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Ukraine extracts about 20 billion cubic meters of fossil gas each year, and since 2022 this has almost met demand. Ukraine has been estimated to possess natural gas reserves of over 670 billion cubic meters (in 2022), and gas is an important part of energy in Ukraine. In 2021, Ukraine produced 19.8 billion cubic meters (bcm or Gm) 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.

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. 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, 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 Russo-Ukrainian war, but instead buys it indirectly from traders in Western Europe as part of the Russian gas that transits through Ukraine. The contract to transit Russian gas expires at the end of 2024.

Domestic production

Domestic production peaked in 1975 at 68.1 billion cubic meters (bcm). Since then production gradually declined, stabilising in recent years at around 20 bcm.

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.

Ukrainian government plans predicted that by 2030 about half of Ukraine's production will come from non-traditional gas deposits (including 6–11 bcm of shale gas a year).

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.

Regions

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

• Chernihiv Oblast
• Ivano-Frankivsk Oblast
• Kharkiv Oblast
• Lviv Oblast
• Poltava Oblast
• Sumy Oblast

Proven reserves

Consumers

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.

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

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 $14–18 billion rescue package.

In the first seven months of 2014, gas consumption in Ukraine fell by 15%; this was amidst the Annexation of Crimea by the Russian Federation and the wider Russo-Ukrainian War.

Electricity generation

Imports

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. 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 have led 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 m³; the price rose to $426 per 1,000 m³ in 2012. In January 2013, Ukraine paid $430 per 1,000 m³.

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 of 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.

In 2014, due to a severe drop in the oil market price (the price halved between the middle and 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.

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 a provisional pipeline from Romania through Moldova. There is no physical reverse flow yet, but a virtual reverse flow (also known as "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 USD$3 billion per 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.

The 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.

The transit of Russian gas to Europe will probably cease at the end of 2024.

Shale gas

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 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. On 5 November 2013, Ukraine signed a $10 billion shale gas production-sharing agreement with Chevron Corporation to develop the Olesska gas field. The Ukrainian government projected that the Yuzivska and Olesska projects together could provide Ukraine with an additional 11 to 16 bcm of natural gas per year by 2018. By 2030, a production of 6–11 bcm of shale gas a year is called for in Ukrainian Government plans.

Ukraine originally expected commercial shale gas extraction to begin in 2017, 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 in the West of Ukraine due to increased geopolitical risks and a collapse in European natural gas prices.

Storage

There is 31 bcm of underground storage in Ukraine.

2022 Russian invasion

Some pipelines in Ukraine were damaged by the 2022 Russian invasion of Ukraine. However as of 2024 the gas grid is thought to be generally secure, in part due to the large amount of spare capacity.

See also

• 2022 Russia–European Union gas dispute – Fossil fuel financing-related conflicts
• Energy in Ukraine
• Russia–Ukraine gas disputes – Disputes between Naftogaz Ukrayiny and Gazprom

Notes

1. Ukraine was part of the Soviet Union from 1920 until 24 August 1991, when Ukraine declared its independence.
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 by 1.1% (year-on-year) during January–November 2009 to 19.413 billion cubic meters (bcm), with natural gas output rising 1.6% to 18.541 bcm.
3. Ukraine has lost access to the Black Sea around Crimea to Russia. The status of Crimea and of the city of Sevastopol is currently under dispute between Russia and Ukraine; Ukraine and the majority of the international community consider 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 Crimea to be a federal subject of Russia and Sevastopol to be one of Russia's three federal cities.
4. For example, through heat loss during transmission.
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". He also stated that Ukraine annually overpaid Russia USD$7 billion for natural gas.
6. In June 2013, per 1,000 m, Ukraine paid $421.7 for natural gas from Russia, $388.6 for natural gas from Germany, and $406.6 for natural gas from Hungary.
7. On 13 September 2013, Prime Minister Mykola Azarov expected that extraction of shale gas in Ukraine would begin from 2015.

References

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External links

• Ukraine - Energy Information Administration

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