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Ukraine’s state-held gas firm Naftogaz is reportedly opposed to the pricing formula for U.S. liquefied natural gas (LNG) it could receive under a long-term contract, while there isn’t enough infrastructure ready to ship American LNG from Poland into Ukraine, analysts have told DW.
The U.S. is eager to supply its LNG to central and eastern European markets, especially Poland and Ukraine, arguing that American gas is superior to gas from Russia, which binds economic contracts with politics.
However, talks between Louisiana Natural Gas Exports Inc and Ukraine’s Naftogaz have stalled, reportedly because the Ukrainian company doesn’t agree with the U.S. firm’s proposal to have the price of the LNG under a 20-year contract linked to the U.S. natural gas benchmark Henry Hub, without any reference to European gas prices, analysts told DW.
In May, the government of Ukraine, which is keen to wean itself off Russian energy supplies, approved a plan to import LNG from the United States. Under the memorandum approved by the government, Ukraine would be importing at least 5.5 billion cubic meters of LNG annually, while the seller will be Louisiana Natural Gas Exports, according to acting energy minister Olga Buslavets.
Ukraine has been seeking for years to diversify its oil and gas supplies away from Russia after Russia annexed Crimea in 2014. The Russian annexation of Crimea drew reactions from the U.S. and the EU, which imposed sanctions on some Russian energy firms and projects, prohibiting Western firms and banks from working with Russian projects.
Ukraine and Poland, both of which seek diversified energy supplies, signed in August last year a trilateral memorandum of cooperation with the United States to enhance the regional security of natural gas supply.
Earlier in May, the Ukrainian port Odessa on the Black Sea also received its first-ever crude oil cargo of WTI Crude from the United States, after the U.S. shipped its first oil to Ukraine just last year. Ukraine’s first-ever U.S. crude oil cargo was received in July last year when a tanker carried 80,000 tons of Bakken crude to the port of Odesa.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com