Russia cuts natural gas supplies to Finland – situation under control
On 20 May 2022, Gazprom Export informed the energy company Gasum Oy that natural gas deliveries to Finland under Gasum’s supply contract will be cut on 21 May 2022 at 7.00 am. The reason for the cut is that Finland has not agreed to pay in rubles for pipeline gas supplies.
Under the long-term supply contract, however, the payment currency is the euro. Gasum has decided to take the contract to arbitration, as the Russian party is violating the terms of the supply contract with its demand.
Preparations made for cutting of gas imports, gas to household customers in all situations
Finland has made preparations for the cutting of Russian gas imports, but replacing them is not without problems. The precise impact on the availability and price of gas will depend on the import routes used and the development of demand. In summer, demand is clearly lower than in winter.
The direct gas needs of household customers can be covered in all situations, as can the gas required by the essential services of society. According to the Finnish Gas Association, in 2019 there were around 4,000 detached houses and around 1,100 terraced houses and apartment blocks heated with gas. In addition, around 1,200 service or retail premises and 21 greenhouses were heated with natural gas.
The National Emergency Supply Agency (NESA) has made preparations to meet the needs of protected customers, i.e. household customers connected to the gas network. NESA is also preparing to be able to meet the gas needs of healthcare and social welfare and of the energy-critical food industry.
Energy companies may switch, and some have already switched, from gas to other fuels on market terms. When Russian imports end, the situation of industrial plants that use gas will vary. Some of them have already changed fuel, some are shifting to source gas from the Baltic countries via the Balticconnector pipeline.
Some will be compelled to suspend operations when pipeline gas imports are cut. For this reason, local and regional effects, such as lay-offs, are possible. The Ministry of Economic Affairs and Employment has already launched a study into how the situation of companies and employees can be alleviated in these cases.
Alternatives to Russian gas are already being prepared – LNG terminal ship has been leased
The Balticconnector gas pipeline between Finland and Estonia enables the import of replacement gas from the Baltic states. Gas will be also supplied to Finland in the form of liquefied natural gas (LNG) via terminals in Tornio and Pori and through a terminal in Hamina to be completed in the autumn.
To cover industry’s delivery and security of supply needs, Finland has leased an LNG terminal vessel. On 7 April 2022, the Ministerial Committee on Economic Policy authorised the transmission network company Gasgrid Finland Oy to handle the matter.
On 20 May 2022, Gasgrid Finland Oy and the US company Excelerate Energy, Inc. signed a 10-year lease agreement for an LNG terminal ship. The LNG terminal ship will play a major role in securing gas supplies for Finland’s industry.
The terminal ship is intended to be taken into use next winter and it will be located in Southern Finland. New port structures will be built for the terminal vessel on the coasts of both Finland and Estonia. If the structures in Estonia are completed first, the vessel can be placed temporarily on the Estonian coast until the necessary infrastructure in Finland is ready for use.
Mari Kokko, Special Adviser to the Minister for Economic Affairs, tel. +358 40 521 2124
Riku Huttunen, Director General, Ministry of Economic Affairs and Employment, tel. +358 50 431 6518
Pia Oesch, Director, National Emergency Supply Agency, tel. +358 50 589 0328
Pekka Kalliomäki, Senior Construction Adviser, Ministry of the Environment, tel. +358 29 525 0114