LNG terminal: Elering talking alternatives, Alexela about blackmail

Representation of the location of the proposed LNG floating terminal in relation to the Port of Paldiski. Balticconnector is an existing gas pipeline which runs between Estonia and Finland.
Representation of the location of the proposed LNG floating terminal in relation to the Port of Paldiski. Balticconnector is an existing gas pipeline which runs between Estonia and Finland. Source: ERR

Head of Alexela Marti Hääl said that the company asked transmission system operator Elering for €3 million a year for the mooring quay. Timo Tatar, deputy secretary general of the Ministry of Economic Affairs and Communications (MKM), said that the government could use liquid fuels to replace gas should negotiations between Elering and Alexela fail.

Minister of Economic Affairs and Infrastructure Taavi Aas (Center) said in a press release on Monday that state company Elering and private enterprise Alexela will work together to facilitate an LNG terminal to be built in Estonia. "Alexela serves as a good example of how a private company can come to the government's aid," Aas said.

Alexela is the only entity with the necessary documentation to quickly construct a mooring quay necessary for hosting a floating LNG terminal or an FSRU.

However, heads of the two companies have been arguing over how Elering could use it for weeks. "Alexela proposed Elering renting the infrastructure," chairman of the board of the private company Marti Hääl said. "The maximum cost, provided there will not be a ship there that would pay for mooring, would be €3 million a year. But Elering refused to enter into negotiations on that point."

The system operator was concerned over the duration of such an agreement. Especially considering the possibility of the floating terminal moving to Finland after one year. Therefore, Alexela was offered a different deal. Namely, that Elering would purchase the quay once finished, with the option of Alexela buying it back should it want to use it in the future. "We will draw up a tender for purchasing the necessary quay from the private owner and they can sell it to us," Elering head Taavi Veskimägi said. Marti Hääl said that the offer was too low.

"The offer was below what it would cost to build, whereas Alexela would be saddled with the development costs for the full 12 years. Understandably, we have no interest in such extortionate conditions. We are not a construction company," Hääl said.

Sides: We can do without one another

He added that the floating terminal solution will not happen if the sides fail to agree that would see Alexela to return to its longer-term terrestrial terminal project.

"Our initial plan of handling regasification on land was always more sensible financially as a logistics solution more than five times cheaper can be used," Hääl said.

Taavi Veskimägi is not clinging to cooperation with Alexela either. "If we fail to agree or should it prove too expensive, we will need to look in the direction of other places in Estonia, like the Port of Muuga or ensure gas supply security in other ways, for example, by creating additional storage," Veskimägi wrote in an opinion piece published in daily Eesti Päevaleht (EPL).

"My information suggests the teams are negotiating behind closed doors on a daily basis," MKM undersecretary Timo Tatar said. "Offers are exchanged and adjusted, which is the main thing. The media frenzy that surrounds it seems inevitable. But the important thing is for negotiations to continue, that they are taking place in the right place and involved people with the necessary mandate."

Tatar: Some gas can be replaced with liquid fuel reserves

According to Tatar, what is most crucial is to ensure security of supply — how this will be done is up to Elering. He noted, however, that Veskimägi's suggestion of using the Port of Muuga would require significant preparations, and the state likely wouldn't have it ready by fall.

"Which clearly means that if there is no LNG reception capacity on Pakri Cape this fall, then this reception capacity needs to be ensured until this capacity is established by other means," he added.

The Estonian government wants to allocate €170 from the supplementary budget to procure a terawatt-hour's worth of gas reserves for the state. How and from whom this is to be procured is yet unclear. The ministry undersecretary said that, if necessary, even more reserves should be procured.

"The other side that we are handling is to be prepared, if necessary, with a Plan B or Plan C — to temporarily switch from gas to other fuels where technically possible," Tatar said. "Gas can be replaced relatively easily and simply with liquid fuels. We have pretty significant stocks of liquid fuels in Estonia, and it's currently even the case that heat production from liquid fuels is even cheaper than from natural gas."


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Editor: Marcus Turovski, Aili Vahtla

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