Estonian priority access to Finnish FSRU unsure

The failure of the Estonian government to ensure that a floating storage and regasification unit (FSRU) was installed in Estonia this winter is a "very big disappointment", and preferential access to the terminal is unsure, executive director of Estonia's gas industry association EGA Heiko Heitur said.

While there had long been "signs in the air" that the FSRU was probably going to be moored in Finland, the confirmation of this decision earlier this week will be a "very big disappointment" for Estonian firms Alexela and Infortar, which constructed LNG infrastructure at the Baltic Sea port of Paldiski in record time, but also for other gas sellers, as well as industrial and ordinary consumers, Heitur said. The state has "failed to protect the security of Estonia's supply in a crisis situation", particularly as half of Estonian industry directly depends on gas, he added. These failures are limited not only to the gas market, but to the "entire Estonian economy", Heitur said.

"Estonia's economy, gas market operators, consumers and the state itself will all lose out from this decision, which sends a rather bad signal to the wider public," Heitur said.

Given the potential for foreign companies to book capacity at the Finnish terminal, this could drive up prices for Estonian gas traders and price them out of the market. "A neighbour comes, sells and leaves with the profits," he said. And the news that Estonian and Finnish buyers should be given preferential access to the terminal is an idea that exists "purely on paper", Heitur said.

While there is agreement on a political level for this preferential access to be given, this has not yet been translated into any contract or terminal rules, which were recently sent to Finnish and Estonian energy market regulators, Estonian deputy minister for energy Timo Tatar said. The expectation is that, if necessary, these rules should be changed in order to create a priority for Estonian and Finnish gas buyers. The governments "did not write exactly how it should be fulfilled", but it is now the responsibility of the regulators and the terminal operator to fulfil this political expectation, Tatar said.

"There are no advantages written into the conditions as they currently exist", director general of the Estonian competition authority Evelin Parn-Lee said, adding that such an idea is "not in line" with EU competition and internal market laws. The Lithuanians have introduced a law giving preference to certain buyers, and Estonia or Finland could also introduce similar legislation, she said. However, "we have not directly analysed the granting of derogations [from EU law]. It's not impossible, but at the moment we don't think it's possible," Parn-Lee said.

The Estonian government considers it "fully justified" to introduce such laws in Estonia as well, Tatar said, although the FSRU being moored in Finland means it will only be subject to Finnish law. This would not be a long-term solution, "but now, when we are in an energy crisis, this terminal was built primarily to improve the security of supply for Finnish and Estonian consumers", he said.

Tatar posited several potential solutions, such as making one of the two cargo slots available for January specifically for Estonian buyers, or giving priority to buyers that have commitments in both countries, or even an obligation that a certain proportion of the gas leaving the terminal must be offered to Estonian buyers. This is where Tatar wants the regulators and terminal operator to "propose a solution and do it as soon as possible", he said.

The Estonian cabinet on Thursday also agreed that the economic affairs and infrastructure ministry must prepare an analysis on the possibility of acquiring an FSRU for Estonia both for this heating season and the next, foreign minister Urmas Reinsalu said, adding that this analysis must show what the costs and lease period are.

By Brendan A'Hearn