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A US company has signed the first significant deal to supply liquefied natural gas to Ukraine, in a move designed to bolster its energy security and reduce Moscow’s energy dominance in eastern Europe.
The move by US exporter Venture Global is the latest step towards meeting a big goal of the Biden administration — to increase energy exports to eastern Europe and in the process reduce Russia’s power in the region following its full-scale invasion of Ukraine in 2022.
While Europe was already the largest recipient of US liquefied natural gas exports, none have ever been purchased directly by Ukraine before.
It comes as the region scrambles to wean itself off Russian pipeline imports, just months ahead of the expiration of a five-year arrangement with Russia’s Gazprom to pipe gas through Ukraine in transit to Europe.
The deal coincides with stepped-up in attacks by Russia on gas storage and electricity infrastructure in Ukraine, which has highlighted an urgent need to strengthen and diversify the nation’s energy supplies, say analysts.
While providing Ukraine with a less volatile source of gas supplies, the move also has the potential to further inflame Russian ire towards the US, which has already supplied billions of dollars in weaponry to Ukraine to counter Russia’s attack.
“This first deal with a Ukrainian customer could underscore that energy security role” for US LNG exporters, said Kevin Book, managing director of research firm Clearview Energy Partners.
Under the terms, Ukraine’s largest private power producer, DTEK, will begin buying an unspecified amount of LNG cargoes from Venture Global later this year and continuing through the end of 2026. The gas will be supplied by Venture Global’s Plaquemines facility on the Louisiana Gulf Coast, and will supply Ukraine and other nations in eastern Europe.
Venture Global, of Arlington, Va., plans to ship the cargoes from terminals on the US Gulf Coast thousands of miles across the Atlantic to multiple ports in Europe, including Greece, which have pipeline connections to Ukraine.
It was not immediately clear how much of Ukraine’s gas demand would be served by the US supply deal. In public comments, Ukraine’s energy minister said in January that it expected to satisfy domestic demand through homegrown production this year.
A significant amount of the volume in the Venture Global deal could be sent to other countries by D Trading, a commodity trading subsidiary of DTEK that is a counterparty to the deal.
“With this landmark agreement, we will help bolster Ukraine’s security of natural gas supply, aid continued recovery and economic growth in the region, and further strengthen European energy security,” Mike Sabel, Venture Global’s chief executive, said in a statement.
The Plaquemines plant is Venure Global’s second facility and is set to come online in the middle of this year. In addition, DTEK has committed to buying up to 2mn tonnes a year of LNG from Venture Global’s yet-to-be constructed CP2 project, also in Louisiana, over a 20-year period.
American exports of LNG have boomed since the first shipments of the superchilled 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 push to ditch Russian imports, with developers striking a flurry of major export deals. The US was the world’s biggest LNG exporter 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 guarantee demand for US LNG in a bid to drive construction of greater export capacity.
Olga Khakova, deputy director of European energy security at the Atlantic Council, said Thursday’s first of a kind LNG deal could help Ukraine by putting a final nail in the coffin of Russia’s gas dominance in the nation and the broader region.
“Diversification towards predictable, reliable and market-driven suppliers will be vital ahead of this winter,” she said. “This is likely to be the most challenging yet for Ukraine.”
Kyiv has said it does expect to sign any agreements with Russia to extend the gas transit deal. Russian gas sent through Ukraine accounts for around five per cent of the EU’s supplies.
The US LNG buildout has been complicated by the Biden administration’s decision in January to freeze new export licenses. That decision is not expected to affect the near-term supplies under the deal, as Plaquemines is already fully approved.