If Estonia wishes to divest itself of its dependence on Russian natural gas, by purchasing a liquefied natural gas (LNG) floating terminal by the autumn of this year, then the government should make a decision in the coming weeks, head of radio news at ERR Indrek Kiisler, and senior ERR journalist Huko Aaspõllu, find.
At the same time, the project presupposes that Latvia and Finland will also opt to stop buying gas from state-owned Russian firm Gazprom, in addition to Estonia (Lithuania already has a floating LNG storage and regasification unit (FSRU) vessel, called the Independence, see cover image - ed.).
Since there is currently no alternative to using Russian natural gas in Estonia, in order to achieve independence here, a new LNG terminal in the region is needed, Timo Tatar, Undersecretary of Energy at the Ministry of Economic Affairs and Communications, says.
If the idea is to stop using Russian gas any time soon, then project developed by Alexela, at Paldiski, has come the nearest to that so far.
The fastest option would be to acquire an LNG FSRU in the port of Paldiski, which could in principle start supplying gas as early as the autumn of this year, Marti Hääl, a member of fuel conglomerate Alexela's supervisory board, says.
However, in order for the FSRU to start supplying gas to the grid in the same autumn, a public investment decision has to be made in the coming weeks.
The vessel needs to be selected, negotiated on, contracted out, a quay needs to be built along with a kilometer-long pipeline to the ship itself, and the vessel itself refitted to the purpose.
A normal procurement process would not be able to do this in that time-frame, so things would have to move much faster.
Additionally, LNG suppliers need to be found. All this in a situation where Estonia is not the only state that plans to make more use of LNG.
As well as Alexela's spokesperson, Jaanus Rahumägi, otherwise involved in maritime security, has also mapped out possible floating terminals (Rahumägi is a former Reform MP and a security expert - ed.).
Rahumägi says that, indeed, we are in a hurry, since once the suitable bases for us have exited the market, we will no longer be able to retrieve them. a.
"This is not a question of weeks or days. It could be the case that one day there is availability, only for this to no more be the case in the evening. A ship is needed. This is an open market, and there are offers out there, while as of today we are not the only ones thinking about these issues," Rahumägi said.
One issue is where the money will come from.
The Ministry of Economic Affairs and Communications has publicly stated that the price of a vessel with the capacity to be adapted to LNG use will come to about €300 million, plus the annual rent will be up to €50-100 million per year.
While Rahumägi says that these prices are rather close to the upper limit, Elering also estimates, for example, the cost of rent to be €100 million a year.
The construction of the pipeline and quay will come at an additional cost of about €30 million.
Marti Hääl says that whereas the state had already made a subsidy package worth €250 million this year to alleviate soaring energy costs for a four-month period, one in which companies did not receive a share, then a possible FSRU investment would not constitute a cost to the state budget, but instead a revenue. This is especially the case in a situation where security of natural gas supply from Russia, and possible gas prices, are both unpredictable.
Naturally, it would be cheaper to build a regasification plant on the land, for example, and to leave only a LNG gas storage facility at Paldiski, or to build both an LNG tank and a regasification plant on terra firma, but it would take years to complete these projects.
If there is a desire to have alternative gas capacity from this autumn, then, there are not too many alternatives left.
There is also the question of natural gas volumes, and the activities of our immediate neighbors, Finland and Latvia.
The planned FSRU could supply 30TWh of gas per year. If the vessel were fully operational, it would mean an additional cost of about €2 per MWh to transfer LNG to the Estonian natural gas network.
If, for example, the price of gas comes to somewhere around €100 per MWh, then this is not a very major mark-up.
Should the terminal be used for lower LNG volumes, the surcharge would have to be many times higher per MWh, however.
Hence the need to involve our immediate neighbors in the project - Latvia and Finland.
While Estonia's annual gas consumption is at the order of 5 TWh, Latvia consumes about 12TWh of natural gas; Finland, 25TWh, according to Timo Tatar.
In order for the Estonian gas terminal to pay for itself and to be able to pump LNG through it, it is thus necessary that both Latvia and Finland refrain from buying gas from Russia.
If they do not do so, Gazprom would price the gas it does sell at a level slightly below the price of LNG, thereby in principle leaving the costs of the terminal to Estonia.
Something similar happened in Lithuania when the state acquired its own FSRU.
For years, the Lithuanian taxpayer paid for the terminal, but without competing overly successfully with Russian gas.
Things have changed now, however.
The volume output of the Klaipėda FSRU Independence, which constitutes about 30-40TWh of gas per year, has been fully booked by both Lithuanian and Polish companies.
The Polish-Lithuanian gas pipeline is also expected to be fully operational in May, while the Poles have said they have no plans to renew their deal, which expires this year, with Gazprom.
Tatar said matters had been discussed with Latvia and Finland.
He said: "There have been such contacts. More will come this week."
"After all, this is a decision to be made at the highest political level. At the moment, we have only common information. Apparently we are still sharing. Nobody has said, 'hooray, let's do it right away,' Tatar continued.
Minister of Economic Affairs Taavi Aas (Center) says that although the involvement of Finland and Latvia is important for the project, he will go to the government cabinet on Tuesday next week with a proposal to start the matter even before reaching an agreement with the neighbors.
"I am going to the cabinet with the view that, in any case, we are going to start building the infrastructure today. This would also be a clear signal to potential partners that we are moving in that direction," Aas said.
While Marti Hääl of Alexela says that it would be most sensible for the state to invest money in the purchase of a floating terminal, instead of renting it, on the grounds that the price and availability of capital is many times cheaper for the state in our current geopolitical situation than it would be for the private sector, according to Taavi Aas, one option might be for [grid distributor] Elering to build a gas pipeline connecting Alexela to the natural gas network, and the Finnish-Estonian Balticconnector gas pipeline, then to lease the necessary vessel.
Aas' proposal would have the state providing Alexela the necessary guarantees that, once the task is concluded, the gas will flow through the pipeline. Aas said: "In the current situation, I can see that this guarantee would be relatively easy to grant, hence why I don't see any alternative to LNG."
Minister of Finance Keit Pentus-Rosimannus (Reform) concurs that the government must make a decision on the acquisition of the LNG terminal in the coming weeks.
At the same time, according to Pentus-Rosimannus, discussions on its financing are ongoing.
She said: "Among other things, all options for attracting foreign currency must be taken into consideration. There are definitely plenty of such opportunities, and a readiness to have investment in the sector from outside Estonia and by various financial institutions. This does not necessarily mean an additional burden for our taxpayer."
Editor: Andrew Whyte