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Ukraine closes deal for US gas in attempt to reduce Russian energy influence
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A US company has signed the first significant agreement to supply liquefied natural gas to Ukraine, in a move aimed at strengthening its energy security and reducing Moscow’s energy dominance in Eastern Europe.
The decision by US exporter Venture Global is the latest step towards fulfilling a major goal of the Biden administration – increasing energy exports to Eastern Europe and, in the process, reducing Russia’s power in the region after its expansion. on a large scale. invasion of Ukraine in 2022.
Although Europe was already the largest recipient of US liquefied natural gas exports, none had been purchased directly by Ukraine before.
This comes as the region struggles to wean itself off Russian pipeline imports, just months before the end of a five-year deal with Russia’s Gazprom to pipe gas through Ukraine in transit to Europe.
The agreement coincides with the intensification attacks by Russia over gas storage and electrical infrastructure in Ukraine, which highlighted the urgent need to strengthen and diversify the country’s energy supply, analysts say.
While providing Ukraine with a less volatile source of gas supplies, the move also has the potential to further inflame Russian anger towards the US, which has already supplied billions of dollars worth of weaponry to Ukraine to combat the attack. Russian.
“This first deal with a Ukrainian customer could underscore the role of energy security” for U.S. LNG exporters, said Kevin Book, managing director at research firm Clearview Energy Partners.
Under the terms, Ukraine’s largest private energy producer, DTEK, will begin purchasing an unspecified amount of LNG cargoes from Venture Global later this year and will continue until the end of 2026. The gas will be supplied by Venture’s Plaquemines facility Global on the Louisiana Gulf Coast. , and will supply Ukraine and other Eastern European nations.
Venture Global, of Arlington, Virginia, plans to move cargo from terminals on the U.S. Gulf Coast, thousands of miles across the Atlantic, to several ports in Europe, including Greece, that have pipeline connections to Ukraine.
It was not immediately clear how much of Ukraine’s gas demand would be met by the U.S. supply deal. In public comments, Ukraine’s energy minister said in January that he hoped to satisfy domestic demand through local production this year.
A significant amount of the volume from the Venture Global deal could be shipped to other countries by D Trading, a commodity trading subsidiary of DTEK that is a counterparty to the deal.
“With this historic agreement, we will help strengthen the security of Ukraine’s natural gas supply, aid the region’s continued recovery and economic growth, and further strengthen European energy security,” said Mike Sabel, chief executive of Venture Global, in a statement.
The Plaquemines plant is Venture Global’s second facility and is expected to come into operation in the middle of this year. Additionally, DTEK has committed to purchasing up to 2 million tons per year of LNG from Venture Global’s yet-to-be-built CP2 project, also in Louisiana, over a 20-year period.
American LNG exports have grown since the first shipments of the super-cooled fuel from the continental US in 2016. Since the invasion of Ukraine, the industry has seized the opportunity to fill the gap left by Europe’s effort to abandon Russian imports, with developers achieving a flurry of major export deals. The US was the world’s largest exporter of LNG in 2023.
Weeks after the invasion, in February 2022, US President Joe Biden and European Commission President Ursula von der Leyen announced a strategic pact under which European companies would aim to secure LNG demand from USA, in an attempt to boost the construction of greater export capacity.
Olga Khakova, deputy director of European energy security at the Atlantic Council, said Thursday’s first LNG deal could help Ukraine by putting a final nail in the coffin of Russia’s gas dominance in the country and the wider region. .
“Diversifying into predictable, reliable and market-driven suppliers will be vital ahead of this winter,” she said. “This will probably be the biggest challenge yet for Ukraine.”
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Kiev has said it hopes to sign any agreements with Russia to extend the gas transit deal. Russian gas shipped through Ukraine represents around five percent of the EU’s supply.
LNG expansion in the US was complicated by the Biden administration’s decision in January to freeze new export licenses. This decision is not expected to affect short-term supplies under the agreement, as Plaquemines is already fully approved.