Reinis Āboltiņš
Senior Energy Market Analyst
Public Utilities Commission
Latvia
While natural gas remains a source of energy with varying levels of relevance in the Baltic Sea region it can be expected that LNG supplies as a source of natural gas will grow in importance until at least 2030, but in some countries in the region even beyond that. Thus, the ability to import LNG remains an outstanding issue for those countries, where natural gas holds an important role in the energy portfolio for district heating, electricity production and industrial use.
Energy sector and economy was quite stable and recovering from the effects of the COVID pandemic when natural gas prices began increasing in the second part of 2021. EU countries began worrying about the unusually low level of natural gas storage reserves in the EU increasingly mentioning that Gazprom is not storing enough gas in Europe prior to the heating season. On February 24, 2022, it became clear that the real cause and reason for unusually high gas prices was a careful and ruthless preparatory work done over several years by those in power in Russia, which also happened to be the single biggest supplier of natural gas to the EU.
After February 2022 few have doubts about Russia using energy resources, and natural gas in particular, as a weapon of war. The fact of not filling up storages in Europe in 2021, constructing Nord Stream subsea pipelines of exactly the annual capacity of gas transit via Ukraine, artificially causing the hike of gas prices and threatening to cut supplies to Europe if Europe would not obey Russia’s demands vis-à-vis its brutal war campaign against Ukraine shows explicitly, why Europeans are switching away from Russian gas supplies.
With Russian invasion in Ukraine there was fear that the engineered energy crisis will derail Europe’s energy transition aspirations. However, this served as a major disruptive event triggering fundamental changes. Not only did it boost an unprecedented interest and investment in renewable energy, it shifted energy supply sources and routes away from Russia and embraced LNG as the new major source of supply of gas. This also escalated plans to go ahead with the development of new LNG infrastructure to improve or strengthen the security of supply.
In the Baltic Sea region, it is the Baltic States and Finland who have experienced the biggest changes. Estonia, Latvia, and Lithuania banned import of Russian gas, including LNG, from January 1, 2023, onward. Thus, the three countries have gone from being 100% reliable on gas supplies from Russia to 0% of gas from Russia in just slightly over one year’s time. The new LNG import terminal together with the Balticconnector subsea gas pipeline, connecting Finland and the Baltic States in a single regional gas market, has allowed Finland also to replace Russian gas with gas from other sources.
Looking for new suppliers and new supply routes has been the main task of governments in 2022 and finding new gas (LNG) suppliers has been one of the biggest challenges for all gas companies in the region. Most of LNG in the region in 2022 came from the US, but cargos were coming in regularly from other sources, too. Even the long-standing regional gas incumbents serving the role of Gazprom’s lobby in the region have shifted away from Russian gas completely as of the beginning of 2023 to obey the law and live up to society’s expectations.
There were eight existing or planned LNG import terminals in the Baltic Sea region at the end of 2022. Some of the planned ones, like Skulte LNG in Latvia, got a major boost once a political go-ahead was given to the project in September 2022 granting it the status of a project of national interest, which allows quicker review procedures over the course of development of the project. Inkoo LNG terminal in Finland has begun its operation, while in Estonia the Paldiski LNG terminal has been finalised and the Tallinn Muuga terminal is still in the plan. This makes it the Baltic States and Finland having altogether 5 LNG import terminals. Add two terminals – Swinoujscie and Gdansk – in Poland and the region seems to have serious LNG import capacity up from no terminal at all just ten years ago.
By the end of 2020, the share of natural gas in final energy consumption in Poland and Lithuania just slightly surpassed 13 and 11% respectively, while being just under 9% in Estonia and Latvia and circa 3% in Finland. Still, record-high gas prices in Q3 2022 did have impact on district heating and power production costs. However, natural gas prices have decreased since mainly due to mild weather conditions and reshuffling of stakeholders on the gas market in the region and globally. Most importantly, governments and the market have worked together successfully to increase the security of energy supply.
Senior Energy Market Analyst
Public Utilities Commission
Latvia
While natural gas remains a source of energy with varying levels of relevance in the Baltic Sea region it can be expected that LNG supplies as a source of natural gas will grow in importance until at least 2030, but in some countries in the region even beyond that. Thus, the ability to import LNG remains an outstanding issue for those countries, where natural gas holds an important role in the energy portfolio for district heating, electricity production and industrial use.
Energy sector and economy was quite stable and recovering from the effects of the COVID pandemic when natural gas prices began increasing in the second part of 2021. EU countries began worrying about the unusually low level of natural gas storage reserves in the EU increasingly mentioning that Gazprom is not storing enough gas in Europe prior to the heating season. On February 24, 2022, it became clear that the real cause and reason for unusually high gas prices was a careful and ruthless preparatory work done over several years by those in power in Russia, which also happened to be the single biggest supplier of natural gas to the EU.
After February 2022 few have doubts about Russia using energy resources, and natural gas in particular, as a weapon of war. The fact of not filling up storages in Europe in 2021, constructing Nord Stream subsea pipelines of exactly the annual capacity of gas transit via Ukraine, artificially causing the hike of gas prices and threatening to cut supplies to Europe if Europe would not obey Russia’s demands vis-à-vis its brutal war campaign against Ukraine shows explicitly, why Europeans are switching away from Russian gas supplies.
With Russian invasion in Ukraine there was fear that the engineered energy crisis will derail Europe’s energy transition aspirations. However, this served as a major disruptive event triggering fundamental changes. Not only did it boost an unprecedented interest and investment in renewable energy, it shifted energy supply sources and routes away from Russia and embraced LNG as the new major source of supply of gas. This also escalated plans to go ahead with the development of new LNG infrastructure to improve or strengthen the security of supply.
In the Baltic Sea region, it is the Baltic States and Finland who have experienced the biggest changes. Estonia, Latvia, and Lithuania banned import of Russian gas, including LNG, from January 1, 2023, onward. Thus, the three countries have gone from being 100% reliable on gas supplies from Russia to 0% of gas from Russia in just slightly over one year’s time. The new LNG import terminal together with the Balticconnector subsea gas pipeline, connecting Finland and the Baltic States in a single regional gas market, has allowed Finland also to replace Russian gas with gas from other sources.
Looking for new suppliers and new supply routes has been the main task of governments in 2022 and finding new gas (LNG) suppliers has been one of the biggest challenges for all gas companies in the region. Most of LNG in the region in 2022 came from the US, but cargos were coming in regularly from other sources, too. Even the long-standing regional gas incumbents serving the role of Gazprom’s lobby in the region have shifted away from Russian gas completely as of the beginning of 2023 to obey the law and live up to society’s expectations.
There were eight existing or planned LNG import terminals in the Baltic Sea region at the end of 2022. Some of the planned ones, like Skulte LNG in Latvia, got a major boost once a political go-ahead was given to the project in September 2022 granting it the status of a project of national interest, which allows quicker review procedures over the course of development of the project. Inkoo LNG terminal in Finland has begun its operation, while in Estonia the Paldiski LNG terminal has been finalised and the Tallinn Muuga terminal is still in the plan. This makes it the Baltic States and Finland having altogether 5 LNG import terminals. Add two terminals – Swinoujscie and Gdansk – in Poland and the region seems to have serious LNG import capacity up from no terminal at all just ten years ago.
By the end of 2020, the share of natural gas in final energy consumption in Poland and Lithuania just slightly surpassed 13 and 11% respectively, while being just under 9% in Estonia and Latvia and circa 3% in Finland. Still, record-high gas prices in Q3 2022 did have impact on district heating and power production costs. However, natural gas prices have decreased since mainly due to mild weather conditions and reshuffling of stakeholders on the gas market in the region and globally. Most importantly, governments and the market have worked together successfully to increase the security of energy supply.