Baltic gas consumption down by 40pc in 2022

Combined gas consumption in the Baltic states and Finland fell by 40pc in 2022 from the previous year, as high prices drove reduced demand and a switch to alternative fuels.

Consumption across the region fell to 40TWh from 66.7TWh in 2021 and was similarly far below 2020 (see consumption table).

Fuel switching was prevalent in the heating sector, with Estonian utilities Utilitas Tallinn and Enefit Power applying for emissions exemptions that would allow them to burn fuel oil instead of gas. Fuel oil was also used for heating in Vilnius, Lithuania's capital and the second most populous city in the Baltic states.

And gas-fired power generation across the four countries more than halved to 392MW from 813MW in 2021 and 843MW in 2020 (see power generation table).

Wind generation in Finland — by far the largest electricity producer of the four — jumped by 40pc on the year, while nuclear output was up by 7pc, lessening the need for strong gas-fired output. And shale oil production in Estonia increased to 474MW from 424MW in 2021 and 259MW in 2020.

While there is no full breakdown by sector, the extent of gas demand reductions in industry can be inferred from summer gas consumption, when heating needs are minimal.

Finnish gas consumption in April-September fell on the year to 4.56TWh from 8.77TWh, while consumption was down by 36pc in Latvia and 24pc in Estonia in the same period.

No monthly breakdown is available for Lithuania, the country in which industrial gas demand likely fell the most as ammonia producer Achema is the region's largest gas consumer. Achema, along with many other European ammonia producers, idled production or operated at reduced rates for much of last year, driving down Lithuanian gas consumption along with it, as gas makes up a large majority of ammonia feedstock. The Finnish chemical sector also reduced its gas consumption by switching to alternative fuels.

LNG replaces Russian gas

Alongside gas demand reductions, a jump in LNG sendout from Lithuania's 2.9mn t/yr Klaipeda terminal helped the region to cope with lower flows from Russia.

Sendout of 32.1TWh was nearly double the 16.3TWh in 2021, the highest for any year since the terminal began operations in 2014, although roughly 4.6TWh was exported to Poland last year.

Lithuania banned Russian gas imports and Finland stopped receiving Russian gas in late May.

Russia exported 11.6TWh by pipeline to the four countries in 2022, drastically down from 45.9TWh in 2021, based on data from the transmission system operators and after netting out onward transit to the Russian exclave of Kaliningrad. That said, the final 2022 figure is likely slightly higher than it should be as Amber Grid was missing roughly a week's worth of data for Lithuanian flows.

Gas demand already returning?

There are early signs of a slow recovery in gas demand, but much of this depends on gas prices continuing to fall.

Achema delayed plans to restart ammonia production at the beginning of February, but is still considering a restart in the next few weeks. European gas prices have fallen low enough that domestic ammonia production is now more profitable than importing from abroad, but there has so far been a limited resumption in production as fertiliser producers cite high imported stocks and still sluggish demand. Steel producer SSAB has also announced the restart of a blast furnace in Raahe, Finland, which is likely to spur gas and electricity consumption.

Much also depends on the weather, although forecasts suggest no deep cold spells over the rest of the winter. The exemptions issued to Estonian utilities to enable fuel switching expire at the end of this winter, and the companies are obliged to return to gas within a "reasonable time".

Several customers have already switched back to gas because it has become cheaper than light heating oil or propane again, Eesti Gaas chief executive Margus Kaasik recently said. Eesti Gaas became the first and only company to reserve space at the new Inkoo LNG terminal, booking seven slots for April-September, following no interest in first-quarter capacity.

Imports of Russian gas were banned from the start of this year in all three Baltic countries, meaning the region will have to rely on LNG and flows from Poland instead.

By Brendan A'Hearn