Baltic companies are stepping up their search for liquefied natural gas cargoes to replace the Russian fuel after prices fell in recent months.
Estonia’s Eesti Gaas AS will tender in the coming weeks to buy seven cargoes to be delivered from April to September at Inkoo, a new floating terminal in Finland, a spokesman said. The firm has already bought fuel for the first three months of the year, while neighboring Lithuania is supplied in tenders.
Gas prices have fallen more than 80% since their peak in August, increasing the appeal of LNG compared to alternatives such as coal or fuel oil. The Baltic states have quickly added infrastructure to diversify away from the lure of cheaper pipeline supplies from their neighbor.
“Several customers in our various markets, who in the meantime were using alternative fuels, are already switching back to natural gas,” Margus Kaasik, CEO of Eesti Gas, said in a statement.
Although demand in the Baltic countries is small compared to major consumers such as Germany or France, the increased buying activity may be a sign that increased demand is here to stay.
Europe has been lucky with mild weather this winter, meaning gas reserves are 68% full, compared to an average of 48% this time of year. Now utilities are shifting their focus to restocking for the summer season.
Eesti Gaas also secured three slots at the Klaipeda LNG terminal in Lithuania, with one cargo delivered in January by Equinor ASA and two more in March.
The company is now preparing a tender for the seven places it has reserved at Inkoo. The floating terminal arrived late last year, and by mid-January the facility was ready to receive shipments.
The Baltic nations, as well as the UK, have banned Russian LNG. Finland is still buying small volumes from its eastern neighbor on a long-term contract.
Estonia, Lithuania and Finland depended on Russia for about three-quarters of their gas imports before the war, said Leo Kabouche, an analyst at Energy Aspects Ltd. The region is not connected to the rest of Europe by gas pipelines, making it LNG. -dependent to replace lost Russian volumes.
“Several Estonian utilities last year applied for exemptions to burn fuel oil due to high gas prices, but these will expire at the end of winter, which may further increase demand for gas,” he said. “LNG is much more competitive than last year for both power generation and industrial consumption following the price declines seen in recent weeks.”
Falling LNG spot prices provide a “significant incentive to bid,” he said.
–With the assistance of Ott Tammik and Milda Seputyte.
