Natural gas in Ukraine
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Ukraine has been estimated to possess natural gas reserves of over 1 trillion cubic meters and in 2018 was ranked 26th among countries with proved reserves of natural gas. Its total gas reserves have been estimated at 5.4 trillion cubic meters. In 2021, Ukraine produced 19.8 billion cubic meters (bcm or Gm3) of natural gas. To satisfy domestic demand of 27.3 bcm that year, Ukraine relied on gas imports (2.6 bcm) and withdrawal from underground storage (4.9 bcm). Winter demand can reach 150 mcm per day. To meet domestic demand, Ukraine plans to increase domestic natural gas output to 27 bcm.
During Soviet times, Ukraine produced a record of 68.7 bcm in 1976. At the time of independence in 1991 production was at 26.6 bcm, and fell in the 1990s to about 18 bcm. Since the mid-2000s production has stabilised between 20 and 21 bcm. According to a report issued by the OECD, over 70% of domestic gas production is extracted by 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.
Ukraine stopped buying gas from Russia in November 2015 to reduce gas dependence after the outbreak of the Ukraine crisis, but instead buys it indirectly from traders in Western Europe as part of the Russian gas that transits through Ukraine. In earlier disputes in 2006 and 2008 Russia stopped gas delivery to the country. In 2009 80% of the European Union gas from Russia was delivered via Ukraine as transit country.
Ukraine aimed to increase natural gas production in the Black Sea from 1 bcm in 2011 to 3 bcm in 2015. In 2012 Black Sea production reached 1.2 bcm and was predicted to rise to 1.65 bcm in 2013.[nb 3]
In 2012 Naftogaz and China Development Bank signed a deal to switch power and chemical production plants from natural gas to coal gasification technologies developed by China in order to reduce reliance on imported gas.
The oil and gas industry has activities in six regions of Ukraine:
|Autonomous Republic of Crimea||16761|
Ukraine is a major natural gas consumer, being ranked thirteenth in the world and fifth in Europe. Consumption levels have fallen from 118 bcm in 1991 to less than 55 bcm in 2012, and from 50.4 bcm in 2013 to 29.8 bcm in 2019. Heavy industry is the largest consumer of natural gas in Ukraine (accounting for 40% of domestic consumption) followed by households (over 30%) and communal heating systems for government buildings and residential properties (20%). It is estimated that 9% of gas is wasted.[nb 4]
Despite its own production of natural gas Ukraine still had to import about 80% of its natural gas needs in 1999. After 2008 the Ukrainian volume of imports of natural gas dropped. According to estimates from 2017, Ukraine domestically supplies 63.8% of its own gas consumption, whereas 36.2% is imported from other countries. Traditionally Ukraine imported natural gas mainly from Turkmenistan and Russia (about two-thirds of its gas in 2012). Since November 2012 Ukraine has diversified its suppliers of imported natural gas.[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".
On 16 June 2014 Russia 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. In June 2014 Ukraine increased imports of natural gas from Poland and Hungary. Ukraine has not bought gas directly from Russia since 2015, sourcing it instead from traders of the gas which is transported through Ukraine to be sold elsewhere in Europe.
Prices of import
Disputes over gas prices lead to several economic conflicts with Russia since 1990. After 2004 Russia began to steadily raise the price of its natural gas exports to Ukraine, aiming to bring prices in line with the rates paid by other European states. Until 2005 Ukraine was charged $50 per 1,000 cm; the price rose to $426 per 1,000 cm in 2012. In January 2013 Ukraine paid $430 per 1,000 cm.[nb 6]
These rapid price increases raised Ukraine's annual cost of gas imports from less than $4 billion in 2005 to $14 billion in 2011 and 2012. Natural gas is Ukraine's biggest import at present and is the main cause of the country's structural trade deficit.
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 from a price of more than $400 in December 2013.
During the Russo-Ukrainian War which started in February 2014 with the Russian military invasion of Crimea, severe tensions extended to the gas sector. 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 2014 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. 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.
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. There is no physical reverse flow yet, but a virtual reverse flow, aka "netting". Ukraine buys natural gas from international gas traders as part of the volumes that Gazprom sends westwards through Ukraine as transit country.
The Russian Federation has refused to allow the transit of gas sales from Central Asia.
Ukraine as transit route of natural gas
In 2020, Ukraine transited more natural gas than any other country in the world and it 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. Following Russia's launch of the Nord Stream pipeline, which bypasses Ukraine, gas transit volumes have been steadily decreasing. In 2004 more than 120 bcm of Russian gas was transported through Ukraine; this figure dropped to just 84 bcm in 2012.
Ukraine's largest natural gas fields are about 80-85% depleted although there are still large quantities of unexploited gas reserves stored in hard-to-reach areas or solid rock. Ukraine has Europe's third-largest shale gas reserves at 1.2 trillion cubic meters (tcm). There are two potentially large shale gas fields. The Yuzivska gas field located in Donetsk Oblast (province) and Kharkiv Oblast, and the Olesska gas field in Lviv Oblast and Ivano-Frankivsk Oblast. Ukraine signed a 50-year production sharing agreement with Royal Dutch Shell on 25 January 2013 involving the Yuzivska shale gas field. The $10 billion deal was the largest foreign direct investment ever for Ukraine. Full shale gas production was expected to depend on successful results from 15 test wells. 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. Ukraine originally expected commercial shale gas extraction to begin in 2017,[nb 7] but Shell pulled out of the Yuzivska project in 2015 as a consequence of the war in the Donbas region, located near the field, a collapse in European natural gas prices, and opposition from local residents. Similarly, Chevron abandoned the Olesska project due to increased geopolitical risks and a collapse in European natural gas prices.
There is 31 bcm of underground storage in Ukraine.
2022 Russian invasion
- 2022 Russia–European Union gas dispute – Fossil fuel financing-related conflicts
- Energy in Ukraine – Energy and electricity production, consumption and import in Ukraine
- Russia–Ukraine gas disputes – Disputes between Naftogaz Ukrayiny and Gazprom
- Ukraine was part of the Soviet Union since 1920 till Ukraine declared its independence from the Soviet Union on 24 August 1991.
- 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.
- Ukraine has lost access to the Black Sea around Crimea to Russia. 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.
- For example through heat loss during transmission.
- 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". He also stated that Ukraine annually overpayd Russia $7 billion for natural gas.
- 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.
- On 13 September 2013 Prime Minister Mykola Azarov expected that from 2015 extraction of shale gas will begin (in Ukraine).
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Ukraine has not imported gas directly from Russia since 2015, but it buys it from Western traders as part of the Russian gas that goes through Ukrainian territory to Europe. [..] If Russia maintains gas transit through Ukraine and transit gas pipelines remain operational, Ukraine is able to provide the population and industry with gas. [..] In theory, gas could be imported at up to 40 mcm per day, but this is barely feasible due to a lack of freely available resources in Europe and funds to buy it.
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Figure: Ukraine's gas production in 1991-2019, billion cubic meters
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Today is the first anniversary since Naftogaz stopped importing gas from Russia.
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According to preliminary data from the Central Dispatching Department, Poland exported 118 million cubic meters of gas to Ukraine, and Hungary - 103 million cubic meters. Total gas imports from Russia and Europe were 2.126 billion cubic meters (bcm) in July.
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Natural gas - production 19.73 billion cu m (2017 est.); Natural gas - consumption 30.92 billion cu m (2017 est.); Natural gas - imports 12.97 billion cu m (2017 est.)
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Ukraine will currently buy only Russian natural gas as its price is the best for the country, Energy and Coal Industry Minister Eduard Stavytsky has said.
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