UPDATE 2-White House plays down speedy role for U.S. natural gas in Ukraine

Sat Mar 8, 2014 3:07am IST

(Adds background on U.S. approvals process, legislation, and lack of LNG terminals in Ukraine)

By Roberta Rampton

ON BOARD AIR FORCE ONE, March 7 (Reuters) - The White House on Friday appeared to play down the possibility of changing U.S. policy on exporting natural gas to address the situation in Ukraine.

White House spokesman Josh Earnest told reporters on Air Force One that policy changes would not have an immediate effect and noted that natural gas stocks in Europe were above normal levels because of a mild winter.

"There is no indication currently that there's much risk of a natural gas shortage in the region," he said.

Europe and Ukraine are key export markets for natural gas from Russia, which has historically shut down pipelines as a pressure tactic. As Russia took control of the Crimean peninsula this week, its state-owned energy company Gazprom said it will stop discounting natural gas for Ukraine.

But widespread shipments of U.S. liquefied natural gas (LNG) are still several years away.

The Department of Energy is working its way down a list of more than 20 applications for LNG export licenses. It has approved six licenses since 2011 and the first project is not expected to begin exporting until late next year. The other five still need approvals from the Federal Energy Regulatory Commission, which can be a lengthy process.

"So proposals to try to respond to the situation in Ukraine that are related to our policy on exporting natural gas would not have an immediate effect," Earnest said.

Several lawmakers, including Rep. Cory Gardner, a Republican from natural gas-rich Colorado, introduced bills this week to try to speed up the DOE approvals, but they face an uphill battle in the Senate.

NO TERMINALS

Ukraine has no terminals to receive LNG shipments, so even if U.S. cargoes were ready soon it is uncertain when the fuel could be delivered.

Washington instead is working to reduce Ukraine's dependence on any single source of natural gas.

Ukraine and Eastern Europe could get more gas from Northern Africa, including Libya and Algeria, and from East Africa or the Mediterranean in the next couple of years.

Washington is also hoping Croatia will build an LNG receiving terminal, which could help Hungary, Slovenia and perhaps Ukraine.

Once U.S. LNG exports start they likely will first head to Japan, India and other Asian countries that have little access to gas sent via pipeline and are willing to pay more for the fuel than Europe does.

As more U.S. projects are approved and investors spend billions of dollars to build them, U.S. LNG could play a bigger role after 2017 in reducing global prices for the commodity, analysts said.

Earnest noted that Russia prides itself on being a reliable supplier of natural gas to other countries. That reputation would be jeopardized if it turned off the taps during the Ukraine crisis.

"Russia currently yields about $50 billion a year in revenue from exporting natural gas, so ending that kind of relationship with Europe would have significant financial consequences for Russia as well," he said. (Additional reporting by Timothy Gardner, Writing by Jeff Mason; Editing by Sandra Maler and Meredith Mazzilli)

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