The damage to the pipeline between Finland and Estonia and the escalation in the Middle East are causing turbulence on the gas markets this week. The Balticconnector is Finland’s only pipeline link to the European gas market. An overview.
Finland’s gas supply not at risk
The pipeline outage has no impact on either European or – according to the Finnish network operator Gasgrid – Finnish gas supply security.
Nevertheless, European gas prices are reacting to this event. The pipeline outage brings back memories of the attack on the Nord Stream pipelines and shows the vulnerability of supply-critical infrastructure.
Balticconnector ends Finland’s dependence on Russia
Finland’s natural gas demand of around 2.6 bcm/year is very low in the European context. Natural gas accounts for only about five percent of Finland’s energy supply and is mainly used for cogeneration and by industry.
Until the Balticconnector came on stream in December 2019, Finland’s gas imports were 100 percent dependent on Russian gas supplies through the Imatra border crossing point. Because Finland had refused to pay for Russian natural gas in rubles, Russia stopped supplying gas to Finland on May 22, 2022.
Russian imports accounted for about two-thirds of Finland’s gas demand at that time. Two new LNG terminals together with the Balticconnector then reset Finland’s gas supply.
Finland’s new LNG import terminals
The Hamina LNG Terminal has been in operation since October 2022 and is essentially used only for regasification of local industry and as an LNG storage facility. Daily dispatches are accordingly low and mostly do not exceed 5 GWh/day.
Of key importance for Finnish gas supply is the Inkoo LNG floating terminal, which has been in operation since January 2023. The annual regasification capacity of around 5 billion cubic meters thus corresponds to almost twice Finland’s annual demand.
Since April 2023, the terminal has mostly been sending between 30 to 90 GWh/day to the Finnish gas grid, with a maximum of 140 GWh/day possible. Finnish Gasgrid estimates winter demand at around 100 GWh/day during peak periods, so the Inkoo LNG terminal alone can fully secure Finland’s gas supply in winter.
Balticconnector: Redundant Supply Assurance for the Baltic States
The Balticconnector is part of Finland’s redundant supply assurance for natural gas imports from Estonia and the possibility to export natural gas (regasified from Inkoo LNG Terminal) to Estonia. With the pipeline outage, the country’s natural gas supply security essentially rests on imports at the Inkoo LNG Terminal.
Back in the days of Russian gas imports, the Balticconnector was an element of the Baltic States’ diversification strategy to reduce dependence on Russian natural gas. Since the commissioning of the Baltic pipeline between Denmark and Poland in October 2022, the Balticconnector thus provides a network connection between Norway, Denmark, Poland, Lithuania, Latvia, Estonia and Finland.
Further diversification of gas supply to the Baltic States is to be achieved through additional LNG terminals. Of the three planned LNG terminals in Skulte (Latvia) and Paldiski and Talinn (Estonia), however, only the terminal in Paldiski currently seems to have a good chance of being implemented.