LNG Terminal Essential for Energy Independence, Says Study

LNG terminal.in Rotterdam, Netherlands. (Reuters/Scanpix)
8/30/2013 3:04 PM
Category: Economy

A fresh analysis commissioned by the Ministry of Economic Affairs stresses the importance of the proposed regional LNG terminal, which both Estonia and Finland are vying to host, in reducing reliance on Russian natural gas, ERR radio reported.

EU financial support that has been pledged is an imperative though, because the project would otherwise be too risky as a fully private venture - the production costs of LNG are higher than for gas transported by pipeline, said Harri Mikk, a former Eesti Energia management member who conducted the analysis.

"Pipeline gas is pumped out of the ground and funneled to its destination. LNG has to be pumped out of the ground, cleaned, cooled down, placed on a ship, shipped to its destination and warmed up again. There are just a lot more steps. So the LNG expense base is by nature higher than for gas transported by pipeline,“ Mikk said.

"From the perspective of the terminal's owner that is a dire situation - the terminal has been built but gas is still flowing from Russia. That is indeed the terminal's biggest problem,“ he said.

Nevertheless, the mere existence of LNG resources, whether or not cheaper than pipeline gas, would open the Estonian gas market and drive down the cost of energy, Mikk said.

"The LNG terminal, if it existed, would undoubtedly have a positive impact on Estonia's gas market. In reality, a gas market does not exist in Estonia; we only have one supplier and it is only possible to consume gas from Russia," Mikk said.

The European Commission is currently considering whether the terminal should be built in Estonia or Finland.


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