Companies took another step towards building an LNG terminal to supply all three Baltic countries and Finland on Wednesday.

Estonia's electricity transmission system operator (TSO) Elering named Dutch company Vopak LNG as its strategic partner for the planned LNG terminal in the Baltic country on Wednesday.

Vopak LNG will steer a feasibility study on the construction of a regional LNG terminal at Muuga Harbour near Tallinn, according to Elering.

To this end, the two companies, along with terminal operator Tallinna Sadam, signed a letter of intent on Wednesday. It states that they will cooperate on a study of the technical and economic aspects of the terminal's construction and the need for EU funding.

The results of the feasibility study will be made public in August, when they are presented to Tallinn's economy ministry.

"In developing the LNG terminal, Estonia complies with the EU directives on gas, which state that the ownership and administration of energy infrastructures must be kept separate from producing and selling energy," said chairman of the Elering board, Taavi Veskimägi.

The study may convince the European Commission that Estonia's LNG terminal project would be suitable for supplying all three Baltic countries and Finland, Elering said.

Last November, the countries asked the Commission to rule on the best location for a regional LNG terminal, after failing to reach consensus themselves. At the time, an independent report by consulting company Pöyry said that Estonia would be the best location (see ESGM 30 November 2011).

The Commission has previously said that it will support the development of an LNG terminal in the Baltics on the condition that it is able to cover at least 25% of the consumption needs of the entire region.

However, Lithuania's intention to build a rival LNG terminal at Klaipeda port may scupper plans to fund a regional terminal. The Lithuanian terminal, which will cater solely for the Lithuanian market, would damage the Estonian terminal's viability (see ESGM 28 March 2012).

The Baltic countries are keen to build independent LNG terminals to diversify supply sources and reduce dependence on Russia'a Gazprom.

Gazprom is the sole natural gas supplier to all three states and owns a 37% stake in Estonian natural gas incumbent Eesti Gaas.

Vopak LNG is a subsidiary of the Netherlands' terminal specialist Royal Vopak. The company owns and operates the Gate LNG terminal in Rotterdam. JE

Copyright 2012 Heren Energy Ltd. All Rights Reserved.

(Originally published May 2, 2012, in European Spot Gas Markets.)