Ambassador Korsunsky: Ukraine moving to LNG to diversify supply

“This LNG plant we are looking to build in Odessa is one of the 10 major national projects of Ukraine,” Ambassador Korsunsky said in an interview with Today’s Zaman and noted that a Spanish company, SOCOIN ingeniería y construcción industrial, S.L.U., had won the preliminary feasibility study in a tender conducted in September the results of which are expected to be made public soon. At the beginning of next year Ukraine will hold another tender to select the construction company and hopes to attract major energy investors.

The ambassador explained that the LNG plant would constitute an essential element of a memorandum between Ukraine and Azerbaijan that foresees the delivery of the equivalent of 2 billion cubic meters of natural gas through the projected Odessa plant in 2014, a volume that is expected to increase to 10 billion cubic meters by 2015.

In return, Korsunsky noted, Azerbaijan is also planning to build its own facilities in Georgia, initially for compressed natural gas (CNG), but in a later stage also for LNG, which is cooled natural gas in liquid form that makes energy delivery much easier, and at a lower cost through the use of tankers. Korsunsky stated that the energy delivery of LNG will provide an alternative to Russia as the world’s dominant natural gas supplier and that other countries could eventually benefit from LNG delivery by tanker once it is in operation. Ukraine is expected to receive Azeri gas from the export terminal in Kulevi directly at its own terminal. That same terminal will be used to load the tankers carrying the LNG to Romania, relying on the Azerbaijan-Georgia-Romanian Interconnector, better known by its acronym, AGRI.

Countries that are looking to receive Caspian gas through the LNG terminal also need “regasification” facilities where LNG is moved into cold storage tanks and “regasified” into natural gas before it can be put on the market. “Turkey already has one such facility, while Romania is planning to build one,” Korsunsky noted, and added that LNG might just be the next big thing in the transportation of gas, the way of the future for the resource-rich Black Sea littoral. Ukraine is also looking for gas from LNG producers, particularly from Algeria, Qatar, Libya and Egypt, a plan that necessitates a decrease in transportation costs if Ukraine is to opt for a source other than its close neighbor Russia.

The significance of the transportation of natural gas in easily transferrable form lies in its capacity to rival the Russian monopoly over energy supplies, Korsunsky acknowledged and referred to the two natural gas crises between Russia and Ukraine. Failed agreements over gas prices between Ukraine and Russia disrupted gas deliveries to Europe in 2006 and in 2009, and the countries are negotiating over prices again this year. “The transit to Europe is secure,” he said, adding: “No war is expected ever again. We just need a fair price.”

Ukraine is currently both the largest consumer of Russian gas as well as its main transit route to European countries, with 80 percent of Russian gas to the EU passing through Ukraine, and disputes between the two countries over price reductions affect those countries that receive their supplies from Russia.

“Azeri gas is sure to break that monopoly, or at least provide grounds for negotiation,” Korsunsky said, and called on international investors to join in the LNG project that will produce results by 2015. “Turks should be partners, co-investors in the LNG project, it is a national project in the sense that it carries significance for us, but international investment is welcome,” he added. Korsunsky also noted that although he can foresee a recession in Europe, long-term projects such as the LNG project might prove beneficial for banks, which will shy away from short-term investment plans.

The only downside of the LNG project might be the increased traffic through the Bosporus Strait, Korsunsky also noted, and the Sea of Marmara is expected to be a popular route for LNG deliveries to Europe via tankers. LNG is a dangerous material to transport, which has led some in Turkey to worry, but the straits are available to Black Sea countries for the free passage of civilian vessels, in line with the Montreux Convention of 1936.

Turkey-Ukraine strategic council

Turkey and Ukraine will hold the first session of the strategic high-level council this winter, chaired by Ukrainian President Victor Yanukovich and Turkish Prime Minister Recep Tayyip Erdoğan, the Ukrainian ambassador announced, as he noted that Ukraine has been preparing for the meeting with Turkey since July and is waiting on a confirmation from officials for the exact dates.

“The countries will probably participate with 10 ministers each, and they will be signing some 10 agreements during the event,” he said and highlighted the agenda in store, noting that the countries already had 80 agreements in place. The visa waiver issue is also at the top of the bilateral agenda, as both sides look to have an agreement for the waiver ready before the strategic council meeting to take place at the end of the year.

“We have been reciprocating the Turkish system since Sept. 10, enabling the issuance of tourist visas at airports,” Korsunsky said, but noted that the system was only available for tourists. He also touched upon the reason to finalize the visa waiver and have it in place before Euro 2012 kicks off, as Ukraine is co-hosting the event with Poland and expecting a surge of tourists from Turkey.

Elaborating on the narrowing distance between Ukraine and Turkey, Korsunsky noted that the significance of good relations between the two countries is enormous, triggering political and expert circles in Ukraine, Brussels and even in Washington, D.C., to devote separate sessions in international forums to the two countries on their agenda. “For us Turkey is not just a country, it is one of our major focus points along with countries like Russia, Poland and the United States,” the ambassador said of the developing relations between the countries, which have emerged with “an unprecedented level of contacts between Turkey and Ukraine this year.”

Korsunsky also noted that the countries have been exchanging visits at the ministerial level, with recent visits from the ministers of justice, energy, European integration and customs to both sides, bringing the relations to the level of a “strategic partnership.”  The ambassador also noted that Turkey and Ukraine were readying for a free trade agreement (FTA) and said unofficial consultations over the agreement have been concluded but that the legislative procedure was pending. “Once the official FTA process starts, it may take a couple of years at most, but we must start,” the ambassador noted, acknowledging that the delay was a result of legalities and paperwork, but the substance of the agreement was already in good shape.

Elaborating on trade levels between Ukraine and Turkey, Korsunsky also noted that Turkey was Ukraine’s second biggest trading partner in terms of export, with levels constantly on the rise. “Ukraine has a surplus in trade with Turkey, but Turkey compensates for the difference by reselling to the Arab countries,” he said, and noted that the three major items of trade from Ukraine were steel, agricultural products and fertilizer. Since Turkey is considerably closer to the Arab markets, it is easier for the country to deliver Ukrainian goods, he noted.

The ambassador also touched upon Turkish economic growth, saying it was “an incredibly smart move” on part of the Turkish government to invest in infrastructure when the world economy was going down in the crisis. An advocate of investment in infrastructure, Korsunsky suggested that countries with large energy reserves usually would not have to put their foreign currency reserves to use. “Countries with oil and gas reserves act like spoiled children, they do not even need to struggle to be competitive,” he added in criticism of the energy giants of the world, but that countries like Ukraine and Turkey both had to work very hard to arrive at where they are today.

Trade ‘tsunami’ to follow when FTA and visa waiver in effect

Korsunsky expressed surprise at seeing how Ukrainian and Turkish businesspeople are already engaged in intensified relations, without the need of having to consult officials from either side. “The way people do it by themselves [find each other without governments’ help] is amazing,” the ambassador added, hinting at the fact that the initiative for business is already in the hands of entrepreneurs, who have found each other without any initiative from governments. “Governments should only open the gates and let people do the rest,” the ambassador said as he evaluated the levels of interaction between the two nations. The ambassador also had one prediction in store, “There will be a tsunami of business contacts when visas are eliminated and the FTA comes into effect. Wait and see.”

The ambassador also noted that trade relations were backed by diplomatic and cultural correspondence between two nations and that the countries will be celebrating the 20th anniversary of their diplomatic relations on Feb. 3. To honor this day, Ukraine will be showcasing Ottoman documents from the beginning of the 20th century, when the Ottomans sent letters to Ukrainian officials to differentiate between Russian and Ukrainian war prisoners. “Ukrainians were ultimately released if they could name the Ukrainian town where they were born,” Korsunsky said, indicating that Ukrainians have held Turks in high regard since the Ottoman Empire era.