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Wave of investment drives Baltic LNG infrastructure

Mon 29 Apr 2019 by John Snyder

Wave of investment drives Baltic LNG infrastructure
Qatar will supply 2 mta of LNG to Poland via the Swinoujscie LNG terminal

Driven by growing demand for LNG as fuel and power generation, Scandinavia is investing heavily in new LNG import terminals, small-scale tankers and bunker vessels

The construction of a new LNG import terminal at the Port of Hamina, Finland, is part of a wave of investment in the Baltic Sea region in LNG infrastructure that will support growing demand in the area for clean energy and LNG bunkering.

Having been awarded an engineering, procurement and construction (EPC) contract, Wärtsilä broke ground on the US$118M Hamina LNG import terminal in September 2018. When operational in 2020, the 30,000 m3-capacity terminal will provide storage of LNG and regasification capability for distributing natural gas to an existing pipeline network serving both regional and national markets. Additionally, the terminal will be able to load trucks and supply bunkering vessels and small-scale carriers with LNG.

A subsequent expansion could increase the terminal’s capacity by 20,000 m3 of LNG storage.

The major stakeholders in Hamina LNG Oy are Hamina Energy Ltd and Estonia-based energy company Alexela, with Wärtsilä holding a minority stake through Wärtsilä Financial and Development Services.

At the time of the ground breaking, Wärtsilä vice president, LNG solutions Alexandre Eykerman, said: “This project is very much in line with Wärtsilä’s emphasis on utilising LNG fuel to reduce the environmental impact of power generation. It also supports our vision of a future where 100% of energy will be sourced from renewables, such as solar and wind. For this, fast-starting, flexible, powerplants fuelled by clean-burning LNG will be needed.”

The start of construction of the Hamina LNG import terminal follows on the heels of Wärtsilä’s completion last year of the Manga LNG terminal in Tornio, Finland. A joint venture between industrial companies Outokumpu and SSAB Europe and energy companies EPV Energy and Gasum, the terminal's LNG storage capacity is the largest in the Baltic at 50,000 m3. The terminal supplies natural gas to industrial customers in Röyttä via a connection pipeline. LNG is also supplied to regional refuelling stations by road using tanker trucks. LNG-fuelled ships are bunkered by truck-to-ship transfer or tank-to-ship at the terminal.

LNG is supplied to the terminal by the Anthony Veder Group’s 18,000-m3 ice class small-scale LNG carrier Coral EnergICE from Risavika LNG production plant in Norway.

“Fast-starting, flexible, power plants fuelled by clean-burning LNG will be needed”

In 2016, Gasum opened commercial operations at Finland’s first LNG import terminal, Pori LNG terminal. With a storage capacity of 28,500 m3, the terminal serves industrial customers through a local connecting pipeline, by LNG carrier or tanker truck. Ships can also bunker LNG by bunker vessel at the terminal or by ship-to-ship transfer.

Linde supplies the Baltic Sea region with LNG from its Nynäshamn terminal in southern Sweden

With the European Union (EU) and Nordic countries imposing stricter CO2 emissions goals, Gasum expects regional LNG demand to increase from new gas-powered vehicles. It is opening additional LNG refuelling stations for heavy-duty vehicles in Finland and expanding to Sweden and Norway in 2019 and 2020. Gasum will add a total of 50 new filling stations in the three Nordic countries, about half of which will be in Sweden.

Truck manufacturers are rolling out new LNG-powered heavy-duty vehicles that promise to reduce CO2 emissions by 20% as compared with diesel-powered vehicles. By 2025, the EU expects CO2 emissions from new vehicles to be 15% lower than in 2019. By 2030, CO2 emissions are expected to be at least 30% lower.

Expanding Poland’s LNG import terminal

Poland is also set to increase the capacity of the Świnoujście LNG import terminal by 50%, following an agreement in April between Polskie LNG and the EU on US$143M in financing. Regasification capacity at the terminal will grow from 5Bn m3 of gas to 7.5Bn m3 once the project is completed.

Future terminal expansion plans will add a second jetty for loading/unloading LNG carriers, LNG transshipment and LNG bunkering services.

The move by Polski LNG (PLNG), a subsidiary of Gaz-System, is part of an effort by Poland and Central European states to lessen their dependence on Russian gas.

Polish government advisor for strategic energy infrastructure Piotr Naimski points out that the expansion of the Świnoujście LNG import terminal fits with the EU’s ‘North Gate’ concept, which involves the construction of the Baltic Pipe that would connect gas fields on the Norwegian continental shelf to Poland by October 2022.

The European Commission (EC) signed an agreement with Poland to provide funding of US$239M for the construction of the Baltic Pipe through Denmark. Poland would serve as a hub for the transport of gas to the Czech Republic, Slovakia, Lithuania, Hungary and Ukraine. The pipe would supply about 10Bn ft3 of natural gas per year to Poland.

Poland purchases about two-thirds of the 17Bn ft3 of gas it annually consumes from Russia’s Gazprom.

“It is crucial for the EC to mark the strategic role of our gas port as a tool to ensure the security of gas supplies not only to Poland but also to the Baltic States, through diversification and promotion of new transport routes in the region,” says Poland Minister of Energy Krzysztof Tchórzewski.

Meeting about 40% of Poland’s current natural gas demand, the expansion, says PLNG president Paweł Jakubowski, “will enable us to launch a more competitive offer of services related to regasification and unloading of LNG, for which we have an increasing demand in Poland.”

Polish gas demand is expected to increase to 21Bn m3 in 2023.

To meet its increasing demand, Poland plans to purchase Norwegian gas through the Baltic Pipe, produce 4Bn m3 per year domestically and import 7.5Bn m3 per year of LNG through the Swinoujscie LNG terminal.

Meanwhile, another pipeline being laid in the Baltic Sea is one of the most controversial energy projects in Europe. Nord Stream 2 is a 1,200-km pipeline being constructed across the Baltic to bring more Russian natural gas to the EU via Germany. The pipeline has come under intense political pressure from the US, with President Trump calling it “horrific,” saying that it is not in the best interests of energy security in Europe.

About 1,000 km of the pipeline has been laid in the Baltic Sea by Switzerland-based Allseas Group. To support the Nord Stream 2 project, Allseas deployed the world’s largest construction vessel Pioneering Spirit, pipelay vessels Solitaire and Audacia, specialised supply vessel Calamity Jane and offshore construction vessels Fortitude and Oceanic.

Completion of the Nord Stream 2 pipeline would have an impact on LNG imports into the EU, with less demand lowering the price”

Nord Stream 2 AG has been frustrated by delays in the permitting process. It said in a statement that it was “incomprehensible why there has still been no decision” from the Danish Energy Agency on its two previous applications and that asking for a third “can only be seen as a deliberate attempt to delay the project’s completion.” The pipeline is scheduled for completion before the end of the year.

If completed, the Nord Stream 2 pipeline would handle gas currently being piped from Russia through Ukraine under a contract between Gazprom and Ukraine’s Naftogas, which is due to expire at the end of the year.

Completion of the pipeline would have an impact on LNG imports into the EU. If the pipeline is completed, there would be less demand for importing LNG, lowering the price paid. As a result, there would be less demand for LNG shipped from the US.

Besides Russia’s Gazprom, the Nord Stream 2 pipeline is being backed by France’s Engie, Anglo-Dutch energy giant Shell, Austria’s OMV and Germany’s Uniper and Wintershall.

Investing in LNG bunker vessels

The Baltic Sea is also home to some of the first LNG bunker and small-scale LNG vessels in the world. Besides investing in refuelling stations for LNG-powered road vehicles and terminals, Gasum is also well experienced in LNG bunker vessel (LNGBV) operations. Operating in the North Sea and Baltic, Gasum’s LNGBV Coralius, with a capacity of 5,800 m3 of LNG, completed its 100th bunkering in 18 months in February.

The first European-built LNG bunker and transport vessel, Coralius, delivers LNG through ship-to-ship bunkering at sea or in port, which broadens the availability of LNG refuelling coverage to vessels that are unable to visit a terminal or a port. Gasum says ship-to-ship bunkering also boosts efficiency.

Coralius has definitely increased Gasum’s flexibility as an LNG supplier,” says Gasum vice president, natural gas and LNG Kimmo Rahkamo.

In Sweden, the first ship-to-ship LNG bunkering operation was completed in March at the Port of Visby. Under a contract signed between Hamburg-based LNG fuel supplier Nauticor GmbH and Sweden’s Destination Gotland, the ferry Visborg was refuelled by the 7,500-m3 LNGBV Kairos.

Nauticor chief executive Mahinde Abeynaike, says Kairos assures “the availability of LNG as fuel for shipping on a large-scale basis is secured in Northwest Europe, with shipping companies having access to a fuel that not only is financially attractive, but also environmentally sustainable.”

Owned by Babcock Schulte Energy, Kairos is chartered by Blue LNG, a joint venture owned 90% by Nauticor and 10% by Lithuanian energy infrastructure provider Klaipedos Nafta, which also operates the Klaipeda LNG Terminal in Lithuania.

Kairos made its first reload operation of LNG in January at the Klaipeda LNG Terminal, which uses the floating storage and regasification unit (FSRU) Independence. The terminal has been focused on the export of LNG, transporting gas on small-scale LNG carriers to terminals in Sweden, Finland and Norway. Starting in April, however, Klaipeda LNG terminal began accepting LNG cargoes from conventional and small-scale LNG carriers, bringing a total of 158,000 m3 of LNG.

“The availability of LNG as fuel for shipping on a large-scale basis is secured in Northwest Europe”

In May and June, it is expected that four more small-scale LNG gas carriers, each of which will carry 10,000 m3 of LNG, and two conventional LNG carriers with 138,000 m3 of LNG each, will enter the terminal.

The move allows the supply of LNG at lower prices to consumers based on seasonal fluctuations in pricing, which can vary US$6/MWh between summer and winter seasons depending on supply and demand.

Manga LNG terminal in Tornio, Finland is supplied by small-scale LNG carrier Coral EnergICE

Two new LNGBVs for the Baltic

Two new LNGBVs are under construction for operation in the Baltic. Steel was cut in March for the first of a planned series of coastal LNGBVs for Estonia energy company Eesti Gaas. Under construction at Damen Yichang Shipyard in China, the 100-m, LGC 6000 LNG class vessel will have a capacity of 6,000 m3 of LNG with delivery set for H2 2020. The LGC 6000 LNG is designed to meet the requirements of ice-class 1A certification, allowing it to operate all year in the Gulf of Finland and northern Baltic.

Eesti Gaas will operate the LNGBV under a long-term charter contract from its parent company Infortar AS. As the adoption of LNG as a marine fuel gains momentum, Eesti Gaas expects that additional LNGBVs will be ordered.

Tallink’s LNG-powered ferry Megastar, which operates between Tallinn and Helsinki, will be one of the vessels that is served by the new LNGBV.

Over a two-year period, Eesti Gaas has delivered a total of 28,300 tonnes of LNG and

company board member Kalev Reiljan expects to see sales increase this year, now that it is the sole LNG bunker supplier for Megastar in the Port of Tallin.

Eesti Gaas bunkers Megastar using eight trailer trucks in an operation that takes approximately four hours. Eesti Gaas purchases LNG in Russia, Finland, Poland and Lithuania.

Under construction at Singapore’s Keppel Offshore & Marine, Russia’s LNGBV Shturman Koshelev will have an ice-class 4 notation and a cargo capacity of 5,800 m3. Set for delivery in Q4 2020, the LNGBV will be chartered to Gazprom Neft for operation in the Baltic Sea. No homeport has yet been named for the LNGBV, but one possible location might be the FSRU Marshal Vasilevskiy at the Kaliningrad gas terminal.

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