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Hopes and Reality: Western Experts are Against LNG Terminals on the Baltic

Источник изображения: http://students.chem.tue.nl/
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The topic of liquefied natural gas terminals as an alternative to Russia’s energy has once again risen in the Baltic countries. In one day Estonian PM Taavi Rõivas asked Finland to speed up the construction of the mutual LNG terminal, and American Senator John McCain promised to ship American LNG to Latvia. The problem is that Western energy experts don’t share the American and Baltic optimism: LNG is more than double the cost of Russian natural gas and won’t bring energy independence to the Baltic countries.

When meeting the Finnish PM Jyrki Katainen the Estonian PM Taavi Rõivas urged his Finnish colleagues to speed up the current mutual energy infrastructure projects. Among these projects is the Balticconnector pipeline which connects Finland’s and Estonia’s gas networks into one LNG terminal. And aside from the Finno-Estonian LNG terminal, there are also plans to build an LNG terminal in the Klaipėda region.

On the very same day, April 16, famous American Senator John McCain when visiting Latvia promised his Latvian colleagues that in order to ensure their ally’s energy independence from Russia USA will ship American liquefied natural gas to Latvia. Itera Latvija CEO Juris Savickis already commented this promise. “We can bring the gas in tankers, we could build a gas terminal. We could also launch a Latvian into space. The only question is who the hell needs that. In twenty years we’ve never had problems with gas and I don’t see why we should have them now. If this will be a gift then it’s clearly just a political gesture. But economically for Latvia this will cost 20-30% higher than the gas in Russia. Who do we want to sanction, the one who supplies us with electricity, gas and ships goods through our country?” asked Savickis.

Itera Latvija cooperates with Gazprom and that’s enough for the Latvian politicians to wave off Juris Savickis’ words with the old Baltic trick of calling him an agent of influence and Putin’s spy.

But a problem emerges: Western European experts and even US experts say the same thing as Savickis and Gazprom does.

“Currently around 40% of all of European gas import into the EU is from Russia and EU pays around 53 billion dollars a year” – notes the Bruegel analytical center in Brussels. Bruegel analysts say that with current level of liquefied natural gas to make the European prices competitive and inviting for transoceanic LNG shipments into the EU, the European gas price must be more than double. Baltic (and also Polish, Ukrainian, etc.) politicians call Russian gas prices high and political? They convinced the population that LNG terminals will lower the gas prices? According to the Brussels experts’ report first they would have to ask Gazprom to triple the gas price. Then European gas prices will be at the level to attract transoceanic shipments and you could double that down and only then will American LNG be cheaper than the Russian pipe one.

“All diversification options of gas shipments (to Europe) will be present only at the end of the current decade. Aside from that, due to the blue fuel running out in Europe, Russian energy will be in high demand in 2030” writes director of European Centre for Energy and Resource Security (EUCERS) Friedbert Pflüger in his article to the German Handelsblatt as he repeats the conclusions of his Belgian colleagues at Bruegel:

Shipments of liquefied natural gas from USA are aimed mostly at Asian countries and the mining and transport costs are a lot higher than the price Europeans want to buy on.

The Paris-based Institute for Sustainable Development and International Relations (IDDRI) earlier said in its report that shale gas, which was planned to be shipped over the ocean, won’t ensure Europe’s energy independence. By 2030 it’ll cover from 3% to 10% of the EU’s energy need. By IDDRI estimates the recent shale gas boom in America is “exceptionally local in characteristics and specific to certain economy sectors”.

Rainer Seele, the CEO of Wintershall Holding GmbH, Germany’s biggest and one of the world’s biggest oil and gas companies in an interview to Russian Vedomosty was asked “Can LNG from USA service Europe’s needs and how beneficial will it be to Europe and American companies?” and answered:

“So far it looks more like populist claims rather than real and economy-based predictions. It’s unclear what this free American gas capacity is and what will the final price of it be in European terminals. It’s hard to evaluate on how ready the current infrastructure is for shipments from America, for example, is there enough tankers? As you can see, these claims leave more questions than answers. Mass shipments from USA are a far-off prospect and not a near-future prediction”.

Even more hurtful to the Baltic elites, experts in the United States themselves have the same opinion as the German CEO who works with Gazprom (who could be called biased due to that) and the Brussels and Paris conclusions (which could be written off as Europe’s cowardice in the face of “Russian aggression”). For example, Bank of America Merrill Lynch analytical overview states that the European Union will not be able to abandon Russian gas in any short of mid term. So you’re forced to make the conclusion that these statements are the objective expert evaluation of the world and European energy market. Without regard to what Senator McCain or, say, Lithuanian conservatives, repeat, the Baltic objective reality is such that there is no cheap liquefied natural gas and there can be no energy independence based on LNG-terminals.

Translated by: Pavel Shamshiev

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