* LNG is part of Ukraine's long-term gas supply plans
* Ukraine seeks alternatives to costly Russian gas
* Turkey opposes more LNG tankers through straits
By Pavel Polityuk
KIEV, Feb 6 Ukraine's plans to replace imports
of natural gas from Russia with cheaper liquefied natural gas
(LNG) supplies via the Black Sea face resistance from Turkey,
which wants to become a regional LNG hub itself.
"We understand the Turkish side's concerns ... (Increased)
traffic through the Bosphorus has both pros and cons," Vladislav
Kaskiv, the head of Ukraine's state investment agency, said in
"On the one hand this means increased economic activity; on
the other hand there are environmental problems."
Turkey controls the Bosphorus and Dardanelles straits, which
connect the Black and the Mediterranean seas, and has warned
Kiev it may deny right of passage to LNG tankers bound for
Ukraine due to congestion.
Turkey's energy minister, Taner Yildiz, said last May that
Turkey was against Ukraine's proposed construction of an LNG
terminal on the Black Sea coast. He cited increased tanker
traffic through the Bosphorus as well as heightened
environmental and safety risks.
Kaskiv said Kiev was determined to press ahead with its
project to build an LNG terminal and had received a legal
opinion from U.S. law firm Baker Botts that LNG tankers must be
granted free right of passage in the Turkish straits.
"We must protect our national interests," he said. "The
bottom line is: there are no legal issues, and the situation
needs to be resolved politically on the bilateral level."
Ankara has suggested that the former Soviet republic buy LNG
from one of Turkey's existing or planned terminals, shipping it
via a route that bypasses the Bosphorus and Dardanelles.
RIGHT OF PASSAGE
But Ukraine views such projects as complementary and not as
an alternative to building its own LNG terminal, Kaskiv said
Both Ukraine and Turkey are major gas importers and see
potentially cheaper LNG as a way to diversify supplies.
Ukraine, however, has yet to build its first re-gasification
terminal - a facility needed to receive LNG shipments - while
Turkey already operates two.
Ukraine plans to start operating an LNG terminal in 2015
using a floating re-gasification facility offshore and complete
the construction of an onshore facility by 2018, allowing it to
import about 10 billion cubic metres of gas a year.
The LNG project became a source of embarrassment for the
Kiev government last November when Kaskiv signed what he thought
was a $1.1 billion deal making Spain's Gas Natural Fenosa
its main investor.
But the Spanish company immediately denied that role, and
Ukraine later admitted the deal had been signed with an
middleman who had no power to do so.
Kiev also has yet to secure supplies of LNG for its
terminal. Officials have mentioned Caspian nations such as
Azerbaijan and Gulf producers such as Qatar.
No facilities have been built so far on the Black Sea to
liquefy Caspian gas for shipment, which means that Ukraine would
need to receive gas through the Bosphorus.
Apart from developing LNG, Ukraine is also hoping to tap
potentially huge shale gas reserves to help it secure
independence from Russian gas imports, which are costly and come
with a heavy political price tag.
Ukraine relies heavily on Russian gas to heat homes and fuel
the industrial sector. But Kiev says the current gas supply deal
signed with Russia's gas export monopoly Gazprom in
2009 sets an exorbitant price for the fuel, at $430 per thousand
cubic metres in the current quarter.
Ukraine's attempts to renegotiate the deal have failed so
far, and a move by Kiev to cut imports by switching to coal was
met last month with a $7 billion bill from Moscow for gas it did
not use, citing a "take or pay" clause in the contract.
(Writing by Olzhas Auyezov; editing by Richard Balmforth and