This document discusses proposals for an LNG terminal in the Baltic region to provide natural gas to Estonia, Latvia, Lithuania, and Finland and reduce dependence on Russia. There is disagreement about the best location. Estonia proposes two sites within Estonia but Latvia argues their existing storage facilities make Riga the best option. The countries have been unable to agree and the EU will conduct a study. In the meantime, Gazprom remains the sole natural gas supplier to the region.

1. An LNG terminal for all
three Baltic countries
Estonian Perspectives
Sulev Vedler,
Eesti Ekspress

3. Estonia as gas producer
 Keri lighthouse (on island in the Gulf of Finland)
used local gas in 1906-1912. It was first natural
gas-powered lighthouse in the world.
 After the Second World War, the Soviets started
to produce gas from the Estonian oil shale.

4. Estonia as gas exporter
 Gas was exported to Russia, for the city of
Leningrad.
 German war prisoners constructed a pipeline
from Estonia to Russia.

5. Estonia as gas importer
 Approximately 50 years ago, local production of
the gas stopped and Estonia became a gas
importer.
 At present Estonia gets all its natural gas from
Russia.
 Gas to Estonia is supplied from two sources:
directly from Russia or via Latvia.

7. Gas as a good fuel
 Ten years ago Russian natural gas had a good
image in Estonia. It was a cheap and nature-
friendly fuel.
 Estonia held to the official scenario that the
biggest power stations would be using gas as
fuel.

8. But there are risks...
 A single supplier risk. All gas sold in Estonia is
bought from Gazprom and imported by Eesti
Gaas, in which Gazprom is the biggest
shareholder.
 The theory that the Kremlin uses its supplies of
gas as an energy-weapon.
 There is also a physical infrastructure risk. For
example, the pipeline between Latvia and
Estonia exploded in 2005.

11. Solution: let’s build a LNG
terminal!
 Two projects in Estonia. 1. In the harbour of
Muuga. The developers are Estonian state-
owned companies Elering and Port of Tallinn and
Dutch private company Vopak LPG.
 2. On the Pakri peninsula near Paldiski. The
developer is private company Balti Gaas, headed
by entrepreneur Heiti Hääl. The ownership is not
transparent.

13. And problem...
 The Estonian gas market is too small.
 Annual consumption is only 7.1 TWh.

14. ... and solution
 But we can talk about a 14 times’ larger market if
we add Latvia, Lithuania and Finland (annual
consumption 99.1 TWh).
 Let’s build a LNG terminal for all three Baltic
countries and Finland also! EU is ready to fund
the construction if it will cover all the region.
 New question: which location is the best for
construction of a LNG terminal? Estonia? Latvia?
Lithuania? Finland?

15. A Baltic LNG terminal gives the
best price option
Approach Total Additional % increase over
construction costs per year, the current gas
price
cost (€ million) for 20 years (€/
1,000m3)
Local terminal 125 8.9 2.0
Regional 972 4.7 1.1
Estonia and 412 8.2 1.9
Latvia

16. Which location is the best?

18. New competition on a higher level
 In the spring of
2011, Lithuanian
Prime Minister
Andrius Kubilius
announced that
Lithuania will
rent a LNG
tanker (ship) and
use it as a small,
floating terminal.

19. Our biggest competitor is
Latvia
 In the summer of 2011 the Latvians announced
that the best location for construction of an LNG
terminal is Riga.
 In this case, it was said, there would be no need
to build new, very expensive storage tanks
because the terminal can use the underground
storage facilities in Inčukalns.

20. The Estonians are against
 The Latvian plan is to use the existing pipeline
between Inčukalns and Estonia.
 The diameter of this pipeline is wide enough to
supply the Estonian market, but not big enough
to also supply the Finnish market. According to
Hääl, a new, bigger pipeline between Estonia
and Latvia will cost 350 million euros.
 But if a terminal was built in Estonia, then the
current pipeline would be sufficient for Latvia.

21. The Estonians are against (2)
 The underground storage facility at Inčukalns is
currently contracted out solely to Gazprom.
 There are also concerns that the Inčukalns
facility may not be able support the high levels of
demand from Estonia, Latvia and northwestern
Russia when they all have peak consumption at
the same time.
 The Port of Riga has the biggest problems with
ice among the Baltic ports.

23. The fight
 In November 2011, the prime ministers of the
Baltic countries decided that they were unable to
reach agreement on where is the most suitable
place for the LNG terminal.
 Estonia and Lithuania demanded that a study be
done by the EU, which would be the best
location for the terminal.
 Latvian prime minister suggested that the
construction of a gas pipeline between Lithuania
and Poland also be analyzed.

24. The bigger fight
 The most electric moment happened on 24th of
November, when the economics ministers of all
EU member countries discussed energy issues
in Brussels.
 Daniel Pavluts, from Latvia, threatened to block
the start of negotiations between the EU and
Russia and Belarus regarding the
synchronization of the electricity system if Latvia
was not chosen as the best place to construct
the Baltic LNG terminal.

25. The bigger fight (2)
 One observer described the meeting in Brussels
as a madhouse. After the meeting Juhan Parts,
Estonian Minister of Economy, said that Latvia
unexpectedly tied one point of the agenda -
synchronization of the electricity systems - with
the location of the LNG terminal.
 Parts said that the Latvian demand was a
surprise for everyone.
17.05.12

26. The bigger fight (3)
 Estonia and Lithuania said no to Latvia. They
explained that the best solution for the location
will be the study done by the EU.
 Latvia didn’t give its nod to start negotiations with
Russia and Belarus. It was the same as a veto.
 Juhan Parts said that Latvia’s step was
regrettable: “If we talk about a common Baltic
and Nordic electricity and gas market, it also
needs common efforts.”

27. One cannot forget Finland.
 In April 2012, Estonian authorities received a
letter in which a Finnish company explained it's
plans to construct its own LNG terminal. Possible
locations are in Porvoo and Inkoo.
 A full-scale terminal (2 billion m3 capacity per
year) has to be ready by 2018.

28. And the winner is...
 ...

30. And the winner is...
 The biggest winner during the present battle
between companies and countries is, of course,
Gazprom. So far all four countries continue to
buy their natural gas from this Russian giant.