Ukraine in talks with Japan, Turkey on liquified gas terminal

Jul 9, 2009, 13:48 GMT

Kiev - Ukraine's government is in talks with Japanese and Turkish energy corporations on the construction of a liquified natural gas terminal able to provide fuel to Europe and bypass Russia-controlled pipelines, the Interfax news agency reported Wednesday.

Representatives from Ukraine's Ministry of Energy, Japan's Mitsubishi Group Inc, and Turkey's Calik Group are discussing building a 750-800 million dollar liquified gas terminal on Ukraine's Black Sea coast able to receive natural gas deliveries by sea, according to the report.

The transshipment complex would enable Azerbaijan and Central Asian producers to deliver product to Europe via Ukraine's pipeline network, and at the same time give Ukraine an alternate to fuel delivered by Russia's natural gas pipeline network.

A pricing dispute between Ukraine and Russian in early January led to a three-week blockade of Russian natural gas deliveries to Ukraine, and unprecedented downstream shortages in Europe.

European Union consumers receive roughly one-quarter of their natural gas needs from Russia, most of it delivered through Ukraine's pipeline system.

Foreign investors would according to preliminary discussions fully finance the terminal project, provided Ukraine's government gave guarantees of state support to the construction, said Burzu Aliev, a Ukraine government spokesman.

The complex if operational would break a Russian monopoly on natural gas deliveries to Europe, and reduce the price of natural gas on the Ukrainian market by as much as 50 per cent, Aliev predicted.

Talks are in a early stage and a business plan is not complete, he added.

The terminal as per current discussions would be able to transfer some 10 billion cubic metres of natural gas a year, roughly one-fifth of Ukraine's total consumption.

Ukraine's government during the Russian blockade met needs using gas held in underground reservoirs, and owned by Russian and Ukrainian private energy companies.

The Ukrainians made up some shortfalls during the January cut-off by tapping into supplies owned by the Russian natural gas monopoly Gazprom and designated for European consumption, a move criticized by Gazprom officials as massive theft by Kiev.

Russia's use of an energy weapon against Ukraine justified the siphoning, Ukrainian officials said at the time.