The two nations signed a memorandum of common intent to construct the Balticconnector gas pipeline joining the Estonian and Finnish gas markets.

The agreement is an important milestone in the development of the region's energy infrastructure, the Estonian Minister of Economy, Juhan Parts, said in a press release on Friday.

He said the price of natural gas has spiked in recent years and prices are currently not formed by free market competition.

The next step is for both sides to submit detailed plans of the construction of the pipeline to the European Commission by the end of May. The aim is to seek funding from the EU, which has said it is willing to cover most of the cost of a LNG terminal in either Finland or Estonia and a pipeline.