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State ready to acquire Paldiski LNG quay earlier than agreed

Submitted by ospa on Fri, 11/04/2022 - 11:09

Government Communication Unit press release, November 3rd - At a Cabinet meeting of the Government, ministers decided to instruct AS Eesti Varude Keskus (EVK) to accept the offer for sale of Pakrineeme Sadam OÜ and to negotiate the acquisition of the liquefied natural gas terminal quay to be built in Paldiski, together with the land that will be part of it. It was also decided to not acquire a holding in the company operating the Finnish LNG terminal.

In mid-October, the Estonian and Finnish ministers of economic affairs decided that the floating LNG terminal, which will increase the region’s security of natural gas supply, will be moored in the Finnish port of Inkoo in the coming winter, where it will be better able to meet the needs of both the Estonian and Finnish gas markets. With this decision the business risk of the company that established the quays in Paldiski materialised and Pakrineeme Sadam OÜ has expressed its wish to realise the option to sell the quay this year.

According to Prime Minister Kaja Kallas, the Government has, since last spring, regarded the Paldiski LNG quay with the gas network connection to be built on the quay as an important object for ensuring the country’s energy security and security of supply, which will also make it possible to import natural gas to Estonia and receive it here in the future if the need for this arises. “In the summer, the Government decided to give the private company building the quays additional certainty to continue with the investment by promising to buy the quay if the FSRU were to go to Finland immediately and the private operators’ initial assumptions changed significantly,” said Kallas. “The preparation of the contract has moved on significantly since summer. With today’s decision, companies will have the option to sell the quay to the state, if they so wish, even as early as this year.”

Minister of Economic Affairs and Infrastructure Riina Sikkut explained that the basic terms agreed for a possible sale would remain the same. “The state will pay the justified and certified costs incurred by the company for the quay this year, up to a maximum of €30 million,” said Sikkut. “We will also buy the harbour property needed to service the quay for €1.5 million. In total, the transaction will cost up to €38 million, including VAT, and this amount has already been allocated by the government to AS Eesti Varude Keskus.”

At today’s cabinet meeting, ministers also decided not to acquire a holding in FSRU OY, the company operating the Finnish LNG terminal. The rules for use of the LNG terminals operating in the EU must be in line with EU law, which obliges terminal operators to ensure equal access for third parties irrespective of the ownership structure of the terminal. Also, possible temporary exceptions are not directly linked to the ownership of the terminal under EU law.

The supplementary budget for 2022 allocated up to €30 million to Elering AS, the Estonian system operator, for participation in the joint venture. According to Minister Sikkut, this money could be used to purchase additional gas volume. “We’re discussing the possibility that the first gas cargo to arrive with the LNG floating terminal will be offered primarily to the holders of the strategic reserves in Estonia, Finland and Latvia,” said Minister Sikkut. “If the price of this quantity of gas is good, the conditions are suitable and the purchase increases the security of supply of the Estonian market, it makes sense to use the opportunity.”