Dispute between Elering and private sector on Paldiski property continues

Paldiski LNG terminal.
Paldiski LNG terminal. Source: Alexela/Infortar

While the Estonian state has purchased the Liquefied Natural Gas (LNG) berth and surrounding land at the Port of Paldiski from private sector companies, one section of property, which the gas pipeline passes through, remain in the hands of two private sector firms.

The companies, fuel retailer Alexela and holding company Infortar, have not granted the state grid distributor Elering the right to utilize the land. Elering, as owner of the actual pipeline, still wishes to take compulsory possession of the facility.

Although the  Estonian Stockpiling Agency (EVK)  bought the port property and the haulage quay last week, as reported by ERR News, the Pakrineeme Sadam (Port of Pakrineeme, named after a nearby peninsula) remains in the hands of the Väike-Pakrineeme property – ie. that owned by Alexela/Infortar.

While the two companies had reportedly made it clear to Elering that the Väike-Pakrineeme property would see a personal right of use issued in favor of Elering, this did not transpire, ERR reports. 

This means that Elering will likely continue with the application for forced possession of the gas pipeline, which in turn will be processed by the local government, i.e. Lääne-Harju Rural Municipality.

The forced possession requested constitutes 2.6 percent of the Väike-Pakrineeme property holding, Elering told ERR.

However, according to Alexela, following last week's transaction, everything that had been agreed to had been carried out, while had Elering subsequently discovered that there was another parcel of land through which the gas pipeline passes, it would need to contact the EVK, who Alexela and Infortar had negotiated with.

"In the event that Elering has any comments regarding the agreement already concluded between the EVK and Pakrineeme Sadam, after its conclusion, Elering should address these to the EVK instead of the media," Marti Hääl, Pakrineeme Sadam board member told ERR.

Hääl reiterated what had been stated earlier, that the state got the port at a much cheaper price than its construction had cost. "Now, the launch of the Pakrineeme Sadam is 100 percent the responsibility of state-owned enterprises," he said.

Municipality put foreclosure proceedings on hold

Elering also wanted to get compulsory possession of the gas pipeline on the harbor area, where the hauling berth is also located; now Elering has to reach an agreement on establishing the right of use with the EVK that bought the area.

As a result, while the situation became clearer for all parties regarding the port area and haulage quay transaction, several legal issues still remain unresolved. 

Elering's applications for two liens on the gas pipeline are still active, but the municipality put them on hold after last week's deal to find out what Elering, the EVK and Pakrineeme Sadam think about the situation now that the berth and harbor area are in the hands of the state.

Erki Ruben (Ühendus electoral alliance), deputy mayor of Lääne-Harju Municipality , told ERR that the municipality is currently waiting for information from the parties, as whether they can reach an agreement without having to impose forced possession. 

If this does not happen, the municipality says it will proceed with the forced possession procedure which is as follows: First, a draft is drawn up and sent to the parties for their opinion. They then have 30 days to respond in. The municipality then makes a decision on whether to approve the draft or not, while there is also a 30-day period in which to contest the decision. As a result, if forced possession is needed, it will take a few months in the most expedited of cases.

Elering's communications manager Ain Köster told ERR that what concerns the haulage quays and the port area will be discussed with the new owner, the EVK, while there is a high probability that an agreement will be reached without imposing that forced possession.

"We will resolve several issues that have not been resolved so far. One such issue is, for example, the right to use the seashore Pakrineeme property, which now belongs to the EVK. We will probably sign a cooperation agreement with EVK regarding further activities," he said, adding the cooperation with the had been "constructive".

Martin Jaško, the EVK's communications manager, told ERR that the plan is to conclude a contract with Elering and define with that how LNG floating terminals will be received.

"The most important thing is to ensure consistency in connection to the gas infrastructure and the provision of port services. In addition, we must agree on the use of the infrastructure," Jaško said.

For this section of the gas pipeline, which is located both in the sea and on the quay, Elering is applying for a construction permit from the Consumer Protection and Technical Regulatory Authority (TTJA).

"If we get a building permit, that equates to the right of use. With regard to the land, we apply for a use permit from the local government. The process is ongoing," Köster said.

Elering announced at the beginning of January that Pakrineeme Port had presented Elering with a rent demand of more than half a million euros per month for use of the gas infrastructure installed on the quay, but since Elering was not willing to pay that, a request was put in with the Lääne-Harju municipality to take forced possession of the gas pipe.

The EVK is looking for an operator for port services

With the acquisition of the quay and the property, the EVK became the port's manager, but the port services themselves will not be provided by it.

According to Jaško, the quay is technically ready to receive ships.

"However, it is necessary to fully develop a port management level that meets international standards by the fall of this year at the latest. This is a set of activities which includes the maintenance of the port infrastructure and the development of various capabilities, such as pollution control and evacuation capabilities, as well as the fulfillment of various security and safety requirements," Jaško said.

In order to find a provider of port services, the inventory center conducts a tender.

The LNG quay, along with its infrastructure and port property, was purchased by Pakrineeme Sadama OÜ, which in turn is owned by Alexela and Infortar,

The purchase was made by the EVK at a cost of €31.5 million.

Marine loading arm base of the Paldiski terminal. Source: ERR

Elering buys a marine loading arm, places it in reserve

When a floating terminal arrives in Paldisk, the presence of a marine loading arm (pictured above) is also necessary for charging. Elering has announced tenders for the purchase of the marine loading arm, and it can be ready and arrive in Estonia by the end of this year, Köster said.

Once the marine loading arm is present, it remains in reserve, and is used when the floating terminal itself does not have such a piece of equipment to hand.

"Elering will acquire the marine loading arm as a reserve device and store it at the Paldiski compressor station. If in the future there is a entrant into Paldiski, i.e. a floating LNG terminal, which does not have its own marine loading arm and is interested in our reserve equipment, then of course we are ready to sell it a spare marine loading arm. If the subscriber acquires a spare marine loading arm from us, it is possible to have a marine loading arm instead of storage take it to the quay at the compressor station and set it up there within a few weeks," Köster said.

The construction of the pipeline connection to the Paldiski LNG terminal cost Elering more than €20 million.

The project has been the focus of projected disputes between public and private sectors and, while the intention was to have it up and running by the fall, in order to attract a Floating Storage Regassification Unit (FSRU), a ship which carries LNG in other words – seen as a vital move in decoupling from dependency on Russian natural gas – no such vessel has arrived at Paldiski, though Inkoo, in Finland, is being supplied, and in turn can pipe gas to Estonia by the Balticconnector pipeline.

LNG is regassified on land for supply to the national network.

Estonia's annual natural gas consumption is estimated at 5TWh, while the state has around 1TWh in reserve, including at subterranean storage facilities in Latvia.

Natural gas can also be supplied via a pipeline running from Poland, through all three Baltic States.


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Editor: Andrew Whyte

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