāze could turn off the stuff for us.

The part of piping giving Moms of Estonia gas to cook morning-porridge for kids is linked to the vast underground Inčukalns storage in Latvia. Every year from April to October, Gazprom pumps gas into Inčukaln­s – in order to supply, from this very storage, North-Western Russia, Latvia, Lithuania, and Estonia from November to March.

As a rule, extra 2.32 billion cubic metres of the light blue fuel is yearly pumped into the 4.47 bn m3 storage, enough for winter needs of all up-to-now clients.   

Estonia’s winter gas comes from Inčukalns via a transmission pipe through Karksi. For purely logistical reasons, only a small share of the gas may at times come from a booster pump station in Irboska, Pskov Oblast of Russia.

But the Irboska pump station which, in addition to the rest of North-Western also supplies St Petersburg, gets its winter-time gas from Inčukalns – thus, through the gas pipe passing Estonia in Misso Village.

After completion of the under-sea Estonia-Finland gas pipe Balticconnector, the owner of Inčukalns storage Latvias Gāze – majority-owned by Gazprom – thinks it realistic to increase the yearly extra gas amount to 3.2 billion cubic metres, so as to supply Finland’s winter needs as well.  

Up to now, it has been interesting and even ironic to watch European officials and even Estonian government figures introduce the Balticconnector built to optimize Gazprom’s Finnish business scheme as key investment in Estonia’s energy security. Rather, Balticconnector may turn out a problem for Estonia’s gas supplies in case Latvias Gāze’s assessment regarding increased holding capacity at the storage should prove faulty.  

Naturally, the system is built in a way that for consumers, and even entire countries who fail to pay for gas can be turned off. But for the political kind of shut-offs there’s not too many options here. Rather, one may rest assured the options do not exist.

Russia did in the 1990ies threaten to turn off the gas for purely political reasons, but it never happened. As assured by EG Võrguteenused, never has there been an occasion where for technical reasons or for shortage of gas the pressure in pipe would have dropped to lows genuinely threatening Estonian consumers with cold.

For Estonia, uninterrupted supply of gas is guaranteed by transparency of supply schemes and the cultural custom in consumers to make honest payment for stuff and services.

Russia begun to tinker the gas tap years before its military aggression against Ukraine. Back then, double-faced politicians were in power in Kiev, undecided whether they wanted allegiance with Kremlin or Brussels. They started to do the gas business through corrupt schemes in which both Russian and Ukrainian players eagerly participated.

First and foremost, Ukraine run into difficulties with gas payments because, for selfish political gain, they sold gas cheaper than purchase-price to citizens and firms. 

Estonia’s government, meanwhile, has missed a vital point perhaps with gas: unlike liquid fuels and oil shale needed to produce electricity, no security storage of natural gas has been created. 

Quite possibly, our leaders have deemed access to gas in Inčukalns so sure that they considered security storage unnecessary. Perhaps, this is the kind of unpardonable neglect as we saw at the dilapidated Eastern border when Russian special service snatched Eston Kohver.

By Estonian law, no-one is under obligation to create security storage of gas. Even so, should the state ask them, EG Võrguteenused might create such storage. Naturally, private consumers would need to pay for the amount of gas reserved for us in Inčukalns; for that, Competition Authority must agree with tariff raise.

Though the gas storage issue was sharply raised recently by economy minister Urve Palo, so far no-one is able to tell how much households, for instance, ought to pay up for that – monthly. Even in the situation where, between the two of them, Russia’s Gazprom and Itera hold 50 percent of Latvias Gāze, natural gas held at Inčukalns is for us always accessible even without free-will pre-payment.

Finland goes for gas

By the time you read this article, over 90 percent of Inčukalns storage is filled up; by the end of October, it’s full.

As a total surprise, at the beginning of the year it was Finland that emerged as Estonia’s top obstacle in making out gas business more competitive; to the very backdrop of Crimea’s annexation, it has ever more glaringly started to show itself not just a partner of Russia’s, but nothing less than a poodle.

A gas consumer about the size of the three Baltics combined, Finland is forcefully and intentionally increasing its energy dependency on Russia. Therefore, it is ready to return favours to its Eastern neighbour, most notably by throwing wrenches in the works with regional LNG terminal planned for Paldiski.

Finnish government and Gasum – majority owner by Gazprom – have not allowed Alexela Energia to start building the terminal, competing for the EU funds available for the project. While Alexela is eager to start building, Gasum is just thinking to find out what kind of a terminal to erect and where. By crafty lobbying, the Finns seem to be able to keep Mr Oettinger’s team in a disarray of sorts.

For Gazprom, a regional LNG terminal on Finnish shore and under their own control would suite much better, Finland being a growing gas market.

Meanwhile, however, they would be just as pleased if the LNG terminal is delayed so long as to never be built at all. Gazprom’s LNG terminals and plants planned in Russia’s own ports would fill the need just as well, while allowing Gazprom to operate without competition.

Despite our excellent payment discipline, Estonia is a bothersome client for Gazprom – a company used to monopoly status – as our goal is lowering consumption of natural gas. While gas is a most environmentally friendly fuel, is carries its problems related to the unstable and aggressive Russia.

In 2004, Gazprom’s share in Estonian final consumption of fuel and energy was close to 28 percent. Last year, the percentage was down to 18.

With a LNG terminal built in Paldiski, Gazprom’s importance in Estonia would start to substantially decrease.

During the past five years, total energy consumption in Estonia has increased, while the volume of natural gas purchased has stayed flat. However, during the next couple of years, the gas consumption is about to do another sharp drop – first and foremost resulting from a change in the way Tallinn is heated.

At the moment, 60 percent of homes in Tallinn are heated by natural gas; next year, Tallinna Küte is opening a new wood-burning boiler-plant in Väo – lowering natural gas percentage to 40. As, at the end of 2016, the Mustamäe city district boiler plant is reset to wood, gas comes down to 20 percent in Tallinn.

Meanwhile, Estonia’s situation on European gas market does not look too rosy. With our neighbours, we are enlisted with those who get gas from Russia alone: Estonia, Latvia, Lithuania and Finland.