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This Week in Energy: How Would LNG Get to Ukraine?

This Week in Energy: How Would LNG Get to Ukraine?

With all the talk about using US natural gas exports as a weapon to fight Russian aggression in Ukraine, what no one’s asking is how this liquefied natural gas (LNG) would get to Ukraine (or Europe in general) in the first place. The answer is Turkey—if Turkey is willing to play ball.

The potential for LNG exports to Europe without a deal between Turkey and Ukraine for the transport of LNG through the Bosphorus will fall flat. This, in turn, makes the Black Sea region potentially the next major geopolitical game venue.

As the crisis in Ukraine’s Crimean Peninsula escalates, the Black Sea becomes a highly significant venue, with Turkey controlling access here. Turkey authorized a US Navy destroyer to pass through the Bosphorus last week, and US-NATO war games have begun in the Black Sea region, close to the borders of Crimea.

Related Article: Ukraine fallout: how to deal with South Stream and Nord Stream

As noted in a recent report published by in Oilprice.com’s premium Oil & Energy Insider: “For Ukraine, LNG is the key to energy independence. For Turkey, LNG is the key to becoming one of the most important energy hubs between the Middle East and Europe. In combination with the Trans-Anatolian Pipeline (TANAP), which will bring Azerbaijani gas from Shah Deniz through Turkey on to European markets, controlling the LNG segment through the Black Sea would give Turkey broader leverage than any other player in Europe. For both Ukraine and Turkey, it would mean greater access to the economic benefits of the European Union, control over Europe’s LNG market and a level of political leverage over the continent that would render both world-class strategic players.”

And it’s not just about US natural gas; Qatar has been heavily lobbying for this Black Sea partnership in both Kiev and Ankara, and is very eagerly eyeing the wider European market.

This past decade has seen global LNG supplies double and regasification and shipping capacity triple. The exception is Europe, where Ukraine and Turkey are singularly positioned to take advantage of this LNG gap before demand picks up and the opportunity for strategic positioning is weakened.

Turkey controls the Bosphorus and Dardanelles straits, which connect the Black and the Mediterranean seas, and congestion is a key issue for Ankara.

Related Article: Turkey Energy Advisory

The biggest problem right now is that Turkey is not convinced that shipping LNG through its Bosporus Strait is safe. But LPG (liquefied petroleum gas) and naval warships traverse this straight, and both are arguably much more dangerous than LNG. LPG is a mixture of propane and butane liquefied at 15 °C. LNG is safer, environmentally, because the gas is lighter than air and disperses quickly if spilled. Propane is heavier than air, and thus heavier than natural gas.

So right now, the task is to convince Turkey that LNG is safe enough to pass through its straits, and that geopolitically, this is the game that must be played in order to offset Russia.

This is one issue that former Ukrainian vice prime minister Yuri Boyko was working on before the crisis descended on Ukraine. Be sure not to miss our exclusive interview with Mr. Boyko published earlier this week, and stay with us as we continue to bring you exclusive insight into the international crisis and the role energy will play in this.

By. James Stafford of Oilprice.com




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