Elering CEO: LNG terminal a security policy, not a business project

Elering CEO Taavi Veskimägi.
Elering CEO Taavi Veskimägi. Source: Siim Lõvi/ERR

The primary goal of building of an LNG terminal in Estonia is to ensure the security of gas supply, which is why decisions cannot be left purely up to private companies and why it's necessary for system operators to participate in the acquisition of a ship to be used as the terminal, said Taavi Veskimägi, CEO of the electricity and gas system operator Elering.

Speaking on Vikerraadio's "Uudis+" program on Tuesday, Veskimägi stressed that the floating storage regasification unit (FSRU) and the pier together with a land connection are two separate projects that require distinct approaches.

"Elering and Gasgrid Finland have indeed received a mandate to bring an FSRU here; the relevant negotiations are underway, and this will be happening," he said. "The other is the pier — and here we are negotiating with Alexela and Infortar about whether it would be possible to get this pier built by November 1. The pier can only be built in such away that the pipeline for it belongs to Elering and the project belongs to Alexela."

Should an agreement not be reached, another alternative would be to consider other pier locations in Estonia. "Whether the ports of Paldiski or Muuga, or whether to proceed based on the fact that it will be shifted to the Finnish side, which makes no difference to Estonian consumers," he explained.

A project in Finland would not be able to be completed by the end of this year; only the Alexela and Infortar project planned for Paldiski could be.

"It's important to add why the market alone isn't doing this — I have not yet heard that anyone on the private capital side would be willing to do this without a guarantee or repurchase obligation or anything with which the state might provide some sort of insurance," Veskimägi said. "As of right now, I, at least, have not heard of there being a private project that would be implemented against market risk."

According to the Elering CEO, no one knows when Russian gas supply to Europe may end — which is why it also isn't possible to provide a guarantee.

"While the Estonian government has made a decision in principle, that is not the case in the region as a whole," he said. "This isn't a business project at first approach — this is security first and foremost. If this were a business project, then of course businessmen could do this. As this is first and foremost the securing of gas consumption, that is why system operators are involved here."

As many countries are preparing for pipeline gas supplies being cut off, demand for FSRUs in Europe is high and all major gas consumers are competing to acquire the vessels.

"This certainly isn't just a matter of a ship being able to be leased only to Estonia or Finland; it is a global market determining the price," Veskimägi explained. "Neither Elering nor the state has been involved in vessel negotiations today. This is a joint Estonian-Finnish project in which Finland is the carrying partner and has said that it will lease the ship even if Estonia should not go along with the project."

The Elering CEO said that he believes that an agreement will ultimately be reached with Alexela and Infortar that will allow for a floating LNG terminal to be received in Estonia by this fall, and that the project won't have to wait for the appropriate reception capacity to be established at Inkoo in Finland.


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Editor: Aili Vahtla

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