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Ukraine crisis raises European demand for LNG

03.05.2014  | 

The crisis in Ukraine, which transits more than 15 percent of Europe’s gas use, may boost demand for floating LNG import terminals, such as the one Hoegh LNG Holdings will deliver to Lithuania this year.



Russia’s military intervention in Ukraine will boost liquefied natural gas demand from European countries eager to diversify their access to the fuel, according to Hoegh LNG Holdings.

The crisis in Ukraine, which transits more than 15% of Europe’s gas use, may boost demand for floating LNG import terminals such as the one the Hamilton, Bermuda-based company will deliver to Lithuania this year, the first in the former Soviet Union, CEO Sveinung Stoehle said.

“It will create an extra push in demand,” he said in an Oslo interview. “It will put even more focus on energy independence, especially on gas. The only way you can be independent on gas is to import LNG.”

LNG exports from the US, which is building plants to ship the fuel after a boom in production, will boost global annual supply by about 40 million metric tons in 2017 from today’s 250 million, Stoehle said. That is already creating demand for import terminals and tankers that will extend to European nations such as Ukraine, Belarus, Romania, Italy and Croatia, he said.

The standoff between Russia and Ukraine, which escalated over the weekend when Moscow invaded the Crimean peninsula, should lead US authorities to ease restrictions on gas exports, industry groups and politicians including House Speaker John Boehner said this week.

While the first of six government-approved US export projects won’t start output before next year, the Energy Department is considering at least 24 applications for new terminals.

More Tankers

The Ukrainian crisis “illustrates how the US can almost get a new foreign-policy instrument by eventually being over- supplied with energy, both gas and oil,” said Jarand Rystad, managing partner at consulting firm Rystad Energy. Energy exports “can put more strength into some of the sanction policies,” he said in an interview in Oslo.

US LNG exports may reach 60 million tpy by 2020, boosting demand for tankers by as much as 25% from about 450 ships expected in two years, Hoegh’s Stoehle said.

Hoegh will in August deliver the floating import terminal -- named Independence -- to Lithuania, which is among countries seeking to reduce its reliance on Russian gas. The Ukrainian crisis may push others to follow, Stoehle said.

“It will start a political thought process,” he said. “It can create possibilities that we didn’t foresee just a short time ago.”

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