Gas Processing & LNG is Produced by Gulf Publishing Holdings LLC

Europe's newest gas link set to hit Gazprom prices around the Baltic Sea

Gas Link Smaller

OSLO (Reuters) - Europe's first new gas interconnector in a decade, linking Finland and Estonia from January, will weaken Gazprom's hold on the Baltic Sea region and spark price competition, the pipeline's owners said.

The pipeline, called Balticconnector, will help Finland diversify its gas supplies which are solely Russian, and can also send gas to the Baltics, whose gas comes from Russia and Lithuania's Klaipeda liquefied natural gas (LNG) terminal.

Although the pipeline will partly carry Russian gas, it is a mostly European Union (EU)-funded project, with the EU covering 75% of its €300 MM ($330.81 MM) cost. Its owners, Finland's Baltic Connector and Estonia's Elering cover the rest.

In the absence of other piped supplies from Europe at the time of its opening, Balticconnector will only carry gas from Russian entry points in Finland and the Baltics, regasified LNG from Klaipeda, or stored gas from Latvia's Incukalns.

Prices between them vary as Russia has different supply contracts in Finland and the Baltics, the stored gas value is seasonal and weather-related, while LNG follows the global market. Abundant and cheap LNG has already reduced Gazprom's share of the wider European market.

Gazprom may have to change its pricing in Finland to compete against LNG, the pipe's owners told Reuters.

"Αs Gazprom supply contracts are different for the different countries then there is also competition between these contracts... There is more import capacity of Russian gas in the region than LNG," Elering's market development manager Erkki Sapp said.

Baltic Connector's Chief Executive Herkko Plit also expected Gazprom to lower its prices.

"Remember what happened in Klaipeda when the terminal opened there? Gazprom dropped their prices by 20%. Gazprom might, as an active player in the (Finnish-Baltic) market, adjust their prices accordingly," he told Reuters.


Gazprom's prices may also come under further pressure from 2022. A connecting pipeline between Lithuania and Poland, GIPL, is scheduled to be completed by the end of 2021, providing physical access to the gas infrastructure in central Europe.

Gazprom did not reply to a request for comment. Its data show the firm exported 2.6 billion cubic metres (Bm3) of gas to Finland in 2018, 1.3 Bm3 to Latvia, 1.4 Bm3 to Lithuania and 0.4 Bm3 to Estonia.

Russia's National Energy Security Fund, a think tank whose views are usually in line with Gazprom's, told Reuters that it didn't expect Balticconnector to be of much use.

"The pipeline may not be filled with gas at all. In order to fill it, it is necessary for Finland to buy more gas from Gazprom and for Estonia to offer a higher price. I don't think it makes sense now," its deputy director for gas Alexey Grivach told Reuters.

"Balticconnector is a typical example of a redundant infrastructure that was built only to absorb money from the EU and create a mythical connection of markets that can be used only once in 10 years," he added.

Elering's Sapp did not share the concern, adding that some market participants had even worried whether the pipe's capacity was sufficient.

($1 = €0.9069) (Additional reporting by Gederts Gelzis in Riga, Maria Grabar in Moscow and Ekaterina Kravtsova in London, editing by Terje Solsvik and Emelia Sithole-Matarise)

Copyright © 2019. All market data is provided by Barchart Solutions. Futures: at least a 10 minute delay. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice. To see all exchange delays and terms of use, please see disclaimer.

                                  CMEGroup                                     Icelogo


Business Trends: Four challenges to Australia’s rising role in the global LNG market
-David Gross
The past 10 yr have been the decade of natural gas, but the next 10 yr will belong to LNG as countries race to build out their export capacity.
Editorial Comment
-Adrienne Blume
Australia and Middle Eastern countries, which have been net LNG exporters, are now foraying into LNG imports due to supply issues.
Industry Focus: Mixed performance for Africa’s gas markets in 2019 poses questions for next decade
-Shem Oirere
As 2020 begins, Africa’s gas market is left with a mixed bag of achievements that only partly confirms a prediction by the International Gas Union (IGU) in early 2019 that the continent’s natural gas segment is “facing a potential turning point.”
Regional Focus: North American NGL to boom alongside petrochemicals
-Eugene Khartukov
Strong natural gas production and rapidly rising demand from petrochemicals makers have resulted in record-high production of natural gas plant liquids in North America, particularly in the U.S. This growth has been led by ethane.

GasPro 2.0: A Webcast Symposium

View On-Demand

Following on the heels of the highly successful GasPro 2.0 Webcast Symposium in October 2018, the second GasPro Webcast Symposium 2.0 will take place on October 24, 2019.

The 2019 web event will gather experts in the fields of LNG, gas processing, and gas transport/distribution to share their operations expertise, engineering and design solutions, and technology advances and trends with our audience.

Attendees will learn about technology and operational solutions and deployments in a number of areas: plant design and expansion, construction, NGL production, optimization, sulfur removal, marine operations and separation technology.

October 24, 2019 08:30 AM CDT

View On-Demand


Please read our Term and Conditions, Cookies Policy, and Privacy Policy before using the site. All material subject to strictly enforced copyright laws.
© 2020 Gulf Publishing Holdings LLC.