Ukraine May Have Russian Gas Choice within 10 Years: Top U.S. Energy Official on Platts Energy Week

April 22, 2014

Ukraine could be in a position within 10 years to decide whether it wants to import natural gas from Russia if it takes the right steps, Carlos Pascual, the U.S. Department of State's top energy official, said on Platts Energy Week.
 
A combination of the development of Ukraine's own resources – both traditional and unconventional – as well as pipeline reversals and energy efficiency improvements, could put Ukraine in such a position, Pascual, the State Department's special envoy and coordinator for international energy affairs said on the all-energy news and talk show program.
 
But the changes are not going to be "immediate," he said. Any pipeline reversals and improvements in output are "not going to solve all of their supply needs for next winter."
 
Reversals of pipelines connecting Ukraine with Slovakia, Poland and Hungary – which could provide a combined natural gas volume of 10 billion cubic meters per year (Bcm/year) – would "start a process of diversification," he said.
 
"Where Ukraine has ... real potential is ... its existing fields of gas, where they have been using Soviet technology since the 1970s," Pascual said.
 
"And they could attract private companies,” he said. “We've had indications from private companies that you could potentially increase [production by 30%] in two to three years."
 
"In addition to that, you have had over the past year, in 2013, contracts that were signed by the Ukrainian government with Chevron, Shell, Eni for shale gas development," Pascual said.
 
"We've been working very closely with the Ukrainians and [have been] in close contact with those companies, and the companies are telling us that they realistically could add another [20 Bcm/year] to production by 2020," he said.
 
Meanwhile, in the U.S., an explosion of domestic of shale gas and oil production will also help Ukraine and others, and has already done so in terms of security of supply, he argues.
 
"That the United States is producing as much gas as we have has already had a big impact on European markets,” he said. “It was estimated that at this point the United States would be importing about 80 Bcm/year of [liquefied natural gas] LNG."
 
"We're only importing about 5 [Bcm],” he said. “That has allowed a lot of commodity to be redirected on international markets. It has been part of what has allowed European companies and utilities to be able to bring in additional supply and get greater leverage in their negotiations with their gas suppliers, such as Gazprom."
 
And that will continue. "The United States ... has approved a total of seven export licenses for LNG, if all of those indeed come to fruition and come onto the market, it will result in an additional 95-96 Bcm/year coming onto the marketplace," he said.
 
But this is not enough for some observers and critics.
 
Various U.S. lawmakers – many of them Republicans – have been beating a drum for a speedy increase in U.S.