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Tallinn LNG Project Needs EU to Cover Third of Cost, Study Finds

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Sept. 6 (Bloomberg) -- A planned Estonian liquefied natural gas terminal, co-developed by a unit of Royal Vopak NV, needs the European Union to cover a third of its estimated cost of 221 million euros ($279 million), a study found.

The terminal, developed by Vopak LNG Holding BV, Estonia’s power grid operator Elering AS and port operator Tallinna Sadam AS at Muuga harbor, near Tallinn, would be the cheapest option for a regional LNG hub covering the three Baltic countries and Finland, the Economy Ministry said in an e-mailed statement today, citing the preliminary feasibility study commissioned from Ramboll Oil & Gas A/S. It would take four years to complete, including two years of construction.

“By a conservative estimate, a third of the financing of the terminal’s construction will need to be provided by investment grants from the European Union, in order to ensure the project’s financial stability and avoid placing an excessive burden on gas consumers,” the ministry said, citing the study commissioned from Ramboll Oil & Gas A/S.

Building an LNG terminal is part of Estonia’s strategy to reduce dependence on Russia’s OAO Gazprom, which owns 37 percent of local gas utility Eesti Gaas and is the sole supplier of gas to Estonia, Latvia and Lithuania. As former Soviet republics before declaring independence, the three countries have uneasy political relations with their larger neighbor and point to supply risks and higher natural-gas prices than in western Europe.

The three Baltic countries asked the EU commission last November to help decide whether a regional LNG terminal is needed and where to build it, after failing to agree on a location.

Commission Support

Elering said in May the commission expressed support for the development of the LNG solution in the Baltics on condition that it is “able to cover at least 25 percent of the consumption of the entire region.”

The Tallinn terminal would include a storage facility of 90,000 cubic meters of LNG and the ability to receive ships of up to 75,000 cubic meter capacity, the ministry said. The terminal could release 9 million cubic meters of natural gas a day.

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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