Finland drops plan to build a regional LNG import terminal

Finland's gas utility Gasum said on Friday it has dropped plans to build a regional liquefied natural gas (LNG) import terminal and a gas link to Estonia, citing declining gas demand and poor economics of the two projects. The decision would benefit Russia's Gazprom, Finland's sole natural gas supplier, which also has a 25 percent stake in Gasum. The government, which has the remaining 75 percent stake in Gasum, said the Nordic country can still apply with Estonia for European Union's financial support to build the pipeline across the Gulf of Finland.
"The Finnish gas market and its future outlook have changed substantially since 2008 when plans for the projects were initiated. The competitiveness of gas has deteriorated and gas consumption has decreased," Gasum said in a statement. "The extensive studies conducted indicate that the Finngulf (LNG terminal) and Balticconnector projects are not commercially viable," it added, explaining the decision to drop both. Instead, Gasum said it would continue to develop small LNG import terminals along Finland's western coast to meet industry and transport needs in the regions, where gas pipelines don't reach.
Natural gas demand in Finland fell to 29.3 terawatt-hours (2.8 billion cubic metres) in 2014, down 12 percent from 2013, data from Gasum showed. Finland's Ministry of Employment and Economy said in a separate statement the government planned to set up a state-owned company which would apply with Estonian partners for EU funds to build the gas link, the Balticonnector. To make the project viable Finland will need EU to cover up to 75 percent of the pipeline's costs, which have been previously estimated at some 200 million euros.
Finland and Estonia agreed on the plan to build a regional LNG terminal and the gas link last November after months of talks, which also involved European Commission representatives. Gazprom's monopoly in the Baltic states cracked last year, when Lithuania opened an LNG import terminal and started importing super-cooled gas by tankers from Norway. In Estonia, gas imported from Lithuania replaced about a quarter of Russian gas supplies, while Gazprom still remains a sole supplier to Latvia.