Finland intends to secure gas supply next winter with a new lng terminal ship project, the total cost of which is EUR 460 million.
In Finland Gasum, which sells Russian natural gas, says the gas supply will end at 7 a.m. Saturday. Russia’s Gazprom informed Gasum on Friday. The reason for the suspension of deliveries is that Finland has not agreed to Russia’s demands to pay for piped gas in rubles.
The cessation of gas imports is causing measures, especially in industry. Many companies have used Russian gas as an energy source as well as a raw material and have now tried to find substitutes for natural gas.
President of Gasgrid, a state-owned company responsible for gas transmission in Finland Olli Sipilä assures that even if the supply of Russian pipeline gas ends, Finland’s gas demand can be met with gas from the Baltics via the Baltic Connector pipeline.
“In recent weeks, the demand for gas in Finland has been about 40 gigawatt hours a day. The gas coming through the Baltic Connector is enough to meet the demand, ”Sipilä said at a press conference organized by the Ministry of Employment and the Economy.
The Baltic Connector, which was commissioned at the beginning of 2020, has supplied about a third of the pipeline gas to Finland. The rest has come from Russia’s Gazprom through the Imatra gas station.
The cessation of gas supplies to Russia will come as no surprise, and industry and companies have been preparing for the situation for at least weeks. Demand for gas has already fallen due to rising prices.
“Gas consumption is at its lowest when it comes to summer. If such an outage had come unexpectedly during the harshest frosts, the situation would have been much more challenging, ”said the Energy Ombudsman’s Energy Ombudsman. Timo Vapalahti stated at a ministry meeting.
According to Vapalahti, the critical food industry, households and hospitals use about 4–5 per cent of Finland’s gas consumption.
“We are working to ensure gas supply for this sharpest peak.”
In winter, demand for gas will increase both in Finland and elsewhere in Europe. This will intensify competition in the gas market. That is why Finland will acquire a new lng terminal vessel under a ten-year lease. The Lng terminal ship should be operational by next winter.
Gasgrid estimates that the total cost of the terminal vessel project under the 10-year lease is approximately EUR 460 million.
Read more: Finland aims to replace Russian natural gas: a ten-year contract for the Lng terminal ship
Fast a change in the energy field inevitably brings costs. It is still unclear how large sums will eventually be talked about and to whom the bill will fall.
“It is difficult to assess the whole, unfortunately the matter will not be clear until later,” said Gasum’s CEO Mika Wiljanen says.
“It will take at least weeks before the matter can be assessed in more detail, let’s see how this starts to take shape. In the first instance, we will focus on securing gas supplies. ”
To the company there are costs of being prepared and having to replace old contracts with new ones. Gasum has had a long agreement with Russian Gazprom. In the gas market, long-term contracts of several years or even decades have generally been cheaper than those of a year or two.
Wiljanen does not go into assessing the magnitude of costs or whether Gasum will be able to pass on the increase in costs to its customers’ bills. However, the tightening situation in the energy market is estimated to increase prices widely.
Gasum is fully state-owned. Has there been any discussion with the state’s corporate governance that the state would help Gasum in this situation and thus incur costs for taxpayers?
“It’s not,” Wiljanen says.
State Researchers at the Center for Economic Research (VATT) have studied the extent to which Finnish industry could squat when Russian natural gas runs out.
Leading researcher at VATT Marita Laukkanen and specialist researcher Kimmo Ollikka are of the opinion that the disruption of Russian natural gas imports is compensable and that the disruption of gas imports does not jeopardize security of supply.
According to VATT, the importance of natural gas is small, especially for the export industry. 92 per cent of the natural gas imported to Finland has come from Russia and its share of the total energy consumption of industry is six per cent. The share of natural gas in industrial energy consumption has halved in the last ten years.
“This sudden outage of natural gas requires industry to switch to alternative energy sources and other adaptation measures. However, the use of natural gas in large industrial export sectors is low and is used more in sectors that account for a small share of the value added of exports. The impact of the end of natural gas imports on the export industry is small, ”Laukkanen and Ollikka write.
Chemical industry According to the Commission, about one-fifth of companies in the sector use natural gas, mainly as an energy source. The association conducted a survey of its member companies, according to which a complete disruption of gas supplies would significantly affect about 40 percent of companies in the chemical industry.
“If gas or alternative fuels are not available, companies may have to temporarily downsize their production processes,” Mika Aalto says in a press release.
In the worst case, downsizing would affect thousands of jobs.
According to the Gas Association, industry in Finland uses just over 14 terawatt hours of natural gas annually. Of this, the chemical industry accounts for 7-8 terawatt hours.
A major user of natural gas in Finland is Neste’s Porvoo refinery, where gas has been used as a raw material for hydrogen production. The aim is to replace natural gas with propane.
VATT: n According to Laukkanen, the share of natural gas in energy consumption in the food industry is 4.6 per cent. Therefore, food supply would not be in jeopardy if gas imports were cut off.
“Even if natural gas could not be replaced by any other form of energy, the concerns about security of supply that were raised in the public debate are not realistic. Of course, in some production plants, natural gas can be a form of energy that is difficult to replace in the short term, ”Laukkanen says in a press release.
The Food Industry Association (ETL) on Friday praised the Finnish government’s efforts to replace Russian natural gas.
“There is no fear of running out of food in Finland, even though the supply of natural gas from Russia will stop. From now on, there will be enough food in shops, schools and hospitals, ”says the director Heli Tammivuori Etl says in the press release.
Gas supply for the summer is guaranteed for all of Gasum’s own customers. So, for example, gas drivers or gas heaters do not have to worry. Households, hospitals and filling stations receive their gas by law in all situations.
According to the Gas Association, there were about 4,000 detached houses heated by gas and about 1,100 terraced and multi-storey buildings in 2019. There have been more than 25,000 gas stove users.
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