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2014-03-15 17:15:00

UKRAINE VS RUSSIA: INCRESING DEMAND LNG

UKRAINE VS RUSSIA: INCRESING DEMAND LNG

OGP. Liquefied natural gas suppliers are forecasting an increase in demand from European countries, following recent political events in Ukraine. Concerns over Russian shipments, and the need to diversify access to LNG to avoid shortages or supply disruptions, has led to some LNG suppliers like Hoegh LNG Holdings Ltd. and Golar LNG Ltd. to predict gains as a result of the Ukrainian dispute.

For example, 15%of Europe's gas transits through Ukraine, so Hoegh believes that the crisis in Ukraine may increase the need for floating LNG import terminals, like those that Hoegh make, in order to bypass transit through the region and to reduce the dependence on Russian gas.

As reported by Bloomberg Businessweek, Hoegh's CEO, Sveinung Stoehle, said, "it will create an extra push in demand. 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."

Aside for a short term jump in demand, Brian Tienzo, Chief Financial Officer at Golar LNG, suggests that there could also be long term changes in the European gas market as a result of the crisis. For example, he suggests that "Germany is one that you can look at. They don't have as many nuclear power generators that they can rely on, and they may feel that actually what they need to do is spread out their sources" of natural gas.

Another example further afield is that the crisis may result in other countries, like the US, increasing their exports into the European market. And that increase in exports of course brings with it other long term change. If US LNG exports reach 60 million tons a year by 2020, for example, then the demand for tankers will also go up by as much as 25%.

That said, even if the situation in Ukraine escalates, it is unlikely that Europe will completely turn away from Russian gas. According to Dragos Talvescu, a partner at Sund Energy, "It'll be difficult for LNG to compete with Russian gas in the period up to 2020... It's hard to believe that Europe will opt out of Russian gas just because it's Russian."

Tags: UKRAINE, RUSSIA, GAS, LNG