The European Commission has allocated €187.5 million for the construction of the Balticconnector, the first Estonia-Finland gas pipeline

The European Commission has allocated €187.5 million for the construction of the Balticconnector, the first Estonia-Finland gas pipeline.

“Other countries had the possibilities to connect themselves to the European gas markets, but as we don’t have any physical connections to Europe, we have only gas pipeline connection to Russia,”Herkko Plit, Deputy Director General of the Energy Department at Finland’s Employment and Economy Ministry, told New Europe by phone on August 12, noting that the Balticconnector will end the gas isolation of Finland and develop the Baltic regional gas market.

“In that prospective it has been an important project not only for Finland and Estonia but also for the European Union. For Finland this Balticconnector provides now the opportunity to, first of all, have diversified gas supply and then together increase the security of supply and on the other hand it also provides the opportunity to open the gas market in Finland, which has been so far in this monopolistic situation,” Plit said.

“Despite that the use of gas is not that crucial for Finnish energy policy, but we still see that importance of remaining gas in the energy mix so in that context it has been an important decision by the Commission and, of course, all the project promoters,” he added.

Anna Bulakh, Research Fellow, ICDS, International Centre for Defence and Security in Estonia, told New Europe by phone on August 11 that the project is important for the whole region. “The three countries – Estonia, Latvia and Lithuania – basically are isolated in infrastructure from European continent per se because there is no interconnector between Lithuania and Poland and this should be finalised in 2019 and the Balticconnector has been under huge discussion for the last three years so it’s a big breakthrough actually for both Finland and Estonia,” Bulakh said.

“All pipelines come from Russia directly so there was no way to bring alternative gas because there was no infrastructure before Lithuania built LNG (liquefied natural gas) terminal,” the Estonian energy expert said.

Bulakh said the project is important for the whole region. “Estonia imports only 8 percent of its gas, it has only 8 percent in its energy mix of gas so basically it’s not really dependent on gas per se, but what is important because like some districts, for example, in Tallinn would be dependent only on gas heating,” she said.

Bulakh said the project is highly geopolitical. “The market integration is the most important here. When the infrastructure is in place the whole volume of the unified market – Lithuania, Latvia, Estonia and Finland, – make around 8 bcm (billion cubic metres) so it’s interesting for prospective suppliers. But if it’s not integrated by infrastructure, then there is no incentive for suppliers to bring here alternative gas because Estonia is consuming 0.6 bcm per year so it’s pretty small,” she said.

However, because of the climate targets, the percentage of gas can be increased in the mix. “Estonia is a unique country in the European Union that is dependent on oil shale, which is pretty dirty as a fuel. Gas is still on the agenda, that’s why LNG and all these new tendencies are on discussion here. Also, maritime transportation would be fuelled by LNG probably because of new regulations,” Bulakh said. “There’re developments for those kind of techniques in the market but on security side, Estonia is not that dependent on gas per se,” she said.

Addressing the gas source for the Balticconnector, Plit said LNG is not the only source that Finland is relying on but the Scandinavian country also relying on pipeline gas.

Bulakh said there are already prospective suppliers that would bring alternative to Russian gas, basically LNG.

According to a European Commission press release on August 10, the EU’s financial support to the Balticconnector comes from the Connecting Europe Facility program and corresponds to 75% of the needed funding. The pipeline will be constructed jointly by Baltic Connector Oy (Finland) and Elering AS (Estonia) and it will include Finnish onshore (22 kilometres) and offshore (80 kilometres) sections, as well as an Estonian onshore (50 kilometres) one. The pipeline is expected to be operational by December 2019. Till 2020 a total of €5.35 billion is allocated to European priority projects under Connecting Europe.

Asked if the project will definitely be implemented, Plit told New Europe that the companies have to make the final investment decision but the funding problem itself is solved. “This is a formality,” he said. “We applied for 75%; we got the maximum 75% so in that respect it’s not possible that it will not go forward because we got what we asked,” he said laughing.

Bulakh stressed that the project is in line with the EU’s Energy Union that strives to integrate the European energy market.

Announcing the funding for the Balticconnector, Commissioner for Climate Action and Energy Miguel Arias Cañete was quoted as saying in the Comssion press release on August 10 that diversifying energy sources and routes, and uniting the energy markets, is at the heart of the Energy Union.

“This is key to ensuring secure, affordable and sustainable energy for all EU citizens. What the Commission has started with the Poland-Lithuania pipeline (GIPL) we are now pursuing with the support to Balticconnector – promoting a chain of projects that will end the gas isolation of north-Eastern Europe and develop the Baltic regional energy market,” Cañete said.

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