A US company has signed its first major deal to supply liquefied natural gas (LNG) to Ukraine, the Financial Times reported on June 13, saying that on a broader level, the move could help boost energy security in Eastern Europe and reduce Moscow’s dominant role in the region.

The move by US LNG exporter Venture Global is the latest step toward achieving a major goal of the Biden administration to boost energy exports to Eastern Europe, and in the process reduce Russia's power in the region, since the Kremlin launched a military campaign in Ukraine in 2022.

Although Europe has been the largest market for US LNG exports since the Russia-Ukraine conflict erupted, no cargoes have ever been purchased directly by Kiev before.

The Ukraine-US deal comes as the region tries to reduce the volume of gas imported via pipeline from Russia, just months before a five-year agreement with Russian energy giant Gazprom to transit gas through Ukraine to Europe expires, and as Ukraine sees an urgent need to increase and diversify its energy supplies.

Under the terms, Ukraine's largest private energy company, DTEK, will begin purchasing an unspecified amount of LNG cargoes from Venture Global later this year and continue the contract until the end of 2026.

The gas will be supplied from Venture Global’s Plaquemines facility on the Gulf Coast of Louisiana, and will be delivered to Ukraine and other countries in Eastern Europe. Venture Global’s shipments will travel thousands of miles across the Atlantic to multiple ports in Europe, including Greece, which has a pipeline connection to Ukraine.

It is unclear how much of Ukraine’s gas needs will be met by the LNG deal with the US. In public comments, Ukraine’s energy minister said in January that the country expected to meet domestic demand through domestic production this year.

A significant volume in the Venture Global deal could be sent to other countries by D Trading, a commodities trading subsidiary of DTEK, a party to the deal.

“With this landmark agreement, we will help strengthen Ukraine’s gas supply security, support continued economic recovery and growth in the region, and further strengthen European energy security,” Mike Sabel, CEO of Venture Global, said in a statement.

U.S. LNG exports have exploded since the first shipments of the super-chilled fuel left the United States in 2016. Since the Russia-Ukraine conflict erupted, the U.S. LNG industry has seized the opportunity to fill the void left by Europe’s push to eliminate imports from Moscow. The U.S. will be the world’s largest LNG exporter by 2023.

But the development of new LNG projects in the United States has been complicated by the Biden administration’s decision in January to halt the issuance of new export licenses. That decision is not expected to affect near-term supplies under the Ukraine deal because Venture Global’s Plaquemines facility has been fully approved .

Minh Duc (According to Financial Times)