Eesti Gaas: LNG terminal to ensure choice and supply security

Margus Kaasik.
Margus Kaasik. Source: Eesti Gaas

Eesti Gaas board member Margus Kaasik said that creating an LNG terminal in Estonia will result in more choice and supply security. However, it is difficult to give up Russian gas right now as there are few if any alternatives and the move would have to be regional.

Kaasik said that customers should not worry about next winter's supply.

He said that an LNG terminal can be built quickly today because preparations were made years ago and the existence of political will allows great things to be done in a short time. "That is the catalyst. Not that the challenge of building it is any less, but a considerable part of the work has already been done."

An LNG terminal would give seller Eesti Gaas an extra source of gas. "Today, we can bring gas either from Russia or through the Klaipeda LNG terminal. This would give us another LNG source and yield more choice, supply security and the chance to give up Russian gas if we so wish," Kaasik said.

Eesti Gaas last bought gas from Russia in March of this year. There are no good alternatives for Russian pipeline gas today. Gas coming through the Klaipeda terminal covers half of demand in the Baltic and Finnish region. "The rest has to come from Russia," he said.

No gas has been imported from Russia in April because of the high price and reluctance to buy from Russia without an acute need. "Looking at the physical flow right now, we are virtually not importing anything from Russia. Gas from Klaipeda covers Baltic and a part of Finnish demand today," Kaasik remarked.

Eesti Gaas has bought liquified natural gas (LNG) in the past, while this has also been mainly of Russian origin, simply not from Gazprom.

"Our game plan is to buy as much LNG as we can through Klaipeda to cover our customers' current consumption. We have already done so for the month of May," Kaasik said. "It is not Russian gas, nor is it possible to bring Russian gas to Klaipeda today."

Eesti Gaas is in talks to continue importing gas from Klaipeda during the summer months.

We are looking at a measure of independence from Russian gas in the coming months. "But it is not absolute independence. We would like to cover current demand using LNG. At the same time, there is no real alternative to Russian gas if we wanted to store more gas," the Eesti Gaas board member added.

"What we need on top of LNG inevitably comes from Russia. If someone should create additional demand for gas on the market, it would have to come from there, whether we want it or not."

Kaasik noted that even if Estonia made a political decision to stop buying Russian gas, we share a market with Finland, the Baltics and soon Poland, meaning that the gas coming to Estonia would still be of Russian origin.

"Every transaction can be traced back to an original source, and if the goal is to make a comprehensive change, the market as a whole needs to find more gas from outside Russia. Stirring the soup in one end of the cauldron is of little use," he said.

A floating LNG terminal is a more expensive solution than a stationary one. Kaasik said that the difference is in operating costs as leasing an LNG ship and constructing a permanent terminal cost roughly the same.

The future price of gas is difficult to forecast as it largely depends on the war in Ukraine. While it is possible to buy LNG cheaply, this would require long-term fixed contracts that might prove unfavorable in the long run.

Kaasik said there are a lot of countries in the world that are prepared to use Russian gas, while rerouting supply is a long process.

Peter Lund, professor of energy at the Aalto University, said that a more permanent solution should be considered down the line. "LNG floating terminals are expensive and leased for a period of time. They are not permanent installations. Therefore, we should look ahead to the wider development of the regional gas market and consider constructing permanent LNG terminals.

Lund also said that it needs to be kept in mind that Poland will also become a participant of the Baltic and Finnish gas market, while its need for gas is three times greater than that of the Baltics and Finland put together.

"Two-thirds of Poland's gas currently comes from Russia," Lund said, adding that Poland deciding to give up Russian gas might mean some of it will have to come from Finland and the Baltics. "This larger market that would also include Poland also speaks in favor of a permanent terminal in the region."

Taavi Veskimägi, head of Estonian transmission system operator Elering, said that a ship might not be the best possible solution three or four years from now. "Perhaps it would be better to have onshore regasification capacity and use LNG tankers for transport," he suggested.


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Editor: Marcus Turovski

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