Finland and Estonia confirm LNG terminal

Finland and Estonia confirm LNG terminal

Finland and Estonia have agreed on the details of a liquefied natural gas pipeline between Finland and Estonia, meaning the project can finally go ahead. Financing for the line and the terminals serving it has still not yet been confirmed, but a launch target has been set for 2019. The wildly expensive project is not without its critics however.


After years of quibbling, Finland and Estonia have finally reached an agreement on the placement of a large liquefied natural gas (LNG) terminal that will serve as the base of new gas pipeline connecting the two countries. The terminal question was the final roadblock to moving ahead with the project. Prime Minister Alexander Stubb announced the accord on Monday evening, saying the LNG pipeline will be completed at the latest by 2019.


It was agreed that a LNG terminal would be built on both the Finnish and Estonian sides of the line, dependent on EU funding. If all goes according to plan, the Finnish terminal would be located near Inkoo. Finland’s terminal would be significantly larger than its Estonian equivalent, something the Estonians resisted strongly at first.


Stubb negotiated the pact on Monday evening with Estonia’s Prime Minister Taavi Rõivas. Stubb said the two statesmen discussed many issues, including Latvia's infrastructure ability to collect and store natural gas. He says the decision is very important for both Finland and Estonia and believes that 75 percent of the financing may be secured from the European Union.


“It is paramount that the pipeline and the terminals are built as quickly as possible,” said Rõivas.


“LNG is the future,” chimed in Stubb, who wouldn’t reveal the total cost of the project, but estimated that it could run into hundreds of millions of euros.


Minister for Economic Affairs Jan Vapaavuori said the pipeline on its own shouldn’t be built without local terminals.


“The whole thing must be economically viable, since at the end of the day, the costs of the investment will be transferred to the gas customers,” says Vapaavuori.


Rõivas: Dependence on Russia a big problem


Stubb said that Estonia and Finland arrived at a consensus for two reasons.


“The first was a European Council decision a few weeks ago to improve gas and energy security, and the second was that this project has been in the works for several years and we needed to cross the finish line. We attained a satisfactory compromise with the Estonian Prime Minister, in cooperation with officials, that covers both the terminals and the pipeline,” said Stubb.  


Estonia’s Prime Minister Taavi Rõivas noted that reliance on a single source of fuel is problematic in itself, but dependency on Russia is double the trouble. He maintains that the LNG agreement will benefit both countries.


“We already have excellent electricity grid connections that work as a positive example. Now we will follow suit with the gas equivalent,” he said.  


Gasum on board, competition grows


Gas company Gasum’s Managing Director Johanna Lamminen says news of an agreement is a positive step in the right direction for Finland.


“Liquefied natural gas is a very clean alternative to oil-based products as we transition to a carbon-neutral future. Gasum is heavily investing in developing LNG networks,” she says. The LNG would be transported in specially designed ships, while the pipeline would contain standard natural gas.


Antto Vihma of Finland’s Institute of International Affairs says the LNG terminal and pipeline from Estonia will bring the country added competition on the natural gas market.


“I can’t think of any downsides to this investment. It will diversify our fuel supply and bring much-needed competition,” says Vihmaa, continuing, “We could for example enter into agreements with Qatar, possibly the US and Norway, or other future LNG suppliers. We could maybe even get a better price. There have been precedents in Europe where the price of natural gas has gone down once there was more competition.”


Politicians sound off


Finland’s Finance Minister Antti Rinne was pleased to hear that the two countries have reached an agreement, even if EU funding is pending.


“It is important in terms of the security of our energy supply and gas in particular. It will also bring jobs, little by little,” he said in a morning television appearance.


“I believe that the funding will eventually be a mix of private, public and EU money,” said Rinne, but would not comment on how much the Finnish State would be willing to invest in the project.


Chair of the parliamentary finance committee Mauri Pekkarinen, a long-term Centre Party MP and three-time Minister in previous governments, is sceptical.


“We don’t need any more pollutant natural gas in Finland. What we need is clean, emission-free biogas,” said Pekkarinen in a radio interview.


“The project is extremely expensive. I think it would be smart to carefully assess the project many times before we go any farther. Is it a worthwhile project and does Finland really need so much of this kind of polluting energy in the future?” he asks.









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