A deal to build the first gas pipeline between Finland and Estonia has been signed on October 21, 2016, in the presence of the president of the European Commission, Jean-Claude Juncker, Estonia's Prime Minister Taavi Roivas and Finnish Prime Minister Juha Sipila.
Balticconnector is the first gas pipeline connecting Finland with Estonia and the Continental European Network.
It is one of the energy infrastructure projects that benefits from the status of a Project of Common Interest (PCI). These projects are critical to establishing the European internal energy market and to achieving the objectives of the Commission’s Energy Union strategy to provide for secure, affordable and sustainable energy.
Under the Connecting Europe Facility programme the Commission might provide financial support to projects of common interest that are commercially non-viable within the regulatory framework and provide significant externalities (e.g. security of supply, solidarity, innovation).
The Connecting Europe Facility budget amounts to €5.35 billion for the 2014 – 2020 period. Part of this investment will take the form of financial instruments aiming to leverage private funding for infrastructure development. The bulk of this EU support fund will be used to provide support to commercially non-viable projects in the form of grants like the one signed today.
The Commission is committed to improving energy links in the Baltic Sea region. Gas and electricity infrastructure in the region is not sufficiently interlinked, energy isolation in the region must end and the region must be integrated with the rest of the EU’s energy systems.
To improve this, the Commission agreed to an Action Plan and Memorandum of Understanding strengthening the Baltic Energy Market Interconnection Plan (BEMIP) which was signed by the Commissioner for Energy and Climate, Miguel Arias Cañete, and Energy Ministers of the participating Member States on 8 June 2015.
A first bidirectional gas pipeline will be built between Finland and Estonia. This will end the isolation of the Finnish gas market and boost the security of gas supply in the entire Eastern Baltic Sea region.
How will it work?
The project will integrate the Finnish gas system with the rest of the internal EU gas market in line with the European Commission’s Energy Security Strategy to ensure that no region in Europe remains isolated. It is the result of a close regional cooperation facilitated by the Commission under the Baltic Energy Market Interconnection Plan (BEMIP).
– end gas isolation of Finland by connecting it to the Continental European Network,
– increase the security of gas supply and solidarity in the region,
– enhance competition and reduce wholesale gas prices.
Futhermore, Balticconnector will bring concrete socio-economic benefits to the Baltic States and Finland. Once completed, Balticconnector, together with a gas link between Poland and Lithuania (GIPL) will allow Finland and the Baltic States to diversify their gas sources, routes and counterparts, helping them to effectively deal with possible supply shortages in the future.
The total construction costs of the project are €250 million.
In 2014 Balticconnector obtained a €5.4 million grant for studies under the Connecting Europe Facility (CEF).
In 2016 Balticconnector obtained a €187 million grant for works under the Connecting Europe Facility. This amounts to 75% of the construction costs – the highest co-financing rate possible under the Connecting Europe Facility, which can only be allocated to a project when the added value of ending the energy isolation is exceptionally high.
Balticconnector will consist of three sections:
22km Finnish onshore
80 km offshore and
50 km Estonian onshore.
In addition, two compressor stations in Inkoo, Finland and Paldiski, Estonia, will be constructed as well as a pressure reduction station in Kiili, Estonia.
The total capacity of the pipeline will be 7.2 million cubic meters of gas per day.
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