Finland strong candidate for Baltic LNG terminal, study shows

Fri Nov 23, 2012 12:08pm EST

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OSLO Nov 23 (Reuters) - Finland is a strong contender for the location of a new liquefied natural gas (LNG) terminal to help eastern Baltic region countries cut dependence on gas imports from Russia, a study for the European Commission showed on Friday.

The Commission asked for the study to establish the best site for a regional LNG terminal, which hopes to win European Union funding, after the Baltic states of Estonia, Latvia and Lithuania failed to come to an agreement.

The study by consultants Booz & Company said a terminal in Finland would fit a strategic goal set by the Commission, the bloc's executive, for the Baltic region, which consumes about 10 billion cubic metres (bcm) a year of gas, half of which is taken by Finland.

"It (a Finnish terminal) would bring the same benefits as a LNG terminal located in Estonia, both in terms of supply diversification and security of supply," the report said.

"Furthermore a LNG terminal in Finland has the advantage to be closer to the centre of biggest gas consumer in the region, namely Finland," it added.

The report said a terminal should have a capacity of about 4 bcm to cover demand and act as a price alternative and cap to Russian gas imports.

Finland's gas grid operator Gasum confirmed last week that it wanted to build an LNG import terminal on its southern coast, connected to Estonia through a gas pipeline.

One possible issue is that Finland is tied into long-term gas contracts with Russia's gas export monopoly Gazprom until 2025.

"It is unrealistic to expect the real need for LNG in Finland before the maturity of existing take-or-pay contracts in 2025," the study said.

ESTONIA AN ALTERNATIVE

Should the terminal not go to Finland, Booz said Estonia's port of Paldiski would be the best option because the cost for connecting the terminal to the gas grid here would be low.

The study said that links to Finland and Poland from here, along with an upgrade to connect the terminal to the remaining Baltic states, would cost 1.3 billion euros ($1.68 billion).

A 4 bcm per year terminal in Paldiski would cost 501 million euros ($649 million), including 38 million euros for a link to Finland. If there is a need to upgrade the capacity to 8 bcm, it would cost an additional 140 million euro.

The study gave no cost estimate for a Finnish terminal.

The study said gas consumption could rise in the Baltic states and Finland to 16 bcm a year, if the LNG terminal and interconnections are built to diversify supply and cut gas costs. At present the Baltic states pay high costs for gas imports due to their almost total reliance on Russian supplies.

Lithuania, the southernmost Baltic state, has decided to build a smaller, floating import terminal with capacity of 2-3 bcm at Klaipeda port, without seeking EU funds.

It also plans to build a gas interconnection to Poland, which is also planning to start importing LNG in 2014. ($1 = 0.7761 euros) (Reporting by Nerijus Adomaitis; Editing by Henning Gloystein and Anthony Barker)

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