January 17, 2014 / 12:35 PM / 4 years ago

UPDATE 1-Estonia to Finland: let's both build LNG terminals

* Dispute over which country will build terminal

* Finnish minister has reservations over proposal-TV (Recasts with ministry statatment)

HELSINKI/TALLINN, Jan 17 (Reuters) - Estonia proposed to Finland that the two countries, which have been competing over a project to build a new liquefied natural gas (LNG) terminal, compromise by building one each.

Estonian Economy Minister Juhan Parts also suggested they could manage the extra costs by delaying planned construction of an undersea gas pipeline connecting the two countries by five years, his ministry confirmed on Friday.

“Estonia’s objective is to bring the developers of these competing projects to closer cooperation, as this is the most probable route to ensuring that a compromise can be reached in the LNG terminal dispute,” the ministry said in a statement.

Parts’ Finnish counterpart, Jan Vapaavuori, did not respond to Reuters’ request for comment but Finnish broadcaster MTV said he had reservations about building two terminals.

Analysts say that the region’s gas demand only warrants one LNG import terminal, in terms of construction costs and gas import prices.

A single LNG terminal is estimated to cost around 500 million euros ($680 million) and provide an alternative to gas supplies from Russia. A pipeline that would allow Finland and Estonia to share the imports would cost around 100 million euros.

The European Union (EU) could fund up to 40 percent of the cost of a regional terminal provided it serves the interests of more than one country, and there are several Baltic Sea states that are vying for funds.

The EU is expected to announce a winner next June, and a study last November showed that Finland would be a strong contender.

Lithuania, the biggest Baltic state, plans to start importing LNG in 2015 through a floating terminal.

Finland and the three ex-Soviet Baltic states of Estonia, Latvia and Lithuania consume about 10 billion cubic metres of gas per year, all of which is currently supplied by Russia’s Gazprom. ($1 = 0.7352 euros) (Reporting by Ritsuko Ando and David Mardiste, editing by Nerijus Adomaitis and William Hardy)

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