Energy Finland is preparing for the disruption of gas supplies to Russia in May

Finland The state administration and companies are preparing for a situation in which the flow of natural gas from Russia to Finland will be cut off in May. The risk of supply disruption is considered real. The reason is Russia’s demands for payment arrangements for gas trade, on which both the EU Commission and the Finnish government have taken a negative position.

The Russian state gas company Gazprom has stated that agreeing to the new payment terms is a condition for continued supplies to continue uninterrupted. Earlier this week, supplies to Poland and Bulgaria were cut off after the countries refused the new terms.

According to HS, Gazprom has requested a response from the Finnish state gas company Gasum by May 20. According to EU sources, the deadline is the same for many other EU countries.

It is possible that the flow of Russian pipeline gas to Finland and much of Europe will be cut off on 21 May. According to official estimates, Finland’s current gas infrastructure, ie the Estonian gas pipeline and lng terminals, will not be enough to replace Russian natural gas if it is cut off in Imatra.

With natural gas plays a much smaller role in Finland’s energy mix than in Central and Southern Europe. Gas accounted for only about five percent of total energy consumption last year. In energy production, gas is mainly fairly easily replaced by other fuels. Gas-fired households are in a secure position and their gas supply is secured by emergency measures if necessary.

Instead, problems are anticipated for industry, where gas is not used as an energy source but as a raw material for processes. Two thirds of gas in Finland is used by industry. The largest users are companies in the chemical and forest industries.

According to official estimates, industrial gas supplies may not be guaranteed in all situations if the Russian gas pipeline closes. The industry must either find a substitute for natural gas or reduce production.

Part companies have already made preparations for gas supply disruptions. Fuel refiner Neste, one of Finland’s largest users of natural gas, has tested the use of propane as a substitute for natural gas at its Porvoon refinery. Managing director Peter Vanackerin according to the tests have progressed promisingly.

“We’re even more confident that we can manage it [kaasutoimitusten katkeamisen] risk, ”Vanacker said said to HS on Friday.

Industrial companies are responsible for preparedness themselves, and it depends on the company and the process how easily natural gas is substitutable.

Gas flow an outage at Imatra would not mean the immediate depletion of natural gas in Finland. The transmission pipeline itself acts as a short-term storage facility. In addition, Finland has alternative supply routes.

Energy security improved considerably in December 2019, when the Baltic Connector pipeline between Finland and Estonia was put into operation. Through Estonia, Finland is connected to the gas storage facility in Latvia and the Lithuanian terminal. Lng means liquefied natural gas that can be imported by ship from around the world.

However, the capacity of the Baltic Connector is clearly lower than that of the Imatran pipeline. Last year, three quarters of the natural gas imported to Finland came via Imatra and a quarter through Estonia.

Lng imports to Finland will be facilitated in October, when the first lng terminal connected to the gas network will be put into operation in Hamina. However, its capacity is small.

Pori and Tornio have lng terminals serving local industry. They are not connected to the network, but in principle the incoming gas can also be transported by road to the gas network’s supply station in Mäntsälä.

Finland and Estonia are currently acquiring a joint floating lng terminal. Procurement is being taken forward in a hurry. It is hoped that the terminal will be operational as early as next winter, but there are no guarantees.

Gas supply The threat of disruption is based on Russia’s demand that gas payments come in rubles in the future. The requirement came into force in early April.

Technically, the payment would require European gas buyers to open two accounts with the Russian Gazprombank, one in euros and one in rubles. The companies pay the gas bill in the old way in euros, and Gazprombank handles the currency exchange and money transfer to the ruble account.

The problem is that under the new arrangement, the payment is not considered to have been made until the money has arrived in the ruble account. The Commission considers that the companies’ payments are held by the Central Bank of Russia in euros, as a kind of loan, before being converted into rubles. This violates EU sanctions that prohibit all transactions with the central bank.

The Commission also considers it a risk that Russia’s new law does not set any time limit on how quickly the currency exchange must take place, ie how long payments from EU companies are held by the central bank. This is the reason why Bulgaria did not want to accept the arrangement, Politico says.

According to the Commission, the problem would be eliminated if the payment were deemed to have been made when the payment in euro is received.

Also The Finnish government has taken a negative view. Minister of Corporate Governance Tytti Tuppurainen (sd) said this week that state-owned Gasum must not agree to payment claims.

According to HS, the problem in Finland was also that in the arrangement required by Gazprom, the currency exchange and payment to the ruble account would not have taken place automatically by Gazprombank but on behalf of the payer, ie Gasum. This was interpreted as meaning that the company would have had to pay in rubles. This was refused by the West in advance.

Russia has argued have already received payments in rublesbut according to the Commission, no European company has yet made payments in line with the new requirements.

Fortum, owned by Fortum, is one of Europe’s largest buyers of Russian pipeline gas, and its operations are now being closely monitored. According to Tuppurainen, the Finnish government will not interfere in Uniper’s decisions, even though it is a subsidiary of Fortum, but will be a German matter, as it is a question of German energy security.

Uniper’s communications tell HS that the company is still negotiating a payment arrangement with Gazprom. The company still says it believes it will be possible to find an arrangement that does not violate sanctions and meets Russian requirements. How this could practically happen, Uniper does not say.