INTERVIEW: D.Trading eyes LNG to boost Ukraine energy security amid supply shocks

Energy supply diversification is key to countering supply shocks across Ukraine, as access to long-term, flexible LNG is expected to reinforce the country's efforts to strengthen energy security, Ukrainian trading firm D.Trading CEO Dmytro Sakharuk told S&P Global Commodity Insights in an interview.

Sakharuk said the future of both Europe and Ukraine's energy security hinges largely on diversification amid assaults on key energy infrastructure.

"Innovation, collaboration and thinking outside the box are key pillars of our approach," Sakharuk said. "What helps is having developed trading capabilities that allow us to manage significant flows, linking illiquid markets to liquid ones. Having the capacity and tools to do this is the foundation of energy security."

Founded in 2019 as the trading arm of Ukraine's largest private energy company, DTEK Group, D.Trading has an established presence in some 23 countries, with local supply capabilities in 16 countries and access to 22 exchanges across the Central, Eastern and Southeast European regions.

Access to those exchanges is "critical" in the context of Ukraine, as the company's decision to leverage swaps to bridge physical supply gaps paramount in bringing value to its clients, Sakharuk said.

"We understand the market and are trying to build a stronger platform to increase volumes because greater volume brings margin that we are also trying to make," Sakharuk said. "We know how to manage and derisk these markets because not all companies are ready to work in this region."

In Europe, gas supply is needed via three main sources: flows from the Norwegian Continental Shelf, from the south into Europe and LNG, Sakharuk said.

This is particularly relevant given the expected end of the Russia-Ukraine gas transit deal, due to expire Dec. 31, 2024. Russian gas transit via Ukraine reached as high as 117 Bcm in 2008 but fell to just 14.65 Bcm in 2023.

Ukraine earned a total of Hryvnia 20.409 billion ($496 million) from the transit of Russian gas in the first half of 2024, according to state-owned Naftogaz, an increase of 6% year over year.

Sakharuk noted that while the anticipated end of the transit deal could introduce further uncertainty to the market and potentially reshape gas flows to the region, transporting physical gas from the south to Ukraine also presented challenges, especially at affordable price levels.

To counterbalance these challenges, D.Trading's strategy concentrated on developing regional expertise.

"This is where innovation counts," Sakharuk said. "That is our value-add, providing that flexibility through our expertise, together with an understanding of Ukrainian infrastructure, our partnerships and collaboration with Naftogaz, accessing secure volumes and ensuring energy resilience," he said.

European gas prices have been volatile in recent months, largely driven by supply-side risks, colder weather conditions and competition with Asia for LNG cargoes.

Platts, part of S&P Global Commodity Insights, assessed the Dutch TTF month-ahead price at Eur47.435/MWh on Dec. 27, rising 4.2% on the day.

LNG expansion

As of June 2024, the firm has expanded its capabilities in LNG as part of its strategic growth initiative, according to Sakharuk.

This involved establishing a "significant presence" within the sector, including shipping operations. LNG represents a flexible source of gas, and while having the ability to compete for spot cargoes is important, long-term business is also a key focus for D.Trading, he said.

"We recognize that LNG is a crucial component of strengthening the energy security of the EU and Ukraine," Sakharuk said. "Our value proposition is in diversifying D.Trading's supply portfolio because, while you can pump gas through pipelines, Europe needs more, and LNG, which no doubt provides more flexibility."

On Dec. 27, D.Trading took delivery of a US LNG cargo at the Greek import terminal in Revithoussa, making it the first Ukrainian company to receive the product from the US.

The delivery followed the June signing of a "landmark" heads of agreement with Venture Global designed to support Ukraine's and the broader region's short- and medium-term energy security needs.

"Regarding LNG terminals, we may use any of them. Yes, some of them are booked or partially booked, but slots are still available," Sakharuk said.

As of December 2024, Sakharuk said the company has independent experience in LNG regasification, along with trading around storages, transferring volumes from one month to another, and initiating swaps between several countries.

"We see a lot of potential in LNG for the next 10 years, [as it] will be a significant part of the gas market in Europe that we should definitely be a part of," he said.

New opportunities

D.Trading's position as one of Ukraine's leading trading companies places it at the forefront of the country's push to ensure lasting energy security. Despite relentless efforts, Sakharuk remains hopeful that the war with Russia will eventually come to an end.

The firm's expansion goals are crucial to Ukraine's prosperity, particularly through increasing volumes and creating a more layered and dynamic presence within commodity markets, Sakharuk said.

"Greater volumes, in general, can bring margin that gives us a basis, but the more creative, structured deals allow us to better manage the risk we take," he said. "Alongside this, analytics and automation are key. We need a knowledge of the areas in which we operate, and bringing in those volumes will need automation."

The company expects to stay "disciplined" on costs by managing operations across various jurisdictions and optimizing its use of diverse infrastructure and workforces.

D.Trading perceives "huge potential" in implementing projects in Ukraine, especially concerning the country's next phase of "reconstruction." According to Sakharuk, the company's role would be to bridge that gap, particularly for European counterparts.

"Many companies will want a presence in Ukraine, and we want to be ready for that," he said.