Energinet predicts increased costs for Baltic Pipe construction

Energinet has revised the budget for the Baltic Pipe as the capital expenditure for the Danish part of the project is now estimated at one billion euros.

The budget for the Baltic Pipe has been revised after construction costs have increased by nearly €135 million. The increase is primarily caused by the partial suspension of construction while a new environmental permit is processed.

Moreover, terminal costs and high demand for construction contractors also added to the rising cost of the project, Energinet said.

Despite the substantial increase in capital expenditure, Baltic Pipe will still yield a €270 million saving on tariffs for Danish gas consumers.

“The economic model for Baltic Pipe is constructed in a way that those who use the pipeline pay for it through tariffs. The budget increase is therefore partly paid by the Danish consumers, who can already look forward to savings, because a much larger group of consumers will contribute to the Danish transmission system. The benefit for consumers in Denmark will be a tariff saving of €270million“, said Torben Brabo, director of International Relations in Energinet.

According to the company, the project budget is adjusted continuously to reflect the actual cost as construction proceeds. Energinet revised the budget once in 2020 with an increase of a little under €80 million after most of the major tender contracts were awarded at a higher cost than initially expected.

However, the financial consequences of the partial construction stop after the repeal of the environmental permit for the Baltic Pipe remain uncertain.

“The contractors working on the pipeline are of course entitled to remuneration for costs related to the delay. But we also have an obligation to minimise the cost of the project and make sure that the gas consumers do not pay more than absolutely necessary for the temporary delay while a new permit is being processed”, added Brabo.

Baltic Pipe is expected to be able to deliver part of the agreed-upon capacity on the original operation date 1 October 2022 by utilizing parts of the existing transmission system until 1 January 2023 where all parts of the project will be operational and deliver the full capacity of 10 BCM.