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Natural gas in Ukraine

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See also: Russia–Ukraine gas disputes and Natural gas transmission system of Ukraine

Ukraine was estimated to possess natural gas reserves of over 1 trillion cubic meters,[1] and was ranked 26th among countries with proved reserves of natural gas[2] before Crimea was annexed by the Russian Federation in 2014. Its total gas reserves have been estimated at 5.4 trillion cubic meters.[3]

Ukraine stopped buying gas from Russia in 2015 due to the Russian presence in eastern Ukraine.[4] In disputes Russia has stopped gas delivery in 2006 and 2008. In 2009 80% of the European Union gas from Russia was delivered via Ukraine.

The largest domestic gas producer is UkrGasVydobuvannya, a subsidiary of the state-owned company Naftogaz. Private gas production companies in Ukraine are DTEK Oil&Gas, Ukrnaftoburinnya, Burisma, Smart Energy, Poltava Petroleum Company, Geo Alliance Group, and KUB-GAS.[5]

In 2019, Ukraine produced 20.7 billion cubic meters (bcm) of natural gas, while its annual domestic demand was 26 bcm. To satisfy domestic demand, Ukraine relies on gas imports, which totals approximately one third of its domestic demand.[6] To meet domestic demand, Ukraine plans to increase domestic natural gas output to 27 bcm. According to a report issued by the OECD, over 70% of the domestic gas production is covered by the Naftogaz subsidiary UkrGasVydobuvannya.[7] In winter demand can reach 150 mcm per day.[8]


Domestic production

See also: UkrGasVydobuvannya

Domestic production peaked in 1975 at 68.1 billion cubic meters (bcm).[3][nb 1] Since then production gradually declined and has stabilised in recent years at around 20 bcm.[3][nb 2]

Since 2011 Ukraine has been trying to raise its natural gas production levels in the Black Sea from 1 bcm in 2011 to 3 bcm in 2015.[3] In 2012 Black Sea production reached 1.2 bcm and it is predicted to rise to 1.65 bcm in 2013.[3][nb 3]

By 2030 about half of Ukraine's production will come from non-traditional gas deposits (including 6-11 bcm of shale gas a year); according to the Ukrainian Government's plans.[3]

Since 2012 Ukraine has gradually been switching from natural gas-based to coal gasification technologies developed by China.[3]

Regions

The oil and gas industry has activities in six regions of Ukraine:

Consumers

Ukraine remains a major gas consumer, ranked thirteenth in the world and fifth in Europe.[3] Heavy industry is the largest consumer of natural gas in Ukraine (accounting for 40% of domestic consumption) followed by households (over 30%) followed by communal heating systems supplying both government buildings and residential properties (20%).[3] It is estimated that 9% of gas is wasted.[3][nb 4]

Consumption levels have fallen from 118 bcm in 1991 to less than 55 bcm in 2012.[3]

Naftogaz stated that on 17 December 2013 that only four Ukrainian Oblasts (provinces) made regularly payments for natural gas.[14]

Ukraine announced on 26 March 2014 that household natural gas prices would rise by 50% from 1 May 2014 in order to receive an IMF $14bn-$18bn rescue package.[15]

In the first seven months of 2014 gas consumption in Ukraine fell by 15%;[16] this was amidst the 2014 Crimean invasion and the 2014 Russian aggression in Ukraine.[12]

Imports

Despite its own production of natural gas Ukraine still had to import about 80% of its natural gas needs in 1999.[17] After 2008 the Ukrainian volume of imports of natural gas dropped.[3] According to the latest data as of January 19th, 2022, Ukraine domestically supplies 63.8% of her own gas consumption, whereas 36.2% is imported from other countries, mainly Poland, Hungary and Germany.[18]

Traditionally Ukraine imports natural gas mainly from Turkmenistan and Russia (about two-thirds of its gas in 2012).[19][20] Since November 2012 Ukraine is diversifying its suppliers of imported natural gas.[21][3][nb 5] On 9 January 2014 Ukrainian Energy and Coal Industry Minister Eduard Stavytsky stated that Ukraine (at that time) will buy only Russian natural gas "because it's currently the most profitable".[23]

Since 16 June 2014 Russia has halted its natural gas supplies to Ukraine because Ukraine refused to pay a debt to Gazprom of $4.5 billion that had arisen after Russia denounced the 2010 Kharkiv Pact on 31 March 2014.[24] Since June 2014 Ukraine imports more natural gas from Poland and Hungary.[16]

Prices of import

After 2004 Russia began to steadily raise the price of its natural gas supplied to Ukraine, it wanted to eventually bring it in line with the rates paid by other European states.[3] Until 2005 Ukraine was charged $50 per 1,000 cm; since then the price has risen to $426 per 1,000 cm in 2012.[3] In January 2013 Ukraine paid $430 per 1,000 cm.[25][nb 6] There have been disputes over prices that lead to several economic conflicts with Russia since 1990.[27]

Then Ukrainian Prime Minister Yulia Tymoshenko and Russian Prime Minister Vladimir Putin making a joint press statement on 18 January 2009 after they reached a deal on restoring gas supplies to both Europe and Ukraine.[28]

After 2008 a rapid increase in price has raised Ukraine's annual cost of gas imports; from less than $4 billion in 2005 to $14 billion in 2011 and 2012.[3] Natural gas is Ukraine's biggest import at present and is the main cause of the country's structural trade deficit.[3]

In the 17 December 2013 Ukrainian–Russian action plan it was agreed that the cost of Russian natural gas supplied to Ukraine would be lowered to $268 per 1,000 cubic metres (this price was more than $400 in December 2013).[29][30]

During the Russo-Ukrainian War, starting in February 2014 with the Russian military invasion of Crimea, severe tensions extended to the gas sector. Eventually, the EU commissioner for energy Günther Oettinger was called in to broker a deal securing supplies to Ukraine and transit to the EU. The package signed on 30. October included Russian supplies of gas to Ukraine in the period November 2014 through March 2015, conditioned on the payment of undisputed Ukrainian gas debt ($3 billion). The price for November and December 2014 was set at $378 per thousand cubic meters, to be adjusted in January. Deliveries were to be prepaid.[31] During that winter Ukrainian monopoly Naftogaz was able to import limited quantities of gas from the EU (reverse flow from Slovakia, Poland and Hungary) at Central European hub prices, around $250 per thousand cubic meters.

Due to severe drop of oil market price (the price halved from mid-2014 to end of the year) Gazprom had to reduce the oil-linked gas price. On 9 January 2014 Naftogaz and Russia's Gazprom signed a supplement to the Russian-Ukrainian gas contract, setting the price of natural gas for Ukraine in the first quarter of 2014 at $268.5 per 1,000 cubic meters.[32]

Reverse flow

Since the end of gas purchases from the Russian Federation in November 2015, Ukraine has started to purchase natural gas from Poland, Slovakia, and Hungary, and is planning to provision a pipeline from Romania through Moldova.

The Russian Federation has refused to allow the transit of gas sales from Central Asia

Ukraine as transit route of natural gas

Main article: Natural gas transmission system of Ukraine

Ukraine remains the main transit route for Russian natural gas sold to Europe, which earns Ukraine about $3 billion a year in transit fees, making it the country's most lucrative export service.[3] Following Russia's launch of the Nord Stream pipeline, which bypasses Ukraine, gas transit volumes have been steadily decreasing.[3] In 2004 more than 120 bcm of Russian gas was transported through Ukraine; this figure dropped to just 84 bcm in 2012.[3]

Russia–Ukraine gas disputes left many countries with a significant drop in their supplies when Russia cut off all natural gas supplies passing through Ukraine in 2009 and 2006.[27][33]

Shale gas

Ukraine has Europe's third-largest shale gas reserves at 1.2 trillion cubic meters (tcm).[20] There are two potentially large shale gas fields.[20] The Yuzivska gas field located in Donetsk Oblast (province) and Kharkiv Oblast; and the Olesska field in Lviv Oblast and Ivano-Frankivsk Oblast.[20] Ukraine signed a shale gas 50-year production sharing agreement with Royal Dutch Shell on 25 January 2013 involving the Yuzivska gas field.[3][25] The $10 billion deal was the largest foreign direct investment ever for Ukraine.[25] Full shale gas production depends on successful results from 15 test wells.[25] Ukraine expects commercial shale gas extraction in 2017.[34][nb 7] On 13 September 2013 Ukrainian Prime Minister Mykola Azarov stated that the (containing all expenditures) price of shale gas will be $120–130 per 1,000 cubic meters.[35]

By 2030 a production of 6-11 bcm of shale gas a year is wanted by the Ukrainian Government plans.[3]

Storage

There is 31 bcm of underground storage.[1]

2022 Russian invasion

Russia damaged some pipelines in Ukraine, after it invaded Ukraine.[36]

See also

Notes

  1. ^ Ukraine was part of the Soviet Union since 1920 till Ukraine declared its independence from the Soviet Union on 24 August 1991.[9]
  2. ^ In 2008 Ukraine's gas production was 21.014 bcm with natural gas output rising 1.7% to 19.985 bcm. Ukraine boosted gas production with 1.1% during January–November 2009 year-on-year to 19.413 billion cubic meters (bcm), with natural gas output rising 1.6% to 18.541 bcm.[10]
  3. ^ Ukraine has lost access to the Black Sea around Crimea to Russia.[11][12] The status of the Crimea and of the city of Sevastopol is currently under dispute between Russia and Ukraine; Ukraine and the majority of the international community consider the Crimea to be an autonomous republic of Ukraine and Sevastopol to be one of Ukraine's cities with special status, while Russia, on the other hand, considers the Crimea to be a federal subject of Russia and Sevastopol to be one of Russia's three federal cities.[11][12][13]
  4. ^ For example through heat loss during transmission.[3]
  5. ^ On 18 June 2013 Prime Minister Mykola Azarov stated “We currently buy gas from RWE and pump it through Poland, Slovakia and Hungary. This gas costs us less than the Russian gas that we buy on the border with Russia, and RWE sells us the same gas that it buys from Russia”.[22] He also stated that Ukraine annually overpayd Russia $7 billion for natural gas.[22]
  6. ^ In June 2013 Ukraine paid $430 per 1,000 cm $421.7 for natural gas from Russia, $388.6 for natural gas from Germany and $406.6 for natural gas from Hungary.[26]
  7. ^ On 13 September 2013 Prime Minister Mykola Azarov expected that from 2015 extraction of shale gas will begin (in Ukraine).[35]

References

  1. ^ a b "The Forgotten Potential of Ukraine's Energy Reserves". Harvard International Review. 2020-10-10. Retrieved 2022-02-27.
  2. ^ Country Comparison :: Natural gas - proved reserves, CIA World Factbook (1 January 2018 est)
  3. ^ a b c d e f g h i j k l m n o p q r s t u v w Kyiv’s gas strategy: closer cooperation with Gazprom or a genuine diversification Archived 2013-10-23 at the Wayback Machine, Centre for Eastern Studies (15 July 2013)
  4. ^ "Naftogaz open letter: a year without gas imports from Russia". www.naftogaz.com. Retrieved 31 August 2018.
  5. ^ [1] Archived 2020-09-29 at the Wayback Machine Associations of Gas Producers of Ukraine
  6. ^ [2], Kiev Post: Why Uraine Gas Production is So Low
  7. ^ [3], OECD Report on SOE Reform in the Hydrocarbons Sector in Ukraine
  8. ^ Reuters (2022-02-24). "Factbox: Ukraine's energy options limited in event of Russian gas disruption". Reuters. Retrieved 2022-02-27. {{cite news}}: |last= has generic name (help)
  9. ^ A History of Ukraine: The Land and Its Peoples by Paul Robert Magocsi, University of Toronto Press, 2010, ISBN 1442610212 (page 563/564 & 722/723)
  10. ^ Ukraine boosts gas production 1.1% up to November, Kyiv Post (December 10, 2009)
  11. ^ a b Gutterman, Steve (18 March 2014). "Putin signs Crimea treaty, will not seize other Ukraine regions". Reuters.com. Retrieved 26 March 2014.
  12. ^ a b c Ukraine crisis timeline, BBC News
  13. ^ UN General Assembly adopts resolution affirming Ukraine's territorial integrity Archived 2018-03-04 at the Wayback Machine, China Central Television (28 March 2014)
  14. ^ Only four regions regularly paying for gas in Ukraine – Naftogaz official, Interfax-Ukraine (17 December 2013)
  15. ^ Buckley, Neil (27 March 2014). "IMF pledges $14bn-$18bn rescue package for Ukraine". Financial Times.
  16. ^ a b Ukraine imports 221 mln cubic meters of gas from Europe in July - Ukrtransgaz, Interfax-Ukraine (7 August 2014)
  17. ^ Ukraine at the Crossroads: Economic Reforms in International Perspective by Axel Siedenberg (Editor), Lutz Hoffmann, Physica-Verlag Heidelberg, 1999, ISBN 3790811890/ISBN 978-3790811896 (page 393)
  18. ^ The World Factbook
  19. ^ Europe Review 2003/4: The Economic and Business Report, Kogan Page, 2004, ISBN 0749440678/ISBN 978-0749440671 (page 384)
  20. ^ a b c d Ukraine picks Shell, Chevron to develop shale gas fields, Reuters (11 May 2012)
  21. ^ Naftogaz to buy 18 b cubic meters of gas from Gazprom in 2014, says Bakulin, Interfax-Ukraine (13 June 2013)
    Naftogaz Ukrainy buys 320-350 mcm of gas from Gazprom in May, says Stavytsky, Interfax-Ukraine (13 June 2013)
    German RWE ready to supply gas to Ukraine via Slovakia, Interfax-Ukraine (14 June 2013)
    Ukraine hopes for diversification of gas supply sources and emergence of new suppliers, Interfax-Ukraine (17 June 2013)
    Ukraine to continue diversification of energy supplies, says president, Interfax-Ukraine (30 August 2013)
  22. ^ a b Azarov: Russian gas from RWE costs Ukraine $100 less than gas bought on border with Russia, Interfax-Ukraine (18 June 2013)
  23. ^ Ukraine to buy only Russian gas due to advantageous price - energy minister, Interfax-Ukraine (9 January 2014)
  24. ^ State Duma approves denunciation of Russian-Ukrainian agreements on Black Sea Fleet, ITAR-TASS (31 March 2014)
    https://www.bloomberg.com/news/2014-04-03/russia-to-charge-ukraine-more-than-germany-as-gas-discounts-end.html
    Ukraine crisis: Russia halts gas supplies to Kiev, BBC News (16 June 2014)
    Ukraine crisis: Russia halts gas supplies to Kiev, BBC News (16 June 2014)
    Russia Cuts Gas to Ukraine While Maintaining Flow to EU , Bloomberg News (16 June 2014)
  25. ^ a b c d Ukraine set to sign landmark $10 billion shale gas deal with Shell, Reuters (24 January 2013)
    Shell for shale: Ukraine signs major deal, Euronews (25 January 2013)
    UPDATE 1-Ukraine signs landmark $10 bln shale gas deal with Shell, Reuters (24 January 2013)
  26. ^ Ukraine pays $397.7 for gas from Europe in June, $421.7 from Russia, Interfax-Ukraine ( August 2013)
  27. ^ a b Country profile: Ukraine, BBC News
  28. ^ "'Gas to flow' after Moscow deal". BBC News. January 18, 2009. Archived from the original on 17 January 2009. Retrieved January 18, 2009.
  29. ^ Russia cuts Ukraine gas price by a third, BBC News (17 December 2013)
  30. ^ Ukraine to issue Eurobonds; Russia will purchase $15 bln, says Russian finance minister, Interfax-Ukraine (17 December 2013)
  31. ^ Russia-Ukraine gas deal secures EU winter supply, BBC (31 October 2014)
  32. ^ Naftogaz, Gazprom sign supplement to gas contract, set gas price for Ukraine in Q1, 2014 at $268.5 per 1,000 cubic meters - Stavytsky, Interfax-Ukraine (9 January 2014)
  33. ^ "EU reaches gas deal with Ukraine". BBC News. 1 August 2009. Retrieved 1 August 2009.
    "Ukraine 'stealing Europe's gas'". BBC. 2 January 2006. Retrieved 16 December 2008.
    The Russo-Ukrainian gas dispute of January 2009: a comprehensive assessment Archived 2009-10-15 at the Wayback Machine page 53-55 Oxford Institute for Energy Studies, Retrieved on October 13, 2009
    "Ukraine 'stealing Europe's gas'". BBC. 2006-01-02. Retrieved 2008-12-16.
  34. ^ "Ukraine sees 2017 for commercial shale gas output". Reuters. 16 May 2012.
  35. ^ a b Shale gas extraction in Ukraine to start in 2015, says premier, Radio Ukraine (16 September 2013)
  36. ^ https://www.abc.net.au/news/2022-02-27/russia-ukraine-war-live-blog-updates-kyiv/100865142
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