Finland's state-owned natural gas incumbent Gasum has informed the government of neighbouring Estonia that its planned LNG terminal will cater exclusively to Finnish energy needs.

Gasum, which also acts as the Finnish transmission system operator (TSO), has notified Tallinn that it will commence an environmental impact assessment in the coming weeks.

The warning is part of a bilateral agreement between the neighbours to allow Estonia to consider the possible environmental effects of the construction of the terminal.

The TSO plans to build a terminal in southern Finland with an annual import capacity of 1 billion cubic metres (Gm3) - 2Gm3 when regasified, commensurate to up to one-half of the country's current annual gas consumption requirements.

However, the project is geared exclusively towards the Finnish market. This is a source of concern for Estonia, where plans are for two separate LNG terminals.

The companies behind the two proposed Estonian terminals, electricity TSO Elering and local gas company Balti Gaas, have written to the Estonian economy ministry asking it to compel Gasum to cooperate with their individual terminal plans.

Gasum concedes that the construction of three separate LNG terminals in the region is unlikely to be economically viable. "In this area, there won't be any more than one large-scale terminal," Gasum vice president Ari Suomilammi said. "At the moment, there has been no indication from Estonia that they are interested in joining our terminal. If we receive an offer, we will take that into account."

The environmental assessment is expected to be completed by next June. Gasum will then commence front-end engineering and design in autumn 2013, after which a final investment decision will be made.

The company expects the terminal to be operational by 2018. However, a scaled-down floating terminal may be operational by 2016, according to Suomilammi.

Gasum made no mention of the planned Balticconnector pipeline, which would connect Estonian and Finnish grid systems. The company has previously said development of an interconnector realistically hinges on the construction of an LNG terminal.

The Balticconnector is supported by the EU under BEMIP, its Baltic energy market interconnector plan.

Elering remains bullish about the company's LNG terminal plans, stating that the project remains viable regardless of the Finnish TSO's plans. JE

Copyright 2012 Heren Energy Ltd. All Rights Reserved.

(Originally published May 10, 2012, in European Spot Gas Markets.)