The natural gas transmission operators (TSOs) of Estonia (Elering), Finland (Gasum and Baltic Connector Oy) and Latvia (Conexus Baltic Grid) have signed an ITC (inter-transmission system operator compensation) agreement which sets up a single gas transmission tariff zone for the three countries from the beginning of 2020. Once implemented, it will remove commercial interconnection points and unify the entry point tariffs on the external borders of the region. More broadly, this is the first stage of building a regional natural gas market that comprises Finland and the Baltic States and marks a significant achievement in regional energy cooperation.
One key driver behind this move is to even out regional differences in the wholesale price of gas and lead to higher market liquidity by making it easier for shippers and traders to sell gas in the region. With the establishment of the new single entry fee, the TSOs will be able to settle the transmission costs of the interconnector pipelines between themselves. The document also determines the cost structure for transmission and how related compensation and entry revenues will be allocated.
The Estonian-Finnish interconnection Balticconnector also falls under the scope of the document. The project is currently under construction and once commissioned in 2020, the 7.2 mcm/d (2.6 bcm/year) gas pipeline will create an alternative supply route for the Finnish market and will connect the country to the rest of the European Union. It will connect Inkoo (Finland) with Paldiski (Estonia) and spread across 150 km.