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Estonia, Latvia plan joint LNG crisis supply deal

The LNG terminal at Paldiski, under construction during the summer of 2022.
The LNG terminal at Paldiski, under construction during the summer of 2022. Source: Alexela/Raul Mee ja MKM

Estonia and Latvia are planning an agreement which would permit the joint purchase of Liquefied Natural Gas (LNG), in the event of a shortage.

Minister of Climate Kristen Michal (Reform) said late last week that: "We are preparing an agreement with Latvia, in case the situation on the natural gas market should change to the extent that supply difficulties arise."

The deal would see LNG brought to the Port of Paldiski via a Floating Storage Regasification Unit (FSRU), following the completion of the LNG terminal there.

Michal said, however, that the current situation is stable and no intervention of this kind is required; an FSRU could be jointly leased by the two countries in the event of a forecast critical deficit, Michal added.

Latvia's climate and energy ministry announced around a fortnight ago that it would commence preparing the necessary conditions for sharing the Paldiski LNG supply, while Minister Michal also met with his Latvian counterpart and with Latvia's prime minister, Krišjānis Kariņš, last week, to discuss the matter.

Michal said talks are till in their early stages, meaning there are no specific plans, though the terms of the initial memorandum of understanding would see the two countries share the costs.

The overarching goal is to agree on a more precise framework, he added.

"This way, as the market situation changes and a critical moment arises, we can immediately take action without delay," Michal said.

Minister of Climate Kristen Michal. Source: Priit Mürk/ERR

The next step will be to prepare a memorandum of common intentions between the ministries, he added.

Latvia had initially wanted to construct its own LNG berth similar to that at Paldiski, and at Inkoo, Finland – both the latter projects were completed in the wake of Russia's invasion of Ukraine in February 2022 and the changed energy picture.

However, in February, Latvia stood back from developing its own LNG terminal over the issues of state guarantees in the public-private partnership.

Estonia's own LNG terminal at Paldiski has also been dogged by disagreements between the state, primarily via Transmission Systems Operator Elering, and the private sector, in the form of Alexela and Infortar.

Nonetheless the project went ahead and was completed; in mid-march, the  Estonian Stockpiling Agency (EVK)  purchased the LNG terminal and its surrounding infrastructure, from the private sector firm set up to manage the project, Pakrineeme Sadama OÜ, at a €31.5-million price tag.

This deal fulfilled a government pledge to purchase the Paldiski berth in any situation where their business prospects in the management of LNG reception infrastructure altered significantly.

Estonia also stores some of its natural gas reserve in the underground facility at Inkucalns, Latvia.

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Editor: Andrew Whyte, Barbara Oja

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