Gas market in Ukraine

Gas Transportation System and Gas Storage Facilities

The Bilche-Volycko-Uger storage facility can store more than four times as much natural gas as the largest storage facility in Germany.

Gas storage facilities of Ukraine for June 2023

Europe's risky plan to prevent the winter energy crisis for June 2023 involves the use of gas storage facilities in Ukraine.

Since last year's crisis, this high-stakes strategy has received increasing support as facilities are far enough from the front line and considered safe, and some traders believe the risk is justified.

As of May 2022

The operator of the GTS of Ukraine from May 11, 2022, against the background of a special operation of Russia in Ukraine, stopped gas transit to Europe through the Spravovka gas distribution station in the Luhansk region. Almost a third of the gas is transited through the system (up to 32.6 million cubic meters. m per day) from Russia to Europe, noted in Kyiv. There is still the possibility of diverting fuel through another key entry point, allowing European contracts to be fulfilled, although it is unclear who is responsible for making that decision.

European gas traders in 2024 avoid Ukrainian storage facilities after Russian attacks. The increased risk reduces the attractiveness of storage in the country.

After the strikes of the RF Armed Forces on infrastructure facilities in the spring of 2024, the storage capacity is about 10% of the usual level. Assurances by representatives of Naftogaz that UGS operate normally, impressions are not made on the EU.

Since the global energy market is controlled by investment funds, the seasonality of consumption is used by them to make a profit. When oil prices fall, large volumes are purchased and stored in tankers and terminals for sale at higher prices during periods of rising prices and consumption.

The situation with gas is similar - in the summer it is pumped into UGS for the purpose of subsequent sale at higher prices during the heating season. For European companies, this is a fairly marginal business, and the revenues of Naftogaz itself from storage services usually amounted to about €200 million.

By the summer of 2024, representatives of Naftogaz reduced the price for gas storage by 4 times - from €20 to €5 MW\h. However, this did not attract new customers: in the risk management strategy, European bankers financing this enterprise assess the risks of further destruction of ground infrastructure as very high.

According to a representative of the Swiss energy company Axpo Group, nothing will happen to the gas itself, but there is a possibility of not receiving it at the time of need. This is reflected in the prices for insurance coverage of such transactions.

Sources of supply

Gas purchases in Russia

Main article: Gazprom's business in Ukraine

Gas imports from Europe

2021: Gas imports to Ukraine from the EU fell 6.2 times over the year, to 2.56 billion cubic meters

At the end of 2021, imports of natural gas to Ukraine from the EU fell 6.2 times compared to 2020 and amounted to 2.56 billion cubic meters. This is evidenced by the data of the "Operator of the GTS of Ukraine" (OGTSU), which ensures the functioning of the GTS of Ukraine, integrated into the gas transmission system of Europe.

The largest volume of supplies was noted in September (0.665 billion cubic meters), July and August 2021 (0.498 billion and 0.567 billion cubic meters), as well as in January (0.439 billion cubic meters), the minimum - in March and in May - 0.008 billion cubic meters each.

Hungary became the main exporter of gas to Ukraine in 2021, from which about 2.2 billion cubic meters came. Despite the stop of physical transit to Hungary from October 1, 2021, virtual imports at the Bereg point have been preserved. Natural imports from Slovakia at the end of 2021 amounted to 285.3 million cubic meters (-97%), from Poland - 78.6 million cubic meters (-95%).

Gas imports to Ukraine from the EU decreased by 6.2 times over the year

At the same time, Ukraine also exported gas. In particular, Hungary received 1.5 billion cubic meters, Slovakia - 600 million cubic meters, Poland - 362 million cubic meters, Moldova - 67.2 million cubic meters.

According to the OGTSU, in 2021, 50 traders ordered gas transportation from the EU to Ukraine, of which 25 were Ukrainian companies and 25 foreign ones. 29 companies used short-haul services and a "customs warehouse."

According to the head of the OGTSU Sergei Makogon, Kyiv sees serious risks of further reducing the transit of Russian gas through the country, therefore, it considers it necessary to strengthen the reliability and flexibility of the gas supply system in Ukraine.

For this reason, we focused on diversifying gas supplies to Ukraine and modernization, significantly increasing investments in the Ukrainian GTS, he said.[1]

2015: Buying gas from Europe at a price higher than Russia offered

In the second quarter of 2015, reverse gas from Europe cost Naftogaz Ukrainy 11% more expensive than gas from Russia, the Ukrainian company reports. Gazprom in the second quarter supplied gas to Ukraine at a price of $247.18 per 1 thousand cubic meters. At the same time, the price of gas from Europe amounted to $275 for Ukraine per 1,000 cubic meters. m, and excluding the transport component - $267 per 1,000 cubic meters. m.

In the second quarter, Ukraine purchased 2.68 billion cubic meters. m of gas from Europe. Thus, Naftogaz Ukrainy spent $737 million on the purchase of European gas. Russian gas supplies during the reporting period amounted to 1.59 billion cubic meters. m for $393 million.

In the third quarter, Ukraine refused to purchase Russian gas at $247.18 per 1 thousand cubic meters. m, having decided to purchase European gas at a price of over $250 per 1,000 cubic meters. m.

Refusal to purchase Russian gas from July 1 cost Naftogaz Ukrainy $8.6 million, said Minister of power and Coal Industry of Ukraine Vladimir Demchishin in an interview with Tyzhden magazine. According to the minister, the cost of Russian gas, which was offered to Naftogaz Ukrainy and which Ukraine refused, was $247 per 1,000 cubic meters. m.

In July, Naftogaz Ukrainy purchased 568.3 million cubic meters. m of gas in Europe, in August - 512.4 million cubic meters. Thus, Ukraine spent $8.6 million more on reverse gas than on the gas proposed by Russia.

2013: Blocking supplies from Slovakia, agreeing route from Croatia

In June 2013, the Minister of Energy and Coal Industry of Ukraine Eduard Stavitsky reported that Gazprom was able to block supplies to Ukraine from Slovakia.

In October 2013, Naftogaz Ukrainy and the European Union agreed on a new route for gas supplies to Ukraine from Croatia through Hungarian territory along the so-called Adriatic Corridor. According to UNIAN on October 25, Eduard Stavitsky said this after negotiations in Brussels.

A day earlier, Ukrainian media wrote that Hungary, Croatia and Ukraine had agreed to expand existing pipelines to create an Adriatic corridor. How much the capacity of the gas pipeline system will increase and when work will begin is still unknown.

Negotiations on the Adriatic corridor took place against the background of reports of the suspension of imports of Polish gas: Naftogaz Ukrainy stopped cooperation with the Poles, as the price of fuel was too high.

In just nine months of 2013, Ukraine did not receive nearly Russia 1.5 billion cubic meters of gas. For comparison, monthly supplies from Russia in August amounted to 2.6 billion cubic meters.

2012: Cooperation with RWE and start of gas imports from Europe

In May 2012, Naftogaz Ukrainy became a partner of RWE Supply & Trading (part of the RWE holding). The parties signed a framework agreement that does not imply the obligatory supply. Then the volumes and timing of deliveries were not reported.

In June 2012, it became known that an agreement with the German company RWE could provide Ukraine with gas supplies in the amount of up to five billion cubic meters. This was stated by the Minister of Energy and Coal Industry of Ukraine Yuriy Boyko in an interview with Bloomberg, ITAR-TASS reports.

By buying fuel in Europe, the Ukrainian side is trying to reduce dependence on Russian gas and reduce the cost of export fuel. As Boyko recalled, Ukraine is also negotiating the possibility of obtaining liquefied natural gas (LNG) from the United States and Qatar. In addition, Kyiv is also considering the option of purchasing up to five billion cubic meters of gas from Turkmenistan "as a fee for infrastructure projects." In this case, as Boyko noted, Ukraine will need permission from Russia to use its pipelines.

At the end of 2012, Ukraine began importing gas from Europe. Thus, Kyiv tried to reduce its dependence on Gazprom, which, under a contract dated 2009, set extremely high fuel prices for Naftogaz. Gazprom has repeatedly criticized Ukraine for reverse supplies, as Europeans practically resell gas received from Russia to Kyiv.

Gas production in Ukraine

Main article: Oil and gas production

2022: Halving its own gas production amid Russia's sting operation

Ukraine has its own gas production, but due to hostilities by August 2022, it decreased by about half: most of it is in the combat zone.

In total, about 13 billion cubic meters of gas were produced in Ukraine per year, most of the fields are located in Kharkiv, Donetsk, Lugansk, Dnepropetrovsk and Poltava regions. Of these, the richest field is Shebelinskoye in the Kharkiv region, which gives about 6 billion cubic meters per year.

However, as of August 2022, according to the head of Naftogaz Ukrainy Yuriy Vitrenko, about 50% of the fields are in the combat zone. Although he previously stated that production decreased by only 7-8%, which was easily compensated by a decrease in consumption due to the loss of regions and the closure of enterprises.

Ordinary consumers are promised not to raise the cost of gas, but the industry has a much more difficult situation. If in July gas was sold to enterprises at 30 hryvnia per cubic meter, then in August - already at 45 hryvnia. And in September, the price can soar to 60 hryvnia per cubic meter. On the verge of stopping 10 sugar factories of the Ukrtsukor company.

See also

• Economy of Ukraine