Finland to receive 23 million euros in aid to build first LNG terminal

Small-scale LNG terminal to be built in Pori.

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Updated on 24 Sep 2015 12:37 GMT

The European Commission (EC) has approved, under European Union (EU) state aid rules, Finland's plans to grant 23 million euros to construct a small-scale LNG terminal at Pori, on Finland's west coast.

The EC has concluded that Finland's plans to grant 23 million euros of public funding for the construction of the Pori LNG terminal, are compatible with EU state aid rules.

The project aims to encourage the use of LNG as fuel for ships, in place of fuel oils and liquefied petroleum gases. The Commission concluded that the project contributes to environmental protection and to the security of gas supply in Finland whilst maintaining competition in the EU's Single Market. Seeking to end the energy isolation of the Baltic Sea Region and to integrate it fully into the EU energy markets is a key building block for the EU's Energy Union strategy and one of the key priorities of the Juncker Commission.

EU Commissioner in charge of competition policy, Margrethe Vestager, said: "The LNG terminal in Pori is the first of its kind in Finland. It will provide a new source of cleaner fuel for the maritime industry and diversify Finland's gas supply sources. It is a good example of how EU state aid rules can encourage sound public investment that helps the EU reach its goals on energy security and environmental protection."

Currently, there are no LNG terminals in Finland. The Pori project forms part of Finland's plans to create a network of small-scale LNG terminals with the aim of offering alternative fuel infrastructure to the maritime industry, i.e. LNG fuelling stations for ships.

The project would bring about a reduction in carbon dioxide (CO2) emissions by providing cleaner fuel for maritime transport. At the same time, the LNG infrastructure will increase the security of supply in Finland, providing local industries with access to gas. The Pori terminal has a storage capacity of 30,000 cubic metres. The public funding of €23,441,500 will cover less than 30 percent of the total investment costs; the remainder will be funded by the developer and future owner of the terminal.

The Commission assessed the project under Article 107(3)(c) of the Treaty on the Functioning of the European Union that allows aid to be granted for the development of certain economic activities, and the 2014 Environmental Protection and Energy State Aid Guidelines. In particular, the Commission's assessment was that the project could not have been carried out without public funding. Indeed, as Finland currently has no LNG infrastructure, the Commission said that potential customers are reluctant to carry out the long-term and costly investments for switching to LNG fuel, whilst private investors have no incentive to build LNG infrastructure because there is no demand.

Moreover, the operator of the infrastructure will be under an obligation to provide access to interested users at a competitive price. This is designed to ensure that the aid is limited to the minimum necessary for triggering the investment and that distortions of competition and trade are minimised.