Latvia cancels Skulte LNG project, but the Baltic reliance on gas persists

Latvia’s government has halted plans to build a liquified fossil gas (LNG) terminal, although campaign groups warn that relying on fossil gas from Estonia, an option the two governments are now exploring, is a false solution. 

Few countries in Europe managed to slash their use of fossil gas in 2022 as much as the three Baltic states of Estonia, Latvia, and Lithuania.  

According to Eurostat, while gas consumption fell 19 per cent across the EU as a whole, it fell by almost 50 per cent in Lithuania, 36 per cent in Latvia and 32 per cent in Estonia. Only Finland (57 per cent) and Sweden (40 per cent) could match the Balts. 

The three countries were also among the first to halt Russian gas imports following Moscow’s full-scale invasion of Ukraine in February 2022. “From now on, Lithuania won’t consume a [single] cubic cm of toxic Russian gas,” Ingrida Simonyte, the country’s prime minister said in April 2022.

While a warmer-than-usual winter helped in the reduction of gas consumption, a paper from the Oxford Institute for Energy Studies suggested last year that the end of Russian gas imports has pushed some industries towards transitioning to the use of alternative fuels. Fuel oil – easier to source from elsewhere than gas – has been one solution. 

However, the main efforts of all three countries to pivot away from Russian gas has remained focused on finding other sources of gas, notably LNG. The construction of the Klaipeda LNG terminal in Lithuania (completed in 2014) and Baltic connector, the first gas pipeline connecting Finland and Estonia, which went into operation in November 2022, have been central to those efforts.  

Further investments in LNG terminals, at Paldiski in Estonia and Skulte, north of Riga in Latvia, were also last year proposed by as a solution to the curtailed supply of Russian gas. 

Skulte hits dead end

In September 2022, Skulte was made an ‘object of national interest’ by the Latvian government. Support for the project has since cooled, however, so much so that on April 11 Latvia’s government announced that it had ended plans for the terminal. 

Analysis by Latvia’s Ministry of Climate and Energy, which guided the government’s decision, concluded that the region has sufficient LNG import capacity as it stands and that, “it is not possible to build a commercially self-sufficient liquefied petroleum natural gas terminal”.  

The announcement effectively means this fossil gas project has hit a dead end, according to Bankwatch, a network of environmental NGOs. 

Civil society groups, who have been warning that the Skulte LNG project is not fit for purpose – at a time when the imperative is to end Europe’s dangerous dependence on fossil gas and when Europe is clearly overbuilding its LNG import capacity – have welcomed the decision by the Latvian government. But they also caution that relying on fossil gas from Estonia, an option the two governments are now exploring, is a false solution. 

“We are relieved that our government has taken the logical step towards sustainability and international cooperation by cancelling the Skulte LNG project,” says Liene Krauja, environmental expert with Latvian NGO Green Liberty. 

“While at the beginning of Russia’s war on Ukraine this was deemed a project of national security, now it is clear that, with sufficient LNG capacities in the region, another fossil gas terminal would create overcapacity and strengthen the fossil gas market for decades to come.  

“However, it is crucial that this cooperation does not lock us all in fossil fuel dependency – a joint energy system must be built along with the deployment of renewables. Only in this way can we avoid the worst consequences of the climate crisis.” 

Rational steps

A briefing published by Bankwatch and the Estonian Green Movement this month showed there is no room for any new LNG capacity in Finland and the Baltic region. The combined capacity of existing and planned LNG infrastructure substantially exceeds demand in the four countries. Any new LNG projects would either cement their dependence on fossil gas for decades to come or risk becoming stranded assets, it says. 

Instead, to improve energy security and tackle the climate crisis, the briefing suggests that they must enhance regional cooperation by directing more investments towards energy efficiency, scaling up renewables and improving power connections between countries in the region to help ditch expensive and polluting fossil gas.  

The briefing also calls on the Latvian and Estonian governments to recognise that, in the current situation, a terminal in Paldiski, Estonia, would be just as unnecessary as a terminal in Skulte.  

“The Latvian government’s decision finally brings some clarity to the chaotic LNG terminal saga in the Baltics,” says Johanna Kuld, advocacy expert with the Estonian Green Movement.  

“The Estonian government should follow Latvia’s example in acknowledging that additional LNG infrastructure in the region is simply unnecessary and publicly announce that the Paldiski LNG quay will not be utilised unless in an emergency. Increased energy cooperation should not prolong our dependence on fossil gas and does not excuse inaction in phasing out fossil gas.” 

“The Baltic countries have shown great determination in cutting their fossil gas consumption,” adds Gligor Radečić, fossil gas campaign leader at Bankwatch.

“The Latvian government’s decision to abandon plans for LNG Skulte is a rational step in the direction of cutting fossil gas demand. This decision reflects an awareness that energy security and climate goals cannot be met by over reliance on fossil fuel imports.” 

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