The second coming of the LNG terminal

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2014/08/19 • Analysis & Opinion

The liquified natural gas terminal may cover 17% of Ukraine’s needs 

The topic of diversifying gas supplies to Ukraine has become more pertinent with the escalation in the political conflict between Ukraine and the Russian Federation. The Ukrainian government is already paying attention to the option of importing fuel by sea as a real alternative to pipelines.

As such, head of the Verkhovna Rada Olexandr Turchynov, stated on August 18 in the town of Palanga, Lithuania, that the usage of new technological ways of construction, in particular, to build a floating platform to process liquified gas, “will allow to save funds and, what is especially important for us, to save time on building such terminals.” “And, most importantly, it will not allow “Gazprom” to continue blackmailing out country, as it will be able to receive diversified supplies of energy resources,” Turchynov added.

The idea to build an LNG-terminal on the Black Sea coast of Ukraine was documented by the Cabinet of Ministers order in December, 2010, and presented on January 31, 2011 by the work group “National Projects” from the economic reform committee. State-owned business “National project “LNG-terminal”” was created next, and a tender was announced to develop the technical and economic blueprint.

All of 2012 and the first half 2013 were spent on “making steps to execute” the aforementioned national project. However, ardent activity, including the widely publicized start of construction works, unfortunately did not lead to concrete results.

First, they failed to find a stable financing resource. There are numerous reasons as to why the potential investors were skeptical, but one of the main ones is the expense of the project. The construction of the land-based plant for gas liquefaction, according to various calculations, would cost more than $900 million. And the final signing of the contract with questionable individuals did nothing to solidify the trust in the “national project.”

Second, they failed to find gas sources. The national project proposed to import Azerbaijani gas, however there is no liquefaction plant in Azerbaijan. Just like concrete plans to build it in the nearest future.

Third, they failed to reach an agreement with Turkey regarding gas pipeline guarantees. Which became one of the reasons for orientation towards Azerbaijan.

However, the idea of the terminal became relevant again, now thanks to Ukrainian private investors. The partnership between port operator “Group of Sea Terminals TIS” (town of Yuzhniy in Odesa oblast) and joint-stock company “Odessagaz” expressed the initiative to invest in the construction of the terminal.


 

Source: Forbes

Translated by Mariya Shcherbinina

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