Leading Ukrainian producer eyes expanding LNG portfolio, head of LNG trading says

• Polish gas grid operator agrees with Ukrainian counterpart GTSOU to double border capacity
• D.Trading keen to expand portfolio in line with expected Ukrainian, regional demand growth
• More LNG terminals may be needed in southern Europe

LONDON (ICIS)– Ukraine’s largest private electricity and gas producer DTEK is exploring opportunities to secure more LNG as the company is building a large regional portfolio.

Speaking to ICIS on the sidelines of the ETCSEE conference on 11 June, James O’Brien, head of LNG at D.Trading, said the commodity trading subsidiary was looking to build a large regional portfolio and import up to 12 cargoes between now and 2026.

The LNG supplies would complement DTEK’s own domestic production of around two billion cubic meters, which the company expects to see rising in the upcoming years.

D.Trading has been in talks with US producer Venture Global and already received its first US LNG cargo at the Revithoussa LNG terminal in December, aboard the 155,000cbm Gaslog Savannah.

The two companies announced a heads of agreement (HOA) in June 2024 for the supply of US LNG to Ukraine and eastern Europe.

Supply was expected to begin later in 2024 through the end of 2026, with a provision for D.Trading to buy up to 2mtpa of LNG from Venture Global’s proposed CP2 LNG export plant for 20 years.

D.Trading has been exploring additional delivery opportunities via Poland and Lithuania, which operate LNG terminals but limited border capacity had been deterring companies from using this route.

INCREASED POLISH CAPACITY

However, on 13 June, the Polish gas grid operator GAZ-System said the firm export capacity to Ukraine would double from six million cubic meters/day currently to 11.5mcm/day from 1 July.

The capacity will be offered for monthly bookings on 16 June.

Poland is one of the cheapest transport routes for Ukrainian companies, allowing access not only to LNG imported via its own Swinoujscie terminal but also from Lithuania’s Klaipeda terminal and North Sea gas secured via Denmark.

The increase in capacity would help Ukrainian companies, which need to secure approximately five billion cubic meters ahead of this year’s heating season.

However, O’Brien said gas grid operators need to work flexibly as the LNG sendout from tanks has a 18-day window, whereas monthly capacity is booked for 30 days.

He acknowledged the importance of Route 1, a new product launched by gas grid operators along the Trans-Balkan corridor, which would allow companies to import regasified volumes in Greece and export them directly to Ukrainian storage.

He said the new product which would be offered at a discounted tariff would be in a position to compete on price with capacity offered via the Baltic-Polish corridor, although overall costs would still be high.

LACK OF FLEXIBILITY

He also noted that the product would present a number of challenges.

“[Route 1] is a step in the right direction because it opens opportunities to bring LNG from the southern route. We see growing demand of around 60 billion cubic meters annually in central and eastern Europe and there is room to have more terminals in the south if the EU proposes to phase out Russian gas,” O’Brien said.

“[Route 1’s] discounted tariffs will be almost equal to costs to bring gas from Poland or Germany. However, you have to have licences all the way throughout the region and have LNG in tanks to match the monthly capacity that is offered,” he added.

O’Brien said the lack of liquidity on regional markets was also a barrier to secure more regional supplies and conceded that Ukraine’s own export ban had a negative impact on companies, such as DTEK, looking to build regional portfolios.