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Highlights

Flows only in direction Estonia-Finland since start-up

Supplies averaging 3 million cu m/d since January 1

Make up one third of total imports; Russia supplies rest

London — The newly operational gas interconnector between Estonia and Finland is unlikely to flow gas in the direction Finland-Estonia in 2020, the head of the Finnish developer of the pipeline said Tuesday.

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The 2.6 Bcm/year capacity Balticconnector is designed to flow gas in both directions, but since it began commercial flows at the start of the year it has only supplied gas from Estonia to Finland.

Baltic Connector Oy CEO Herkko Plit told S&P Global Platts Tuesday the trend for the pipeline to work in the Estonia-Finland direction would persist for the remainder of the year.

Asked whether he anticipated reverse flows, Plit said: "I don't expect that."

Finland has been importing gas via the new interconnector at a steady rate of around 3 million cu m/d since the start of the year, which also marked the opening of the Finnish market to competition.

On an annualized basis, current flows would imply supplies of 1 Bcm, though Finland's imports are centered on the winter months so flows are likely to be lower over the summer months.

Russian dependence

According to Estonian gas grid operator Elering, the flows via the Balticconnector account for around one third of Finland's total imports.

The remaining two thirds -- around 5 million cu m/d -- are supplied from Russia via the Imatra entry point.

Before the commissioning of the Balticconnector, Finland was effectively dependent on Russian imports to meet its demand, though the country does also have small-scale LNG import facilities.

Finnish gas demand has fallen in recent years from highs of around 4 Bcm/year in the late 2000s to around 2.5 Bcm now, partly due to the country's dependence on costly Russian gas imports.

While imports via Estonia now make up one third of Finnish imports, much of the gas flow comes from the Incukalns storage facility in Latvia, which itself is filled with mostly Russian gas.

Finland does, though, also now have access to regasified LNG via Lithuania.

Arbitrage economics

For the Balticconnector to work in reverse mode, the arbitrage economics would have to work for Russian gas imports into Finland to be re-exported to the Baltics.

Finnish gas incumbent Gasum last month said the company would be interested in flowing gas via the new Balticconnector in either direction.

"We see Balticconnector both as an alternative supply route as well as export route to Baltics and we are ready to use it if interesting opportunities rise," a Gasum spokeswoman said.

Gasum -- which has now handed over responsibility for operating the country's gas grid to newly created independent transmission systems operator Gasgrid Finland -- has a long-term import contract with Gazprom that ends in 2031.

Estonia's Elering said Balticconnector flows in January amounted for the entire allocated market transfer capacity, which it said was evidence of the economic viability of the pipeline.

"While many had doubted the need for the pipeline during its construction, January clearly demonstrated the market demand for this connection, with the gas from the underground storage facility in Latvia being transferred to Finland in the winter period," Elering chairman Taavi Veskimagi said in mid-February.

In the past, transmission fees had to be paid for moving gas from one country to another, but starting from 2020 gas can flow within the common Estonian-Latvian-Finnish gas market without financial expense for market participants.

Lithuania is not yet a member of the common regional market, which Elering said is the first gas bidding area in Europe to encompass three countries.

Finland and the Baltic countries were identified as being in particular need of better energy interconnections with each other and with the rest of the EU, and of greater independence from Russia.