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After the outbreak of the war in Ukraine, so much Russian pipeline gas has been imported into the Baltic-Finnish gas network that it exceeds Estonia's annual consumption by more than two and a half times. But without purchasing the despised resource our rooms could stay cold in winter.
Mid-October. Both Prime Minister Kaja Kallas (Reform Party) and Minister of Economy and Infrastructure Riina Sikkut (SDE) announce that Estonia will have enough natural gas for the coming winter. The purpose of the message is to calm the people who have become anxious about the floating LNG terminal staying in Finland instead of Paldiski. The ministers have not reached this conclusion on their own. It is based on the paper submitted by Elering, according to which there are 66.6 terawatt-hours worth of sources of gas supply for the Baltic countries and Finland for the year. As a result of the region's system managers’ joint thinking, 49.5 terawatt-hours have been entered in the box for gas consumption.
Kallas looks at the figures and confirms in the Riigikogu that Estonia no longer has serious concerns about the security of supply. "Even if the Balticconnector (the Estonian-Finnish gas pipeline) should for some reason come under attack and we cannot receive gas through it, we still have access to 51.6 terawatt-hours of gas,” the Prime Minister confidently announces.
Although the supply on paper exceeds consumption with a contingency reserve, the actual situation is not as pretty as it looks. For example, due to the fact that in Elering's scenario, accounting runs from June of this year to June of next year. However, six terawatt-hours of gas coming through the Finnish terminal in April and May 2023 will not be of much use to survive the winter.
And there are further risks. For example, Elering expects that by the end of January, gas for three LNG ships will have already been pumped into the network from Finland. This, of course, presumes that the Inkoo terminal has been launched quickly and without problems. The consumption side in turn is strongly influenced by the weather, which, admittedly, has been exceptionally warm so far and has allowed to economizing on heating.
Yet it is difficult to predict the weather or the construction rate of the Finns when making a forecast. That's why Elering's boss Taavi Veskimägi keeps emphasizing that the assessments are based on the best knowledge of the system administrators and do not declare the final truth.
However, the data presented by Elering to the public reveal other shortcomings, which do not change the big picture much, but are somewhat absurd. For example, Postimees determined that the system manager shows the same amount of gas in different lines of the document several times. Namely, the annual throughput of the Klaipeda LNG terminal was displayed as of the beginning of June (38 terawatt-hours), while the reserve of the underground gas storage in Latvia's Inčukalns was estimated according to the filling amount in the autumn.
But since part of Klaipeda's gas was stored in Latvia during the summer, such inconsistency means calculation errors. Or in other words: Elering’s forecast is reckoning with gas which should be located in two places at the same time in order for the calculations to work, although in reality it is only in Latvia.
With the help of logical errors, Elering increased the amount of gas by at least 1.9 terawatt-hours. For our region, this is not a large amount, but in Estonia alone it covers half a year's needs. The Estonian gas system manager accepted the error and promised to display the data in a different way in the future.
Why was this error necessary? This approach helped hide Russian gas from the public. If Elering were to display the Latvian gas storage capacity with data from the beginning of June, instead of 12.6 terawatt-hours, it would have had to enter 8.8 terawatt-hours, and the 1.9 terawatt-hours of Russian gas imported to the Baltic countries from June to the beginning of October should have been noted as an additional supply channel.
Instead, the Russian supplies were hidden in the filling of the Latvian gas storage with the help of “double gas”. “It is a correct assessment that a large part of the increase in the level of the gas storage has come from Russia, which the system managers have not predicted in the base scenario and which has simply constantly raised the level of the gas storage,” admitted Elering's spokesperson Elo Ellermaa.
But the 1.9 terawatt-hours, or just over 190 million cubic meters of gas purchased in the Baltic States from June to the beginning of October, is only the tip of the iceberg as far as supplies from Russia go. In fact, a much larger amount of Russian gas was brought to the Baltic States shortly after the beginning of the war. It is possible to follows the movement of these quantities. Yet one cannot identify buyers because this is a business secret. It is even difficult to speculate because Estonian, Latvian or Finnish enterprises can guy gas through Lithuania or vice versa. Moreover, it is not very reasonable or justified to blame the companies due to the limited connection capacity - but this will be discussed later.
As Russia invaded Ukraine on February 24, the Baltic States and Finland began to buy Russian gas extremely actively, using all kinds of supply channels. The data of the gas flows shows that the amount of Russian gas reaching Lithuania from Belarus increased by more than 50 percent on the very first day of the war.
While the gas from Belarus previously moved directly to Kaliningrad and the Lithuanians themselves used the gas from the LNG terminal and the Latvian gas storage facility, the gas taps in Belarus were opened so wide on the first day of the war that the supply greatly exceeded Kaliningrad’s own needs. By the beginning of April, 5.9 terawatt-hours worth of gas was delivered from Belarus to Lithuania in five weeks, 2.75 terawatt-hours of which never reached Kaliningrad. Some amount of it was consumed in the Baltic states, but the greatest part was stored in Latvia.
A similar Russian gas race, albeit in a smaller extent, began across the Russian-Estonian, Russian-Finnish and Russian-Latvian border. On February 25, the day after the war began, gas began to moving from Russia to Värska for the first time this winter. By the beginning of April, 0.4 terawatt-hours worth of blood-tainted Russian gas had already been purchased that way.
Even earlier, already in the evening of the first day of war, the gas vendors’ wishes reversed the Estonia-Finland gas flow and Estonia began to pump gas from Finland. In the past, gas has moved rarely and in small quantities in this direction. However, the gas imported from Finland is also Russian as Finland has no gas production of its own. The data show that in March, import volume on the Finnish-Russian border increased dramatically: from the beginning of the war until April, Finland received 2.1 terawatt-hours worth of gas, or more than in January and February combined.
The gas traffic between Russia and Latvia also increased significantly in March. While 0.23 terawatt-hours worth of gas in January and 0.36 terawatt-hours in February flowed from the East to Latvia, Russian gas imports in March already reached nearly 0.9 terawatt-hours.
As a result of the huge gas race, the Baltic States and Finland had bought a total of 6.2 terawatt-hours worth of Russian gas by April 1. The price of that quantity was then 770 million euros. Most of it was spent on current consumption, as gas was no longer removed from the Latvian storage facility. On the contrary, because the delivery was so intensive, 2.3 terawatt-hours were put into storage. It can be used, for example, in the coming winter.
According to the gas market experts who spoke to Postimees, there were two reasons for the sudden buying of gas. On the one hand, the buyers perceived the risk of Russian supplies being interrupted for political reasons. On the other hand, supplying gas was a reasonable move in March, business-wise.
The Russian gas party lasted until the beginning of April in the Baltic states. Then Lithuania, which had been the largest Baltic gas importer in March, announced that they would embargo Russian gas as the first European country. Although Estonia has not imposed a similar ban, no Russian gas has entered our pipelines directly after April.
However, this does not mean that buying Russian gas ended with March. They did use the handbrake in April, but as described above, gas flowed to Latvia from Russia all summer. Although the deliveries through Värska ended in March, Russian gas was imported to Estonia through Finland for a brief period in May. In total, it was done to the extent of 0.22 terawatt-hours; then Russia stopped deliveries to the Finns who refused to pay for it in rubles, and no more gas reached in the Estonian system across the Gulf of Finland.
If you add the quantities of Russian gas which reached the Baltic States and Finland since the beginning of the war, it amounts to 9.3 terawatt hours. Given that the price of gas has remained steadily over a hundred euros for a megawatt-hour after the war broke out and has been significantly higher in the second half of the summer, the volume of purchases of Russian gas by the Baltic gas sellers reached 1.2 billion euros. Although this amount was not directly transferred to Gazprom in rubles, this amount’s worth of Russian gas has reached the Baltic States and Finland through mediators.
In their hearts, no participant of the Baltic-Finnish gas market probably wants to finance the Russian war machine. However, this had to be done because there are simply no practical alternatives in the region other than Klaipeda and the Russian supply channels. And the Klaipeda import volume is not sufficient for all, even though the terminal has been working at its peak capacity for a long time.
“The fact that the capacity of the Klaipeda LNG terminal is not enough to supply the entire Finnish-Baltic area and fill the storage facility has been well known. In one way or another, the LNG deficit has been met by Russian gas, purchased either before or after February,” said Margus Kaasik, CEO of Eesti Gaas.
As there are no other supply channels, the head of Eesti Gaas is not afraid to say that they bought Russian gas after the beginning of the war. “We last bought gas from Gazprom at the end of March. Since May, 90 percent of our gas supplies have been LNG Norwegian and American origin, the rest have been purchased from Latvian and Finnish partners, from the gas exchange,” Kaasik explained the procurements of Estonia's largest gas company.
On May 1, the half billion euro gas pipeline GIPL was opened between Lithuania and Poland, which would allow pumping gas from Poland to the Baltic region. Initially, the gas link has only worked in the opposite direction – in the summer, the Poles transported regasified LNG from Lithuania to their country. Various bottlenecks prevent moving the gas in the opposite direction.
Although GIPL would allow 60 gigawatt-hours worth of gas per 24 hours to be brought to the Baltic States in the summer, there is a problem between Lithuania and Latvia. Since the flow from Klaipeda also largely moves to Latvia and from there mainly to Finland, the Kimenai connection between Lithuania and Latvia is constantly fully booked. Therefore, Lithuania is the only destination for the gas coming through GIPL. Yet they meet their current consumption with gas from the LNG terminal. However, gas began to come to the Baltic states through Poland in November as the throughput of the Latvia-Lithuania interconnection was increased.
Legally, Estonian and Latvian gas sellers could still buy gas from Russia, as unlike Lithuania, the ban on buying Russian gas comes in force only at the end of the year. It the Baltic States and Finland would have closed the Russian gas tap on the first day of war, in Inčukalns storage facility would now contain only 5.1 terawatt-hours worth of gas instead of the current 14.4 terawatt-hours and the security of supply would be much worse. This is because Klaipeda adds to the network about 3 terawatt-hours worth of gas per month, which is estimated as only half of the winter gas consumption of the Baltic-Finnish area. In other words, without the full capacity of the Finnish terminal (another 3 terawatt-hours per month), the situation would be really bad.
If one wants to find the culprit in the ugly story of financing the Russian war machine, one should first look northwards rather than towards the Baltic gas sellers. If the Finns had built their LNG terminal according to the agreement with Estonia’s Prime Minister Taavi Rõivas in 2014, the Baltic gas dealers would have had an alternative channel available when the war broke out. However, the Finnish state energy company Gasum considered it more reasonable to continue buying cheap Russian gas from Gazprom and the terminal was not built. The following year, this error will be corrected and buying gas from Russia will end.