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Dicker: Why U.S. Natural Gas Can't Help Ukraine

NEW YORK (TheStreet) -- I was speaking with Joe Deaux about the Ukraine crisis and whether it was likely the U.S. natural gas boom could help relieve some of the influence that Russia's Vladimir Putin can exert on Eastern Europe and the EU. In short, the answer is not likely.

Natural gas can only be transported in two ways; by pipeline or in a liquid form, called LNG. It is more than unlikely that any pipeline company could or would want to build a 5000 mile pipe across the Atlantic.

But significant LNG exports to Europe from the U.S. seem equally unlikely. The buildout of an LNG export terminal requires billions of dollars and years of planning. In order to take on these risks, potential LNG exporters demand long-term, multi-decade contracts from natural gas providers delivering gas at deep discounts as well as multi-decade contracts from importers insuring strong LNG premiums.

In energy-poor nations like Japan that rely upon imported gas to survive, finding customers willing to pay a premium for LNG is possible, if still difficult to do in large volume.

But there are few, if any, natural gas providers here in the U.S. willing to guarantee a meager $4-$5/mcf price for a decade or more to potential LNG exporters. If you are willing to enter the LNG game, you're doing it praying that market conditions and the deep arbitrage that exists in prices between the United States and Europe will stay that way for 20 years or more.

Quite simply, that's a risk that few, if any major energy companies are willing to take and assures that LNG will never be a major export business or a viable alternative energy source to the EU.

I talk more about this with Joe in the video above.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 25 years of oil trading experience. He is a licensed commodities trade adviser.

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