Ukraine managed to maintain stability in the gas sector even during a full-scale war. In particular, this was achieved thanks to imported supplies and expansion of own production.
Ukraine refused direct supplies of Russian gas back in November 2015. This decision is supported to this day, and is confirmed by "Ukrtransgaz", which keeps a "still alive" counter that counts for 3118 days already. Thus, Ukraine has successfully operated without gas from its former supplier for almost nine years.
During this time, the Ukrainian gas market underwent significant changes, including reforms in Naftogaz, which ceased to be unprofitable. Before 2014, Ukraine imported significant volumes of gas under favorable terms from Gazprom, but after 2015, this happened only from European sources.
"Ukraine buys gas on the European market, all agreements and contracts are concluded with European counterparties. Ukraine's principled position is not to have agreements and contracts for the purchase of gas with Russia's Gazprom, because the Kremlin has been using gas as a political weapon for a long time," explained Andrii Gerus, head of the parliamentary committee on energy issues, in May 2022.
Previously, the Kremlin was counting on Ukraine to comply on the gas issue, but this did not happen. However, the country was able to successfully supply gas thanks to imports from other sources and the growth of its own production.
Recently, Ukraine consumed approximately 30 billion cubic meters of gas per year, of which roughly a third was imported supplies from Europe. This is different from 2013, when consumption was significantly higher and imports from Russia amounted to about 30 billion cubic meters.
Rejection of direct supplies from the aggressor country brought Ukraine not only market, but also energy and political independence. However, closing the gate was only the beginning, as the contract with discriminatory terms ran until 2019.
According to this contract, Ukraine had to buy 52 billion cubic meters of gas or pay a fine. However, prices were tied to oil prices, which made gas more expensive than on the European market. This situation made it difficult to fulfill the terms of the contract, which led to an increase in the debt to Russia to 50 billion dollars.
The settlement of this issue was thanks to the Stockholm arbitration, which in February 2018 decided to advance Naftogaz and awarded almost 5 billion dollars. Part of this amount was paid in money by the Russian side, and the rest remained credited for the gas delivered in 2014.
Learning that Moscow can blackmail Kyiv and demand political concessions for gas supplies prompted the search for alternative suppliers. Talks about the possibility of obtaining gas from Europe began already during the gas war of 2009, but they were actually implemented in the spring of 2014, when European companies agreed to deliveries through Poland, Hungary and Slovakia.
As a result, in 2014, 5 billion cubic meters of gas were imported from the western border. These deliveries were a real reversal, since the contracts at the time provided for the control of electronic measuring devices at the exit from the Ukrainian GTS, which belonged to the Russians, and for the reversal it was necessary to create loops across the border.
In general, in 2014, a quarter of Ukraine's gas imports came from Europe, with the rest coming from Gazprom. However, the following year Gazprom's share in the structure of Ukrainian imports dropped to zero.
In 2020, a virtual reversal began, when the gas flows mutually healed each other. Through the Ukrainian GTS, Russian gas reached European countries, and Ukraine, according to the agreements, received a certain amount for its storage facilities, without physically leaving the pipelines.
However, the Russian-Hungarian contract stopped the possibility of a virtual reversal from Hungary. At that time, the gas supply routes were as follows:
- Poland - point "Hermanowychy"
- Slovakia - point "Budynce"
- Romania - point "Orlivka"
- Moldova - points "Kaushany" and "Oleksiivka"
These European routes increased Ukraine's energy security in the face of full-scale war. According to the data of the GTS Operator, in 2023 more than 4.3 billion cubic meters of gas arrived from the countries of the European Union and Moldova, which is twice as much as in 2022. This is a significant number, considering that the level of gas consumption in 2023 was 19.8 billion cubic meters.
The main volumes of gas arrived during the pumping season to PSG. Approximately 42% of the total volume came from Slovakia, 31% from Hungary, 14% from Poland, and 13% from Romania-Moldavia.
Work is currently underway to expand reverse capacity, in particular, through the Trans-Balkan pipeline in cooperation with Romania and Moldova. Also, in July, a new phase of the "Vertical Corridor" initiative will be launched with the participation of operators of gas transportation systems in Central, Southern, and Eastern Europe.
The full-scale war caused a drop in gas consumption by 30% - from 28.7 billion cubic meters in 2021 to 19.8 billion in 2023. The main part of this decline - almost 60% - fell on industry. As a result, Ukraine for the first time provided itself with gas during the winter at the expense of its own resources.
"Historical event. Ten years ago, no one would have believed this. Two years ago, when a full-scale war began, it was also hard to believe," Naftogaz head Oleksiy Chernyshov said in March.
Extraction of natural gas has always been a challenge for Ukraine, which became even more difficult during the period of independence due to Russia's hybrid war. After the invasion in February 2022, production suddenly dropped by almost 10%. Part of the deposits are controlled by the occupiers, while others are stopped due to the approach to the front.
The largest gas fields are located in the Kharkiv and Poltava regions, such as Shebelinsk, Zahidno-Khrestishchensk and Yefremivsk, with total reserves of more than 970 billion cubic meters. Approximately 17% of production is in deposits in the Ivano-Frankivsk region.
The company "Ukrgazvydobuvannya" managed to restrain the volume of production, avoiding a sharp decline, which was observed in the private sector. In 2023, it showed stable growth. If 2022 was timed to stabilize production, then in 2023 there was a confident increase, exceeding the indicators not only of the previous year, but also of 2021 before the full-scale invasion.
As a result, Ukraine increased gas production by 0.9% in 2023, reaching 18.7 billion cubic meters. Of this amount, Ukrgazvydobuvannya extracted 13.9 billion cubic meters, Ukrnafta - almost 1.1 billion, and the remaining 3.7 billion belong to private companies.
According to the Minister of Energy Herman Galushchenko, Ukraine can be self-sufficient in gas from its own production already in 2024.
"We are very close to it. There are real chances to achieve a zero gas balance already this year... It is important to understand that our consumption has decreased significantly. Much will depend on the further development of the industry and the economy," he said in a January interview with Reuters.
As last year, increasing gas production remains the main priority.
"Our goal for 2024 is to increase natural gas production by at least half a billion cubic meters. We are speeding up the process of drilling new wells and using advanced technologies both for geological research and for efficient production," Oleksiy Chernyshov emphasized in March.
As a result, in February "Ukrgazvydobuvannya" reached the highest level of daily production in the last five years. In particular, according to the results of February 8, 2024, the company received 38.54 million cubic meters of commercial gas.
"This is an impressive result, achieved due to the commissioning of a record number of new wells, including a significant number of high-throughput wells, which provide production of more than 100 thousand cubic meters per day," he added.
In April, the Naftogaz group set a historical record for monthly drilling. During the second month of spring, the Ukrburgaz Drilling Department drilled more than 40,000 meters of wells. This figure was 24% higher than the previous all-time high for penetration, set in November 2023.
In May, Ukrgazvydobuvannya commissioned two high-throughput wells at one of the deepest fields in eastern Ukraine. In total, they give 390 thousand cubic meters per day. These wells were drilled on the same layer and almost simultaneously, so they are called "twins" in technical slang.
Moreover, they were also drilled in record time. Previously, drilling wells more than 6,000 meters deep took two to three years. These were ready in 8 months. As specified in Naftogaz in May, in 2024 it is planned to reach 15 billion cubic meters of annual production. In general, in the first five months of this year, Ukrgazvydobuvannya increased natural gas production by 10% compared to the same period in 2023.
In total, since the beginning of the year, Ukrgazvydobuvannya has launched 36 new wells, including 11 high-throughput wells. If the pace is maintained, the plans will most likely be implemented.
