Elering inks LNG terminal deal with Finnish partner

Elering CEO Taavi Veskimägi (right) signing the LNG agreement with Gasgrid Finland chief Olli Sipilä.
Elering CEO Taavi Veskimägi (right) signing the LNG agreement with Gasgrid Finland chief Olli Sipilä. Source: Elering

Estonian natural gas system operator Elering signed a cooperation agreement with its Finnish counterpart Gasgrid Finland on Wednesday, for the joint lease and management of a planned Liquefied Natural Gas (LNG) floating terminal.

The floating terminal, essentially a vessel specially purposed for the job, will ensure the security of gas supply to both countries, and bring to an end the need for Russian pipeline gas consumption, Elering says.

Berthing capabilities will also be installed on both sides of the Gulf of Finland, meaning the floating terminal can be moored off the coast of either country.

Taavi Veskimägi, Elering board chair, says the agreement clarifies the most important part of the LNG supply chain, namely the LNG floating terminal itself.

Veskimägi said the deal represented: "Our joint process, including securing of the vessel to the region by the end of the year is progressing as planned."

"Once the floating terminal has become the cornerstone of this complex and multi-stakeholder cooperation project, we will continue negotiations with Alexela and Infortar in Estonia to develop a haulage site in Paldiski," Veskimägi continued, according to an Elering press release.

"It will depend on these negotiations when gas traders can start using the LNG terminal to deliver gas to the region. To the market participants, we want to go public with the rules of using the terminal as soon  as possible," added Veskimägi.

Under the terms of the agreement, the two parties will develop the necessary infrastructure for installing LNG floating terminal and will bear the related costs in their respective countries.

According to the current plan, the vessel will arrive in Estonia by the end of this year and, when Finland is ready with a mooring point there also, the vessel will relocate there.

But Estonia would still have the capacity of having the floating storage in Paldiski as well. So, the mooring points on both shores and the rented vessel – it is all one project that Estonia is doing together with Finland. For building the mooring point into Estonia under this cooperation agreement, Elering is having separate negotiations with Alexela and Infortar.

The rental costs of the floating terminal are going to be covered jointly, Elering says, in proportion to Estonian and Finnish gas consumption levels, i.e. Elering's share is 20 percent while the Finnish partner's will come to 80 percent (Finland's population is a little more than four times that of Estonia-ed.).

According to the current plan, the LNG floating terminal will arrive in Estonia by the end of the year, remaining there until the hauling site for the terminal is also completed on the Finnish side.

Standing as it will in Finland, the floating terminal will have the capacity to serve both Finnish and Estonian customers effectively, while ensuring security of supply in both countries.

With the LNG floating terminal also being located in Finland, Estonia will have two potential gas supply directions, Balticconnector, a gas pipeline flowing between the two countries which opened in December 2019, along with the floating LNG terminal in the north, and, to the south, an underground gas storage facility in Latvia, an existing floating LNG terminal in Klaipeda, Lithuania, and the Polish-Lithuanian gas connection.

While getting an LNG terminal set up to supply Estonia and Finland has been a pressing issue due to the need to decouple from Russian natural gas supplies ahead of next winter - reserves are likely to be sufficient to see the country through the summer and autumn - Elering's chief stopped short of promising an LNG terminal in Paldiski by the fall.


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Editor: Andrew Whyte

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