Government proposes EUR 28 million funding for construction of Balticconnector gas pipeline

Ministry of Economic Affairs and Employment 13.9.2016 15.00
Press release

The Government proposes funding of EUR 28 million for construction of the Balticconnector gas pipeline between Finland and Estonia. The funding, in the form of capitalisation for the state-owned company Baltic Connector Oy, will be included in the third supplementary budget proposal for 2016 to be presented in October.

The proposal was agreed at the meeting of the Government’s Ministerial Committee on Economic Policy on 13 September 2016.

On 15 July 2016, the European Commission announced it would award grants totalling EUR 187.5 million to Baltic Connector Oy and the Estonian transmission network company Elering AS for construction of the Balticconnector gas pipeline. The EU grants amount to 75 per cent of the pipeline’s EUR 250 million construction costs.

“The Government’s contribution to Baltic Connector Oy’s capital puts the company’s Board of Directors in a position where it can make the investment decision concerning construction of the connector pipeline. This, in turn, will facilitate a major structural reform in Finland’s natural gas market. Construction of the interconnector will open up our natural gas market to competition and link Finland with the EU’s internal market for gas. The Government anticipates that actors in the sector will work towards developing the natural gas market,” says Minister of Economic Affairs Olli Rehn.

The Balticconnector is a bi-directional gas pipeline that will connect the gas networks of Finland and the Baltic countries. The project includes, in Finland, a 22-kilometre onshore pipeline between Siuntio and Inkoo together with a compressor station; a 78-kilometre subsea pipeline between Inkoo and Paldiski, Estonia; and, on the Estonian side, a 54-kilometre onshore pipeline, a compressor station and, for the Tallinn city network, a gas pressure reduction station.

The project forms part of the EU’s Baltic Energy Market Interconnection Plan (BEMIP), which also provides a framework for development of the Baltic countries’ gas network and for construction of the Gas Interconnection Poland-Lithuania (GIPL) pipeline. The Commission has also awarded substantial grants for construction of the GIPL pipeline and for increasing the gas transmission capacity between Estonia and Latvia.

The Balticconnector, together with the GIPL project, will enable Finland’s isolated gas market to be opened up to competition in the early 2020s. Finnish natural gas users will be able to invite bids for their gas purchasing contracts and will also be able to make use of the Baltic countries’ gas infrastructure in ensuring deliveries. There will be alternative supply sources for pipeline gas deliveries, which will bring competition to the market and reduce dependence on a single natural gas supplier.

Later this year, the Government will present a proposal for a new Natural Gas Market Act. Finland is also making preparations with the Baltic countries for a common natural gas market area.

Inquiries:
Markku Rajala, Special Adviser to the Minister of Economic Affairs, tel. +358 50 345 8490
Herkko Plit, Chairman of the Board, Baltic Connector Oy, tel. +358 50 462 0788