Pipelines International speaks to Baltic Connector Oy CEO Herkko Plit about his role at the company, the progress of the Balticconnector pipeline and the impact the new supply of gas will have on the Finnish and European gas market.
How did you get started in the pipeline industry?
I was the Deputy Director General in the energy department of Finland’s Ministry of Economic Affairs and Employment. In 2013, my responsibilities were expanded to include being in charge of fossil fuels in Finland and hence started my involvement in gas issues, including the plan to construct an LNG terminal and gas pipeline.
When the project promoter Gasum withdrew from the project, the Finnish Government set up Baltic Connector Oy to complete the Finnish portion of the project. In 2016, when the application for funding from the European Union (EU) for the project was approved, I took over responsibilities as the group’s CEO.
During my career, I have been the Project Director for the Olkiluoto 3 Nuclear Power Plant construction project as well as CEO of an engineering company; these areas of expertise have provided good support for the skills I have used and needed on this project.
What does your current role involve?
As CEO, I ensure that our organisation can fully concentrate on the technical implementation and cost management of the project. I provide the frame for the organisation and keep external issues off of their hands to let them focus 100 per cent on the development of the pipeline.
Due to my experience on large projects and in senior management positions, I am involved with the major decisions on the project, in consultation with our management board. Together with our financial department, we have gathered the funding for the project’s construction period; some external loans were needed, despite strong EU support and Finnish state equity.
The planning and preparation for operation of the pipeline and opening-up of the Finnish gas market – which will take place once the Balticconnector is ready – are elementary parts of my job. Our company acts as a facilitator for the new gas market and tries to get new players to enter this market.
On the other hand, there will be structural changes to the state-owned gas infrastructure once the market opens, so planning and discussing those activities is also part of the work. Also, I manage international contacts of our company, such as the EU Commission and other relevant parties.
Can you briefly outline the Balticconnector project?
The Balticconnector pipeline will play a major role in the energy strategies of both Finland, Estonia and the EU. It will enable the interconnection of the Baltic and Finnish gas markets, as well as their integration with the EU’s common energy market.
It will also improve energy security by diversifying gas distribution channels, which will promote the security of supply in Finland and the Baltic Sea region. Furthermore, the Balticconnector gas pipeline will facilitate the opening up of the Finnish gas market.
The project comprises an offshore pipeline between Inkoo in Finland and Paldiski in Estonia, onshore pipelines in Finland and Estonia and a compressor station in each country.
The EU has granted funding to cover 75 per cent of the project, which is due to be completed by 2020.
What impact will the pipeline have on Europe’s energy market once it is completed?
We are constructing Balticconnector to improve energy security in the region, so that no energy crisis takes place. Once completed, our gas market will open and I hope that the market and competitive pricing will ensure adequate gas supplies and reasonable prices.
Previously, when the closed market has been opened for competition, the price levels have decreased – at least, within the EU this has been the case. Essentially, market functioning will ensure that no crisis emerges.
Have you faced any challenges on the project?
Looking back over some years, it was challenging to find an adequate compromise on a political level for how Finland and Estonia would proceed and to agree on the new gas infrastructure projects. When that decision was reached, it opened a way for EU funding and technical implementation.
We decided early on that the first studies, design and planning, and major procurements had to be finished before entering the construction phase; getting the relevant licenses was also part of our preparatory activities.
The concept of proactive mitigation, rather than reactive action, has led our activities so far. Now we are entering the construction phase and everything has progressed exactly as planned.
Do you anticipate any hurdles in the future?
There is no project without any challenges; however, if you have finished your design to a fine level of detail, and have defined interfaces and the scope of work of various actors and subprojects, you are provided with a strong basis for successful project implementation during construction.
Our procurement strategy also reflects the risk management profile. For offshore procurement, we have one large installation contract, whereas for onshore and the compressors we manage the interfaces ourselves, since we have relevant construction experience.
For offshore, we have also hired experienced staff to steer and manage contractor activities professionally. So, we are well prepared for the eventual challenges and ready to solve them within the project schedule and budget.
Have you been involved with any other notable projects in your career?
I personally have experience working on mega projects like the Olkiluoto 3 Nuclear Power Plant’s construction. I have also run an energy business with Fortum Group and acted as CEO of a nuclear engineering company.
Further to this business experience, I have worked in the EU Commission, as well as in Finland’s Ministry of Economic Affairs and Employment on senior level energy issues, thus complex project tasks and challenges are not new to me.
What is the state of the pipeline industry in Finland?
We expect to use local companies for the onshore and compressor station works. However, for the offshore section, local experience is rather limited and we expect this work to be carried out by international contractors.
Gas consumption has decreased substantially in the last few years; one main reason has been the energy taxation that has favoured the use of coal instead of gas. When the Balticconnector is finished, the Finnish gas market will be open to the rest of Europe and is expected to bring more competitive gas prices to the region and eventually increase the use of gas.
Could more projects of this kind to stimulate the economy and provide new sources of energy for the market?
The EU Commission regularly selects projects eligible for a Projects of Common Interest (PCI) status. PCIs are key infrastructure projects that link the energy systems of EU countries and are intended to help the EU achieve its energy policy and climate objectives; PCIs also have the right to apply for Connecting Europe Facility (CEF) funding.
CEF is the European support program for trans-European infrastructure, which include, for example, gas infrastructure projects – the most recent project to receive this CEF funding is the EastMed Pipeline, which will connect Cyprus to the European gas network.
Gas will certainly play a crucial role in the EU energy policy for a long time. It is the well-behaving husband of renewables and therefore needed to balance intermittent renewables like solar and wind.
This article was featured in the March edition of Pipelines International. To view the magazine on your PC, Mac, tablet, or mobile device, click here.
For more information visit the Balticconnector website.
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