Pipeline gas or LNG? Ukraine doesn’t keep all its eggs in one basket

(EurActiv, 18 Dec 2019) Ukraine has for decades counted exclusively on Russian pipeline gas, for its own use and for the lucrative transit taxes. But the tensions with Russia after 2014 and the low prices of LNG have changed the paradigm completely.

One of the least known secrets is that LNG from the United States has become highly competitive versus Russian pipeline gas. The unconventional gas revolution in the US has boosted the US economy and the country’s export capacity to 112 bcm/y as of 2020, more than doubling the capacity in just 18 months.

According to the International Energy Agency, in 2018, Europe saved $8 billion on its natural gas bills thanks to the import of US LNG. This huge difference is also the result of a downward renegotiation of Russian pipeline exports.

Even a country like Bulgaria, probably the most “addicted” to Russian pipeline gas, bought the first LNG from the US last May, at prices which were not disclosed. But as energy minister Temenujka Petkova said, they were lower than what the country pays for Russian pipeline gas.

Imports from the US are expected to grow substantially, after Bulgaria and Greece complete in 2020 the gas interconnector Stara Zagora-Komotini.

LNG is natural gas that is cooled to -161 C, at which point it becomes a liquid and occupies only 1/600th of its original volume, making it convenient for shipping. The process needs liquefaction plants, specially designed ships fitted with cryogenic cooling tanks, regasification terminals.

Russia says the process is very expensive and pipeline gas will always be cheaper. But Russia has also hugely overspent on developing gas in the northern Yamal peninsula and cannot push its price down.

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EurActiv, 18 Dec 2019: Pipeline gas or LNG? Ukraine doesn’t keep all its eggs in one basket