Alexela Group to continue LNG import terminal in Paldiski

Estonia’s Alexela Group failed to secure EU funding for its planned LNG import terminal in Paldiski in last year's round of EU calls for energy proposals.
Alexela Group to continue LNG import terminal in Paldiski

(.Shell, CC BY-NC-ND)

Still, the group, majority-owned by Estonian businessman Heiti Haal, plans to go ahead with the project with private investment.

There are already four LNG terminals on the Baltic coast – two large ones in Lithuania and Poland and two smaller ones in Sweden and Finland – while pipelines are being built interlinking the national grids of Poland, Latvia, Lithuania, Estonia and Finland.

The European Commission (EC) told Alexela that the terminal was not going to get financial support at this point, Alexela said. The company was seeking a grant of close to EUR344m, or 39 per cent, of the cost of the project from its Connecting Europe Facility (CEF).

Alexia had argued that if Estonia and Finland were to build the BalticConnector linking their two grids, then Paldiski LNG terminal would be the “only possible supplier of gas” to both markets, apart from Gazprom, were there to be a sudden break in gas supply.

The terminal planned by Vopak at Muuga does not have this ability, Alexela has said. The EC allocated EUR187.5m in July 2016 from the CEF to Estonia and Finland to the Balticconnector subsea pipeline project between the two countries.

Alexela Group’s board member Marti Haal told the Estonian press that the announcement was to be expected in light of Lithuanian PM Saulius Skvernelis’ recent statements in which he expressed doubts about the need for an LNG terminal in Estonia.

Alexia filed an application for EUR344m with the EU in October 2015; the company had by that time already invested close to EUR10mn in the project.

Meanwhile Vopak EOS, part of the Dutch-owned Vopak and the largest independent oil product terminal operator in the Baltics, which also wants to build a LNG import terminal in Muuga, east of Tallinn, has not yet handed in its application for EU support to the EC.

Balticconnector is a proposed natural gas pipeline between Estonia and Finland that will connect the gas grids of the two countries. The bidirectional pipeline is scheduled to be completed by 2020.

The transnational gas pipeline is planned to create alternative supply channels for the isolated Finnish gas market and connect it to the transmission network of rest of EU countries.

The pipeline project is being jointly developed by Elering from Estonia and Baltic Connector Oy from Finland. An agreement for the pipeline was signed between the European Commission, Baltic Connector Oy and Elering Gaas on 22 December 2015 to increase energy security in the eastern Baltic Sea region.

Project schedule of Balticonnector pipeline

A feasibility study on the project was completed in 2007 followed by an offshore front-end engineering and design (FEED) in 2015. The offshore environmental impact report was approved later that year leading to the start of seabed surveys, which are expected to continue until 2017.

Construction on the pipeline is expected to commence in 2018 with the pipeline beginning operations in 2020. The lifetime of the pipeline is approximately 50 years.

Balticconnector details

The 150km natural gas pipeline will be segmented into three divisions, namely a 22km Finnish onshore section, an 81km offshore section on the seabed of the Gulf of Finland, and a 47km Estonian onshore section.

It will connect Paldiski, Estonia, and Inkoo, Finland, and will have a capacity of 7.2 million cubic meters a day (mcm) with a throughput of five terawatt hour a year (TWh/y) from the terminal. The pipeline will have a nominal diameter of 500mm and a pressure capacity of 80bar.

The pipeline project is estimated to cost EUR250m. The European Commission announced on 15 July 2016 that it will fund 75 per cent of the project cost, amounting to EUR187.5m. The associated Estonia-Latvia gas connection modification project has also received a 50 per cent funding from the European Commission.

The Commission had earlier granted EUR5.4m for conducting studies related to the project development. The two countries will equally divide the project’s construction costs among themselves. Finland’s share in the project will be funded by the state as equity.

A feasibility study for the Balticconnector was conducted by Ramboll, which will also be the technical project management consultant and engineering consultant for the project.

(.Shell, CC BY-NC-ND)

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