For several years, environmental groups and local residents have protested plans to build a new fossil gas import terminal in Skulte, Latvia. Last week, the Latvian government decided to abandon this project, but rather than replacing it with fossil gas imported from Estonia, as the Latvian authorities are now considering, governments in the Baltics and Finland should work together to step up the transition to a sustainable energy system based on renewables.
Governments across Europe have misidentified liquefied fossil gas (also called LNG) infrastructure as the key investment needed to support energy security and end reliance on Russian fossil gas imports. In response to the war in Ukraine, EU governments have rushed to build more LNG import terminals on top of those that already exist. However, as recent analysis has shown, this risks leading to vast overcapacity. The Baltics also caught the LNG fever, with the resurgence of new LNG terminal plans in Latvia and Estonia.
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However, the Latvian government’s decision to shelve the Skulte LNG project is a reminder that there is no room for more fossil gas in the region. The climate ministry’s analysis informing the government’s decision stated that “it is not possible to build a commercially self-sufficient liquefied natural gas terminal” – effectively echoing a briefing published by Bankwatch and the Estonian Green Movement a month earlier. Existing LNG capacity already exceeds fossil gas consumption in the Baltics and Finland, not least in light of falling demand. Even industry sources question the need for Latvia to turn to Estonia’s Paldiski LNG terminal as an alternative to the Skulte project.
Concerns over the economic feasibility of these LNG projects have been dismissed too easily. In both Estonia and Latvia, LNG terminal developers tried (and fortunately failed) to secure financial guarantees from governments. This suggests a problematic business case. In practice, in the event of increased gas consumption and a high use rate, the company would have kept all the profits; in the event of reduced demand and market failure, governments would have had to shoulder the financial burden of stranded assets.
Until last week, the Latvian government had been seeking to fast-track the development of the LNG terminal in Skulte, granting it ‘national interest’ status. However, the project was met with opposition from the start by both environmental NGOs and local residents. In a legal challenge launched in late March, environmental groups Green Liberty and Latvia’s Coastal Environment Protection Society contended that the special law behind its priority status is unconstitutional because it seeks to enable a fossil energy project despite its environmental and notably climate impact. That legal challenge is still active.
“It is not possible to build a commercially self-sufficient liquefied natural gas terminal.”
Latvian climate ministry’s analysis informing the government’s decision to shelve the skulte lng projectHow well do you really know your competitors?
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By GlobalData
In 2022, Finland, Estonia, Latvia and Lithuania slashed gas demand more than any other EU region, by as much as 48% in Finland and by 37% for the region as a whole. The region should prioritise making this reduction in demand permanent. To this end, governments need to increase regional cooperation to provide alternatives to LNG and aim to achieve a regional fossil gas phase-out.
Last year, 49 civil society organisations from Estonia, Latvia, Lithuania and Finland urged their governments to improve regional energy cooperation instead of building unnecessary LNG terminals in the Baltics. The governments have already successfully cooperated on offshore wind projects. It is in every country’s interest to direct as much funding as possible to long-term, sustainable changes to the energy system.
Governments have, to some extent, realised the urgent need to speed and scale up the deployment of renewables by investing in grids, energy efficiency and decarbonisation of industry and heating, but these efforts lack momentum and financing. In Estonia and Finland, for example, docks to accommodate fossil gas import vessels were built at record speed. This kind of mobilisation needs to happen at a transformative scale to build renewable energy infrastructure if we are to ensure energy security while tackling the climate crisis.
No scenario compatible with the Paris Agreement, or any credible climate policy, predicts a resurgence of fossil gas use. Oil and gas companies are proposing LNG terminals with the intention of prolonging the use of fossil gas because it serves their interests. Governments should reject these proposals, for the sake of their countries and their people. In the face of the climate and energy crises, ensuring a fully renewable and decentralised energy system is the safest, cheapest and most resilient path forward. There is no reason for otherwise progressive governments to waste scarce finances on expensive infrastructure that is likely to become stranded assets in less than a decade.
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