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Crimean crisis brings LNG to forefront of debate

LNG Industry,

Recent developments in Ukraine have increased chances of rejuvenated LNG exports to Europe. Russia's decision to send troops into the Ukrainian peninsula of Crimea has lead to uncertainty over the Russian supply of natural gas to Europe, nearly 50% of which is piped through Ukraine.

Russian-Ukrainian disagreements on pricing and debt in 2006 and late 2009 saw disruptions to the supply of piped natural gas. During this period, the price of LNG rocketed to more than US$ 30 million/Btu compared with today’s value of below US$ 10 million/Btu.

In December, as part of a deal signed between the Kremlin and former Ukrainian president Viktor Yanukovych, Kiev gas prices were reduced by roughly a third from 2009 to US$ 268.50/1000 m3. However, the ousting of Yanakovych after months of political uprising against his failure to agree a trade deal with the EU in favour of closer Russian ties has lead the head of Russian gas giant Gazprom, Alexei Miller, to issue a statement withdrawing the offer of discounted gas as of April this year.

There are fears that Russia could cut gas supply altogether if the current crisis deepens.

The world’s largest consumer of LNG, Japan, which gets 10% of its LNG from Russia, will be reluctant to impose economic sanctions.

US exports to Europe

Meanwhile, US Energy experts say that US exports of LNG to European markets could alleviate possible shortages and contest Russia’s energy influence, although central and southern European countries are more likely to rely on Russia due to transportation costs.

The US Department of Energy has approved six proposals to export LNG to countries without free trade agreements (FTA). Together, these projects amount to 8.5 billion ft3/d of LNG – more than Russia exports to Europe through Ukrainian pipelines (6 billion ft3/d).

Tackling Russian dominance

Fred Upton, Chairman of the US House of Representatives Energy and Commerce Committee, said: “Expanding US LNG exports is an opportunity to combat Russian influence and power, and we have an energy diplomacy responsibility to act quickly”. He called for a quickening of export approvals from the US Department of Energy (of which there are currently over 20), the end to what advocates of unfettered exports have termed as a ‘go-slow’ approach: “Now is the time to send the signal to our global allies that US natural gas will be an available and viable alternative to meet their energy needs”.

The Senate and House of Representatives introduced legislation in 2013 – the Expedited LNG for American Allies Act – which appealed to the DOE to speed up the process of approvals if national interests were at stake.

Professor and specialist on energy security policy, Brenda Shaffer, said that countries should also focus on increasing their capacity for storage of LNG, particularly those counties in central Europe for whom imports from the US look doubtful.


Edited from various sources by Ted Monroe

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