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There is enough gas for all: Estonia and Latvia strengthen cooperation

After Germany built its liquified natural gas (LNG) terminal in record time, following Russia’s aggression in Ukraine and the subsequent gas supply disruptions, everybody’s interest was turned towards this commodity: how to ensure new suppliers, how to create new routes, how to reach those landlocked countries, how to develop the infrastructure. But, most of all, how to do all of this as quickly as possible.

This is when we started to look at the Baltic States. After all, these were the countries hit the most by the cut of Russian gas but, at the same time, they were also the ones that had spent years diversifying their energy supply and therefore an example to learn from. In April 2022, in an interview with CNN, Lithuania’s President, Gitanas Nausėda recalled that his country had spent the past decade implementing very important infrastructure projects, which not only included an LNG terminal but also an oil terminal that imports crude oil from the Baltic Sea.

Thus, other projects started to be developed, like the Tallinn and Paldiski terminals, in Estonia, with a structure very similar to Klaipeda, the Lithuanian one, in terms of investment and economic evaluation.

On the other hand, Latvia was assessing the possibility to build its own terminal: the Skulte LNG Terminal. According to the Latvian Minister for Climate and Energy Raimonds Čudars, its benefits included the fact that it was supposed to be the only one to not require investments in an expensive LNG cold storage facility as it would use a unique geographical location near the third largest European underground gas storage at Inčukalns.

But the project never really started. Was the growing interest in LNG terminals only a bubble doomed to explode? Or maybe, realistically speaking, there was no need for all this gas, especially looking from a long-term perspective that takes also the green energy transition into account?

According to the Ministry of Climate and Energy, although some proposals from investors were received, after a thorough analysis, they were all rejected.

Asked on what criteria these rejections were made, the Ministry’s spokesperson told CEENERGYNEWS that “after receiving additional information from investors, which provided more detailed information on the infrastructure, capacity and costs of the project, the Ministry concluded that the specific conditions of project cooperation could not be supported, mainly due to the extent of their regulatory advantages and guarantees.”

Indeed, the Ministry actually proved that the transhipment capacity of already existing Baltic and Finnish terminals is twice as high as the country’s consumption.

Thus, once again, we are in front of a case of cooperation. On 12 May, the Estonian Minister of Climate Kristen Michal and Minister Čudars signed a Memorandum of Understanding (MoU), which set the framework for establishing an LNG reception capacity in case of natural gas supply disruptions.

Also, Minister Michal agreed that the security of supply is currently well ensured on the Baltic and Finnish gas markets.

“Russia’s aggression in Ukraine has, however, continued to increase the risk of gas supply disruptions across the European Union,” he said. “As we operate on the Baltic-Finnish gas market with Latvia, it makes sense for us to put our backs together and cooperate to ensure that we have the security of gas supply at all times. We’ll agree on how to deal with possible supply disruptions because if the situation were to change at some point, we’d be able to quickly start using the Pakrineeme Port to receive natural gas.”

The MoU states that the countries will agree between themselves on the procedures that will enable them to intervene swiftly in the event of gas supply disruptions. The plan is to bring a floating terminal to Pakrineem, if necessary, which would make it possible to receive additional gas supplies and direct them to consumers in the region or to store them in the underground storage facility in Latvia. The countries will review and agree on joint action in the event of a crisis and also agree on how the costs related to the Pakrineeme Quay and the land infrastructure will be shared.

“The past year has been challenging and has tested our resilience in different ways. However, overcoming these challenges only strengthens our commitment to deepen our cooperation,” added Minister Čudars. “Working out on this agreement ensures the safety of natural gas supplies in Latvia, Estonia and all the Baltic region.”

A joint Estonian-Latvian working group will be set up in order to implement the agreement made today, which will bring together the parties concerned from both countries and whose task is to develop and agree on more detailed cooperation procedures.

Thanks to the efforts made last year to reorganise the existing supply channels in order to stop using natural gas of Russian origin, the availability of gas on the Finnish-Baltic common market is currently well ensured.

“The capacity of the LNG terminals in Finland and Lithuania is sufficient to meet the needs of the Baltic and Finnish gas markets, even if demand were to recover,” pointed out Mr Michal. “However, the infrastructure built on Pakrineem last year provides significant additional insurance and a sense of security that we can cope with emergencies.”

Estonia has also built up a strategic gas reserve, the volume of which is approximately sufficient to cover three months of gas consumption.

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