Volodymyr Omelchenko, Director of Energy Programmes, Razumkov Centre
Maksym Vakulenko, Expert in LNG-Based Distributed Gas Generation Architecture
Abstract
This article makes the case for developing small-scale LNG solutions in Ukraine as a practical instrument for decentralising gas supply and strengthening the resilience of businesses and critical infrastructure under wartime conditions. Its central argument is that, in the first phase, Ukraine should not focus on building large LNG terminals. A more realistic model is a “virtual gas pipeline”: LNG delivered by LNG tanker trucks from European hubs, stored locally, regasified and supplied directly to consumer sites. In the second phase, Ukraine should develop domestic bio-LNG production based on its own biomethane potential. This approach combines energy security, economic rationality, preparation for CBAM requirements and a gradual reduction in the carbon intensity of production.
Keywords: LNG, bio-LNG, Gas-as-a-Service, virtual gas pipeline, energy decentralisation, gas transmission system, CBAM, biomethane, energy security.
1. Problem Statement
Decentralisation in Ukraine’s energy sector is no longer merely a technological trend. Under the conditions of Russia’s full-scale war, it has become a matter of survival for businesses, local communities and critical infrastructure. At the same time, many new energy projects still contain a conceptual contradiction: enterprises install autonomous electricity generation to reduce their dependence on the centralised power grid, while keeping that generation fully dependent on the centralised gas pipeline.
This creates a paradox: a facility may have its own generation capacity, yet still lack genuine fuel autonomy. If pressure in the local network falls, a gas distribution station is damaged, a section of the gas transmission system faces operational restrictions, or a local gas shortage emerges, even a modern gas-engine or cogeneration unit may become non-operational.
The scale of wartime threats to gas infrastructure is confirmed by official data. According to Naftogaz of Ukraine, since the beginning of the full-scale invasion Russia has carried out 401 attacks on the Group’s infrastructure, including 229 attacks in 2025 alone [2]. The International Energy Agency also identifies the vulnerability of Ukraine’s energy infrastructure as one of the key risks for heating seasons and for the long-term resilience of the energy system [1].
Ukraine therefore needs to move beyond a logic based solely on fixed, centralised infrastructure and towards flexible energy-supply models capable of providing redundancy, mobility and rapid deployment. One such instrument is LNG, or liquefied natural gas, deployed as a “virtual gas pipeline”.
2. LNG as a “Virtual Gas Pipeline”: What Is Being Proposed
The proposal needs to be defined precisely. In the first phase, Ukraine should not prioritise the construction of large coastal LNG terminals or major import complexes. Such projects require substantial capital, lengthy permitting procedures and specialised port infrastructure; they also carry elevated wartime risks.
A more realistic first-phase model is the delivery of LNG by LNG tanker trucks from European hubs, followed by local storage, regasification and direct supply to the consumer site. This corresponds to the logic of small-scale LNG, which is widely used internationally to supply consumers located away from pipeline networks or to provide backup fuel for critical facilities.
For Ukraine, this model is particularly valuable because it does not compete with the gas transmission system; it complements it. In this case, LNG is not a substitute for the entire gas transmission system, but a targeted insurance layer for specific consumers for whom an interruption of energy supply would mean a production shutdown, loss of revenue or a threat to essential services.
3. The Wartime Logic of LNG Deployment
Russia’s war has changed the basic assumptions on which peacetime energy projects were built. Gas transmission infrastructure, gas distribution stations, electrical substations, combined heat and power plants, large boiler houses and trunk networks are all potential targets. As a result, the critical issue is no longer only the price of energy, but the continuity of operations.
LNG makes it possible to create a local fuel reserve near the facility, organise deliveries by LNG tanker truck, rapidly deploy regasification equipment and keep generation operating even when the local gas network is damaged, overloaded or unstable. For a number of consumers, this may be the difference between continued operations and a complete shutdown of the production cycle.
The most obvious areas of application include defence-sector enterprises, food processing, pharmaceuticals, logistics, water utilities, hospitals, district heating companies, agro-processing and export-oriented manufacturing. For these consumers, energy resilience has not only commercial value, but also public significance.
| Risk | Consequence for the consumer | Role of the LNG solution |
| Damage to a gas distribution station or a local network section | Reduced or interrupted gas supply to the facility | A local LNG reserve and autonomous regasification provide a backup supply circuit |
| Overload or instability in the gas distribution network | Inability to guarantee generation output | LNG tanker-truck delivery helps maintain critical operating mode |
| Long waiting time for network connection | Delayed launch of a relocated or new production facility | LNG offers a temporary or permanent solution without building new trunk infrastructure |
| Use of diesel or LPG as backup fuel | High energy cost, logistical constraints and environmental limitations | LNG may be a more technologically convenient and economically rational alternative |
4. The Economic Rationale for LNG Solutions
The economics of LNG cannot be assessed solely by comparing the price of pipeline gas with the delivered price of LNG. Such an approach is too narrow because it ignores the cost of risk, downtime, lost contracts, penalties for non-performance and reputational consequences for businesses.
The more relevant economic question is different: how much does one day, or one week, of production stoppage caused by the absence of guaranteed energy supply cost an enterprise? For many production facilities, even a short disruption may cost more than a backup fuel solution. LNG should therefore be treated as an operational risk-management tool, not merely as an alternative to pipeline gas.
The economic rationale for LNG is visible in six key dimensions.
Avoiding downtime. If LNG enables an enterprise to maintain production during disruptions in gas or electricity infrastructure, it creates not only energy resilience, but also financial resilience.
Replacing more expensive or less efficient fuels. For consumers using diesel, fuel oil or LPG, LNG may in many cases be a more economically rational and technologically convenient solution.
Shortening commissioning timelines. Where network connection requires months or significant capital expenditure, an LNG solution can be deployed faster and with lower infrastructure risk.
Flexible CAPEX. Under a Gas-as-a-Service model, part of the capital expenditure can be shifted from the consumer’s balance sheet to the service provider, while the client pays for guaranteed fuel supply, redundancy and service.
Reducing insurance and credit risk. A company with a redundant energy model looks more resilient to banks, investors, insurers and international partners.
Preparing for carbon regulation. For exporters to the EU, energy is gradually becoming not only a production cost, but also a factor in the carbon footprint of products and in market access.
Thus, LNG should be assessed as part of the economics of continuity, redundancy, energy efficiency and risk reduction. In some cases, it may be more expensive than pipeline gas under stable conditions, but economically justified in scenarios involving high downtime costs, network instability or the replacement of diesel generation.
| Assessment criterion | Traditional approach | More appropriate approach for a wartime economy |
| Energy commodity price | Comparison of the cost of pipeline gas and LNG | Comparison of total cost of ownership, including logistics, redundancy and downtime risk |
| CAPEX | Assessment limited to equipment cost | Assessment of deployment speed, connection timelines, opportunity costs and the potential for a service model |
| Operational risk | Treated as secondary | Becomes a key factor in financial resilience |
| Environmental factor | Considered separately from economics | Affects access to capital, CBAM, ESG and export competitiveness |
5. Gas-as-a-Service as a Business Model
The Gas-as-a-Service concept means moving from the sale of fuel to the provision of a guaranteed energy service. Under this model, a business receives not only LNG as a commodity, but an integrated solution: logistics from Europe, local storage, regasification, maintenance, redundancy and operational management.
This is especially important for companies that do not have in-house LNG logistics expertise, do not wish to create a separate energy department, or are not ready to finance a full infrastructure project on their own. A service model can lower the entry barrier and deliver practical results more quickly.
In a broader format, Gas-as-a-Service can be integrated into Energy-as-a-Service: LNG supply can be combined with gas-fired generation, cogeneration, battery energy storage systems, heat pumps, energy management systems and energy-efficiency measures. This integrated approach makes it possible to move beyond simple fuel backup and towards the management of an enterprise’s overall energy resilience.
6. CBAM and Carbon Competitiveness
The European Union’s Carbon Border Adjustment Mechanism (CBAM) enters its full operational phase on 1 January 2026, following the 2023–2025 transitional period [3; 4]. For Ukrainian exporters, this means that the energy model behind production will increasingly affect the competitiveness of their goods on the EU market.
LNG is not a zero-carbon fuel and should not be presented as a final answer to Net Zero requirements. At the same time, it can serve as a transitional alternative to diesel, fuel oil or coal, particularly where it is combined with high-efficiency cogeneration, BESS, heat pumps, energy management and a subsequent transition to biomethane or bio-LNG.
For exporters, it is important not only to reduce current costs, but also to create a transparent system for accounting for energy use and emissions. In the future, the ability to prove the origin of energy, the carbon intensity of products and the existence of a credible decarbonisation pathway may determine access to contracts, capital and insurance.
7. Two Stages of Development: Imported LNG and Ukrainian Bio-LNG
Strategically, the development of LNG solutions in Ukraine should be viewed in two phases.
The first phase is the delivery of LNG by LNG tanker trucks from European LNG hubs. The European LNG market already has developed infrastructure and a high level of operational activity. According to ACER, LNG imports into the EU reached a record 146 billion cubic metres in 2025, confirming LNG’s significant role in the new architecture of European gas security [5]. For Ukraine, this creates an opportunity to use European LNG infrastructure without immediately building large domestic terminals.
The second phase is the development of domestic bio-LNG production, meaning liquefied biomethane of Ukrainian origin. Ukraine has substantial biomethane production potential. According to the Energy Community, it may exceed 20 billion cubic metres per year [6]. Other analytical estimates project Ukraine’s biomethane production potential at around 1 billion cubic metres by 2030 and 6–22 billion cubic metres by 2050 [7].
Converting part of this resource into bio-LNG could create a new model of energy independence: a local resource base, added value in communities, new jobs, reduced dependence on imports and a lower carbon footprint for products. In this logic, imported LNG is a transitional instrument of resilience, while bio-LNG is the next stage of localisation and decarbonisation.
| Stage | Model | Key effect |
| Phase 1: LNG from Europe | Delivery of LNG by LNG tanker trucks from European hubs, followed by local storage and regasification | Rapid backup for critical consumers without building large LNG terminals |
| Phase 2: Ukrainian bio-LNG | Production of biomethane from agricultural biomass and organic waste, followed by liquefaction | Localisation of the fuel base, lower carbon footprint and preparation for CBAM and ESG requirements |
8. Target Consumer Groups
LNG solutions are not a universal answer for all consumers. They should be applied where high downtime costs, infrastructure risks, limited network-connection capacity or the need for rapid backup coincide.
- Enterprises located in areas of elevated wartime or infrastructure risk, where network-pressure disruptions or damage to gas infrastructure may occur.
- Relocated businesses that need to restart production quickly without waiting for a lengthy network-connection process.
- Consumers of diesel, fuel oil or LPG for whom LNG may become a more efficient fuel solution.
- Critical infrastructure facilities: hospitals, water utilities, district heating companies, logistics hubs, and food and pharmaceutical enterprises.
- Exporters to the EU for whom the energy model is becoming a factor in CBAM, ESG, insurance and access to capital.
9. Constraints and Conditions for Success
A professional assessment of LNG solutions must consider not only their advantages, but also their constraints. LNG requires specialised logistics, compliance with industrial-safety requirements, high-quality design of storage tanks, regasifiers, metering units, control systems and emergency protection. Stable supply contracts, backup logistics routes and a qualified operator are also essential.
In addition, LNG remains a fossil fuel and should therefore not be presented as the final climate solution. Its strategic value lies in its transitional role: resilience today, preparation for bio-LNG tomorrow, a gradual reduction in carbon intensity and integration with high-efficiency energy technologies.
Successful implementation requires a clear techno-economic model, an assessment of downtime costs, an analysis of fuel alternatives, safe engineering design, transparent emissions accounting and a long-term logistics strategy.
10. Conclusions and Recommendations
The time for LNG in Ukraine has arrived not because it is a fashionable technology, but because the old logic of energy security no longer corresponds to the realities of a wartime economy. Businesses and critical infrastructure need not nominal autonomy, but genuine resilience: not only a generator, but guaranteed fuel; not only a network connection, but the ability to operate when network infrastructure is damaged or unstable.
The economic rationale for LNG lies not only in the commodity price of gas. It is reflected in avoided downtime, the replacement of more expensive fuels, shorter commissioning timelines, flexible CAPEX, lower infrastructure risk, stronger investment appeal and preparation for CBAM rules.
In the first phase, LNG delivered by LNG tanker trucks from Europe can give Ukraine a rapid instrument for backup supply and mobile energy resilience without the immediate need to build large LNG terminals. In the second phase, domestically produced bio-LNG can become part of a new Ukrainian energy model: more local, cleaner, more resilient and more competitive under European carbon regulation.
The following practical steps are advisable:
- Prepare standard techno-economic models for LNG solutions for industrial consumers, critical infrastructure and local communities.
- Develop regulatory and safety requirements for small-scale LNG complexes, local storage and regasification.
- Create Gas-as-a-Service pilot projects for enterprises with high downtime costs and elevated wartime risk.
- Integrate LNG solutions with cogeneration, BESS, heat pumps and energy management.
- Develop the biomethane sector and bio-LNG projects in parallel as the second phase of fuel-base localisation and decarbonisation.
- Build into all projects an energy and emissions accounting system compatible with CBAM and ESG reporting requirements.
References:
1. International Energy Agency. Ukraine’s Energy Security and the Coming Winter: Ukraine’s energy system under attack. IEA. URL: https://www.iea.org/reports/ukraines-energy-security-and-the-coming-winter/ukraines-energy-system-under-attack
2. Naftogaz of Ukraine. In 2025, Russia carried out 229 attacks on Naftogaz Group infrastructure. 17.02.2026. URL: https://www.naftogaz.com/en/news/v-2025-rotsi-rosiya-zdiysnyla-229-atak-na-ob-yekty-naftogaz
3. European Commission. Carbon Border Adjustment Mechanism. Taxation and Customs Union. URL: https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism_en
4. Regulation (EU) 2023/956 of the European Parliament and of the Council of 10 May 2023 establishing a carbon border adjustment mechanism. Official Journal of the European Union. 16.05.2023. URL: https://eur-lex.europa.eu/eli/reg/2023/956/oj
5. Agency for the Cooperation of Energy Regulators (ACER). Analysis of the European LNG market developments. 2026 Monitoring Report. 13.05.2026. URL: https://www.acer.europa.eu/monitoring/MMR/LNG_market_developments_2026
6. Energy Community Secretariat. Unlocking biomethane production potential in Ukraine. 07.08.2025. URL: https://www.energy-community.org/news/Energy-Community-News/2025/08/07.html
7. Bohushenko A., Epik O., Naumenko D., Łoskot-Strachota A., Zachmann G., Zaniewicz M. Harvesting Green Energy: The Potential of Ukraine-EU Biomethane Cooperation. Green Deal Ukraina, 2024. URL: https://greendealukraina.org/uk/assets/images/reports/the-potential-of-ukraine-eu-biomethane-cooperation-ukr.pdf
8. Bioenergy Association of Ukraine. Prospects of biomethane in Ukraine. 2024. URL: https://uabio.org/wp-content/uploads/2024/09/Geletukha-100GREEN-BIOMETHAVERSE-ENG-1.pdf
