Estonian CEO says no commercial need for Latvia LNG terminal

Text of report in English by Latvian news agency LETA on 26 May

Riga, 26 May: The existing liquefied natural gas (LNG) terminals in Klaipeda, Lithuania, and Inkoo, Finland, fully meet demand for gas in the Baltic region, so it is difficult to see how the Skulte LNG terminal project could pay off commercially, Margus Kaasik, CEO of Estonian gas utility Eesti Gaas, told LETA.

"As for Skulte or any other projects, it is difficult to see how they could be implemented at the moment because there is not that much demand for gas. The only exception is if it gets public funding, because with public money you can do virtually anything. But as a commercial project, I see little justification for it at the moment," said Kaasik, when asked whether a fourth LNG supply point should be built in the Baltic-Finnish region alongside the terminals in Klaipeda, Inkoo and Paldiski in Estonia.

He added that for another LNG terminal to be commercially feasible, gas consumption in the region needs to return to at least the same level as two years ago, and even slightly above. This however is unlikely. While some recovery in gas consumption will be seen as prices continue to fall, the previous levels of consumption are unlikely to be reached.

"Moreover, the Green Deal and renewable energy projects have not disappeared, and all of this will gradually reduce gas consumption over time. It will not be like it was 10 or 20 years ago," Kaasik said.

Furthermore, it is evident now that the relatively recently completed Inkoo LNG terminal is not being used at fully capacity either, Kaasik added.

He also noted that Paldiski in Estonia is currently a back-up option, where a regasification platform can be delivered and used in case something happens to the Klaipeda or Inkoo LNG terminal.

"You never know what can happen, and last year proved that anything can happen. If the Paldiski terminal had been ready a year ago, many things in our region would have been very different. In addition, there is now a Memorandum of Cooperation between the Latvian and Estonian governments to use the Paldiski LNG terminal as a backup option, and I think this is a wise decision. Latvia and Estonia form one gas trading area and therefore it makes little difference whether the gas is delivered via Paldiski or Skulte, for example. As far as the market is concerned, it is the same. Therefore, now that the Paldiski terminal is ready, I see very little point in building a fourth LNG supply point in this region," Kaazik said.

In his words, Eesti Gaas currently imports gas mainly through the Inkoo LNG terminal and is likely to be the terminal's main user this summer. Eesti Gaas plans to import 15 LNG cargos with 15 terawatt hours of gas in the period from October 2022 to September 2023.

Eesti Gaas operates in Latvia, Lithuania, Finland and Poland under the Elenger brand.

The sole shareholder of Eesti Gaas is Estonian investment group Infortar, which comprises 47 companies. Infortar owns a 41 stake in Tallink Grupp and 100 per cent in Eesti Gaas.

Source: LETA website, Riga, in English 0635 gmt 26 May 23