Baltic Sea Countries Utilize LNG and Offshore Wind to Secure Energy Independence

On August 30, eight Baltic Sea littoral countries (Germany, Poland, Lithuania, Latvia, Estonia, Finland, Sweden and Denmark) signed the so-called Marienborg Declaration, agreeing on the necessity of “phasing out Russian energy and decarbonizing the energy sector” within the region (Regeringen.dk, August 30). The document itself does not contain any binding provisions nor introduce any new sectoral policies. The move should be, however, understood as a clear expression of energy solidarity within the Baltic Sea region as a whole and as an additional political commitment to collaborate (both on a regional and pan-European basis) extensively in the further development of liquefied natural gas (LNG) and offshore wind projects.

Beginning with the gas sector, until recently, the only two countries (apart from Russia) having their own large-scale LNG import terminals on the Baltic Sea were Lithuania—with a floating storage regasification unit (FSRU) in Klaipeda—and Poland—specifically the Świnoujście LNG terminal and planned FSRU in Gdańsk. The situation in the region has, however, begun to change dramatically after Russia’s re-invasion of Ukraine in February 2022. Since then, Germany has announced plans to secure fast-track deployment of FSRUs. Berlin had lacked regasification capacities before, but at the moment, it is eying as many as five FSRUs and two onshore LNG terminals. One FSRU will be located in Lubmin near the border with Poland by the end of 2022 (Lngprime.com, August 30).

Another example is Finland, which together with Estonia, has developed its own FSRU project. The regasification unit will be moored either in Inkoo, Finland, or Paldiski, Estonia, depending on the current demand structure (Nra.lv, August 31). Moreover, the Latvians are also advancing preparations for building their LNG terminal in Skulte (Skultelng.lv, August 30), and Lithuania’s Klaipedos Nafta has already ordered a feasibility study for the Klaipeda terminal’s capacities extension (Kn.lt, July 4). The common denominator for all these projects is, obviously, phasing out Russian natural gas, as Gazprom has traditionally been the main supplier for all the aforementioned markets in the Baltic Sea region.

In general, a similar determination is also being observed in the case of offshore wind; however, the rush to install new capacities in the Baltic Sea was already present before the war started, driven by decarbonization goals and economic, not political, factors. Overall, the offshore wind potential for the entire Baltic Sea is estimated at 93 gigawatts (GW), while the current capacity is a mere 2.8 GW.

At the moment, the operating offshore wind farms on the Baltic Sea are located in German, Danish, Swedish and Finnish waters (Denmark, Germany and Sweden are the pioneers within the sector). Yet, the Baltic states and Poland are making significant progress to join their neighbors. The very first offshore wind projects in Polish waters are already in the development phase, while Lithuania, Latvia and Estonia will hold their first auctions for prospective investors in the coming years. Some of the specific projects are also supposed to be transboundary in nature, both providing generation capacity and creating a new subsea interconnector among the countries involved (e.g., the Elwind project discussed by Latvia and Estonia) (Renewablesnow.com, September 2). Significantly, such “hybrid projects” will also qualify for extensive EU financial support, which can be of great help in fully utilizing the offshore wind potential of the Baltic Sea

Despite the Marienborg Declaration being signed by only the Baltic Sea littoral states and being focused predominantly on regional cooperation, it should be understood that the fulfillment of the document’s provisions is also possible through partnerships with allies from outside the region, such as the United States. In this context, it should be remembered that the US International Development Finance Corporation (DFC) agreed to provide up to $300 million of financing for various Three Seas Initiative projects in June 2022 (Dfc.gov, June 20). Indeed, the DFC’s CEO, Scott Nathan, publicly named support for “LNG projects in the Baltics” as an option being seriously considered (Foreignaffairs.house.gov, June 14).

Furthermore, it is also remarkable that the first agreement for LNG supplies to Germany was signed by German energy company EnBW with US-based firm Venture Global (Enbw.com, June 21). It is easy to imagine that similar deals may also happen in regards to LNG imports via the Baltic states’ new regasification terminals.

On the one hand, the document introduced in Marienborg is certainly an important political declaration, especially as it has been signed by all EU member states bordering the Baltic Sea. Energy cooperation in the Baltics is gaining momentum, and joint Estonian-Finnish efforts to deploy an FSRU in the Gulf of Finland this winter serve as a perfect example. On the other hand, however, one should not overestimate the declaration’s significance. The document is a political statement only and will not automatically lead to further developments in cultivating lasting energy independence in the region.