Russia cuts gas supply to Finland

Natural gas imports from Russia under the supply contract of Finnish state-owned energy company Gasum will be halted on Saturday morning, said Gasum in a press release on Friday.

The reason for the cut is that Finland has not agreed to pay in rubles for pipeline gas supplies.

Gazprom Export on Friday informed Gasum that natural gas supplies to Finland will be cut at 7:00 am on Saturday.

Gasum, however, will supply natural gas to its customers from other sources through the Balticconnector pipeline from Saturday.

Gasum’s gas filling stations in the gas network area will continue in normal operation, said the company.

“It is highly regrettable that natural gas supplies under our supply contract will now be halted. However, we have been carefully preparing for this situation and provided that there will be no disruptions in the gas transmission network, we will be able to supply all our customers with gas in the coming months,” said Chief Executive Officer of Gasum Mika Wiljanen.

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, said the Ministry of Economic Affairs and Employment in a press release.

Finland has made preparations for the cutting of Russian gas imports, but replacing them is not without problems, said the ministry.

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.

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, said the ministry´s press release.

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.

“The LNG terminal ship will play a major role in securing gas supplies for Finland’s industry. It is equally important to move construction and permit procedures forward without delay so that the vessel will be ready to operate on the coast of Finland by next winter. I would like to thank the companies for their swift work and productive cooperation,” said Minister of Economic Affairs Mika Lintilä.

The volume of the LNG terminal ship Exemplar is 151,000 cubic metres, which corresponds to approximately 68,000 tonnes of liquefied natural gas (LNG).

LNG from the global market will be delivered to the terminal ship on tankers, which are expected to visit the terminal 2–3 times a month. The liquefied natural gas is revaporised on board the ship and fed into the natural gas transmission network.

According to Gasgrid, the timetable for the project will be confirmed in June. The company estimates that the total costs of the LNG terminal ship project will be approximately EUR 460 million under the ten-year lease agreement. There will also be costs related to the volume of use.

“We have launched a number of measures to improve our security of supply, including the supply of natural gas. The LNG terminal will make it possible for us to break free from Russian gas. I look forward to seeing all parties work swiftly to complete the project,” said Minister of Finance Annika Saarikko.

Finland is dependent on imported natural gas because the country does not have our own resources or production.

Natural gas accounts for about five per cent of all energy consumption in Finland. Natural gas is mainly needed for industrial processes, transport, and combined heat and power generation.

Earlier on Wednesday, Gasum considered that natural gas imports from Russia could end this week.