Finland eyes new pipeline to Baltics for gas security

By Ben Nimmo Oct 6, 2006, 13:18 GMT

Riga - Finnish gas monopoly Gasum is assessing the feasibility of linking its natural-gas grid to the Baltic states to boost security of supply, a senior company figure confirmed Friday.

'We've finished the preliminary investigation of the (Baltic) sea-bed, and the report is due later this month. Then will come the environmental impact assessment, and then we'll decide on further steps,' Gasum vice-president Aleksei Novitsky told Deutsche Presse-Agentur dpa.

Gasum's proposed plan involves building a gas pipeline under the Baltic Sea from Helsinki to Tallinn. This would give Gasum access, via Estonia, to Latvia's gas infrastructure - and a major gas reservoir, the Incukalns underground storage facility.

'Incukalns reservoir is the largest in the region,' the plant's operations chief Ivars Scerbickis said. Its current capacity is 2.3 billion cubic metres - enough to supply Latvia throughout the winter, with enough left over to send some to Russia and Estonia.

Built by the Soviets as part of an integrated gas system for north-eastern Europe, the Incukalns reservoir consists of an underground body of porous limestone surrounded by impermeable clay.

The region's harsh climate means that gas consumption in winter is four times that in summer. Throughout the summer, while demand is at its lowest, Russian gas is pumped into Incukalns' porous rock.

It is pumped out again in winter, supplying gas to Latvia, Estonia and western Russia. This insulates Incukalns' clients against unexpected supply interruptions - a question which has become pressing since Gazprom's dispute with Ukraine this January.

Currently, Finland receives all its gas through two pipelines from Russia, supplying 11 per cent of the country's primary energy needs. It has never suffered a serious interruption.

'The only time we ever had a shut-off was in 1991, when a fault developed in a pipe in Russia. It was fixed within 12 hours,' Novitsky, a specialist in gas supply, said.

Nevertheless, the company is taking energy security seriously.

'The main reason for linking into the Baltic grid would be the security which Incukalns could give. However, they ultimately get their gas from the same place we do, so it would only be a partial diversification,' said Novitsky.

The subject is also sensitive because a plan to lay a subsea pipe from Russia to Germany has alarmed the Baltics, Poland and Sweden. Officially, their fears relate to possible environmental impacts, but the risk that the pipe could allow Russia to cut their supplies without harming western countries has also been mentioned.

The fact that Gasum's pipe would cross the Russian-German one is not, however, cause for alarm, Novitsky said.

'People have been laying subsea pipelines across one another for years - look at the North Sea. I don't see any technical problems with this,' he pointed out.

Latvia's monopoly gas company Latvijas Gaze (LG) is keen to expand the reservoir at Incukalns. Planned upgrades should boost its capacity by 200 million cubic metres in 2007, and experts believe further investment could expand capacity by up to 45 per cent.

Moreover, LG has already identified a site in western Latvia where geological conditions would allow for the creation of a second reservoir. This could double Latvia's gas-storage capacity, but would require an investment beyond LG's means.

'The whole region needs gas,' LG chairman Adrian Davis told senior managers of gas companies from Finland, the Baltics, Central Europe and the former USSR at a conference held in Latvia this week.

Gas suppliers from across Central and Eastern Europe and the CIS should consider investing in an expansion of Latvia's storage capacity as a way of meeting their own energy needs, he added.

However, any link-up between Finland and the Baltic gas grid will depend heavily on external factors, Novitsky pointed out.

'The final decision will depend on market conditions, both in the gas market and in comparison with other energy sources,' he said.

Gasum, the sole operator of gas infrastructure in Finland, is joint-owned by the Finnish state, Finnish energy provider Fortum and European giants Eon Ruhrgas and Gazprom.

Eon and Gazprom also hold stakes in the Baltic states' national gas companies: Eesti Gaas, LG and Lietuvos Dujos.