No interest in 1Q capacity at Inkoo FSRU

Finland's new floating storage and regasification unit (FSRU) in Inkoo may go unused in the first quarter, owing to limited gas demand and an inability to share cargoes.

The terminal began commercial operations on 16 January and slots for the first quarter were marketed in late November, but none have been booked so far, system operator Gasgrid Finland confirmed to Argus today. The country's ministry of finance had already said in December that there was "considerable uncertainty about the start of commercial demand".

The lack of interest in the terminal for the first quarter can be explained by limited consumption on the one hand, and by the lack of an option for firms to split cargoes on the other.

Mild weather in the first half of January is likely to have limited heating demand, with overnight lows in Helsinki 2.9°C above the long-term average on 1-17 January. Similar weather patterns held in neighbouring Estonia, particularly over the past week.

Gas demand in the region had already slumped last year. Finnish consumption of 11.9TWh in 2022 was down by 53pc from 25.1TWh in 2021, according to Gasgrid data. It fell by more in percentage terms than in any other EU country, closely followed by the Baltic countries. Gas' share in the power mix also shrank last year, as nuclear and wind power generation ramped up, while high gas prices drove down gas burn from industry.

A second explanation for the lack of interest in Inkoo capacity is special operating rules during the first quarter that do not allow firms to share slots, normally a key part of the terminal rules. This is the "main obstacle" preventing bookings, as "local players find it difficult to regasify 800-900GWh within 10-12 days without sharing an inventory", especially with "unstable demand" because of mild weather, one market participant told Argus.

Another market participant told Argus that while one buyer could regasify an entire cargo on its own if it had access to storage at Incukalns, it is difficult to effectively hedge "if you do not know if/when replacement molecules will arrive and whether you have sufficient demand". And even when slot sharing becomes possible, there are additional fees associated with it, as joint users have to provide guarantees in addition to other committed capital for the cargo, similar to posting collateral for a loan.

LNG sendout from the 2.9mn t/yr Klaipeda terminal in Lithuania and limited imports through the Poland-Lithuania interconnector are meeting the region's needs at the moment. Eesti Gaas, a large utility in the Baltic states which mostly dominates the Estonian market, yesterday received a cargo from Norway's Hammerfest on the 174,000m³ Isabella at Klaipeda. The firm took five cargoes at the terminal in 2022 to meet its gas needs, and plans to take another in March.

Eesti Gaas signed a contract with Norway's Equinor last July for 2TWh of LNG this winter. The firm will consider bringing cargoes to Inkoo as well, but not until the second or third quarter, when the terminal "has started working properly in Finland", chief executive Margus Kaasik said.

While Inkoo slots may go unused in the first quarter, interest might ramp up in the summer as companies start preparing for next winter. Latvia should "think about" gas purchases for next winter in spring rather than waiting until the autumn, the chairman of utility Latvijas Gaze Aigars Kalvitis recently said.

Much will also depend on the weather. A cold spell could drive up demand, although the majority of Finland's gas demand comes from industry as opposed to domestic heating.

By Brendan A'Hearn