Regions
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The oil and gas industry has activities in six regions of Ukraine:
Ukraine extracts about 20 billion cubic meters of fossil gas each year, and since 2022 this has almost met demand. [1] Ukraine has been estimated to possess natural gas reserves of over 670 billion cubic meters (in 2022), [2] and gas is an important part of energy in Ukraine. 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. [3]
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. [4] Over 70% of domestic gas production is extracted by UkrGasVydobuvannya, [5] 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. [6]
Ukraine stopped buying gas from Russia in November 2015 to reduce gas dependence after the outbreak of the Russo-Ukrainian war, [7] but instead buys it indirectly from traders in Western Europe as part of the Russian gas that transits through Ukraine. [3] The contract to transit Russian gas expires at the end of 2024. [8]
Domestic production peaked in 1975 at 68.1 billion cubic meters (bcm). [9] [nb 1] Since then production gradually declined, stabilising in recent years at around 20 bcm. [9] [nb 2]
Ukraine aimed to increase natural gas production in the Black Sea from 1 bcm in 2011 to 3 bcm in 2015. [9] In 2012, Black Sea production reached 1.2 bcm and was predicted to rise to 1.65 bcm in 2013. [9] [nb 3]
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). [9]
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. [9]
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The oil and gas industry has activities in six regions of Ukraine:
| Region | Millions m3 |
|---|---|
| Kharkiv Oblast | 317,630 |
| Poltava Oblast | 270,868 |
| Lviv Oblast | 72,272 |
| Black Sea | 37,506 |
| Ivano-Frankivsk Oblast | 30,556 |
| Sumy Oblast | 29,443 |
| Autonomous Republic of Crimea | 16,761 |
| Dnipropetrovsk Oblast | 13,079 |
| Luhansk Oblast | 12,591 |
| Chernihiv Oblast | 9,296 |
| Chernivtsi Oblast | 3,408 |
| Zaporizhzhia Oblast | 2,987 |
| Zakarpattia Oblast | 1,289 |
| Volyn Oblast | 1,022 |
| Odesa Oblast | 137 |
| Donetsk Oblast | 84 |
| Azov Sea | 14 |
Ukraine is a major natural gas consumer, being ranked thirteenth in the world and fifth in Europe. [9] Consumption levels have fallen from 118 bcm in 1991 to less than 55 bcm in 2012, [9] and from 50.4 bcm in 2013 to 29.8 bcm in 2019. [16] 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%). [9] It is estimated that 9% of gas is wasted. [9] [nb 4]
Naftogaz stated on 17 December 2013 that only four Ukrainian Oblasts (provinces) made regular payments for natural gas. [17]
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. [18]
In the first seven months of 2014, gas consumption in Ukraine fell by 15%; [19] this was amidst the Annexation of Crimea by the Russian Federation and the wider Russo-Ukrainian War. [13]
Despite its own production of natural gas, Ukraine still had to import about 80% of its natural gas needs in 1999. [22] After 2008, the Ukrainian volume of imports of natural gas dropped. [9] According to estimates from 2017, Ukraine domestically supplies 63.8% of its own gas consumption, whereas 36.2% is imported from other countries. [23] Traditionally, Ukraine imported natural gas mainly from Turkmenistan and Russia (about two-thirds of its gas in 2012). [24] [25] Since November 2012, Ukraine has diversified its suppliers of imported natural gas. [26] [9] [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". [28]
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. [29] In June 2014, Ukraine increased imports of natural gas from Poland and Hungary. [19] 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. [3]
Disputes over gas prices have led to several economic conflicts with Russia since 1990. [30] 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. [9] Until 2005, Ukraine was charged $50 per 1,000 m³; the price rose to $426 per 1,000 m³ in 2012. [9] In January 2013, Ukraine paid $430 per 1,000 m³. [31] [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. [9] Natural gas is Ukraine's biggest import at present and is the main cause of the country's structural trade deficit. [9]
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. [34] [35]
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. [36] 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. [37]
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.[ citation needed ] There is no physical reverse flow yet, [38] [39] 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. [3]
The Russian Federation has refused to allow the transit of gas sales from Central Asia.[ citation needed ]
In 2020, Ukraine transited more natural gas than any other country in the world, [16] 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. [9] Following Russia's launch of the Nord Stream pipeline, which bypasses Ukraine, gas transit volumes have been steadily decreasing. [9] In 2004, more than 120 bcm of Russian gas was transported through Ukraine; this figure dropped to just 84 bcm in 2012. [9]
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. [30] [40]
The transit of Russian gas to Europe will probably cease at the end of 2024. [41]
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. [42] Ukraine has Europe's third largest shale gas reserves, at 1.2 trillion cubic meters (tcm). [25]
There are two potentially large shale gas fields. [25] The Yuzivska gas field located in Donetsk Oblast and Kharkiv Oblast, and the Olesska gas field in Lviv Oblast and Ivano-Frankivsk Oblast. [25] Ukraine signed a 50-year production sharing agreement with Royal Dutch Shell on 25 January 2013 involving the Yuzivska shale gas field. [9] [31] The $10 billion deal was the largest foreign direct investment ever for Ukraine. [31] Full shale gas production was expected to depend on successful results from 15 test wells. [31] 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. [43] On 5 November 2013, Ukraine signed a $10 billion shale gas production-sharing agreement with Chevron Corporation to develop the Olesska gas field. [44] 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. [44] By 2030, a production of 6–11 bcm of shale gas a year is called for in Ukrainian Government plans. [9]
Ukraine originally expected commercial shale gas extraction to begin in 2017, [45] [nb 7] but Shell pulled out of the Yuzivska project in 2015 as a consequence of the war in the Donbas region, [46] located near the field, a collapse in European natural gas prices, [16] and opposition from local residents. [42] Similarly, Chevron abandoned the Olesska project in the West of Ukraine due to increased geopolitical risks and a collapse in European natural gas prices. [16]
There is 31 bcm of underground storage in Ukraine. [2]
Some pipelines in Ukraine were damaged by the 2022 Russian invasion of Ukraine. [47] However as of 2024 the gas grid is thought to be generally secure, in part due to the large amount of spare capacity. [48]
PJSC Gazprom is a Russian majority state-owned multinational energy corporation headquartered in the Lakhta Center in Saint Petersburg. The Gazprom name is a contraction of the Russian words gazovaya promyshlennost. In January 2022, Gazprom displaced Sberbank from the first place in the list of the largest company in Russia by market capitalization. In 2022, the company's revenue amounted to 8 trillion rubles.
The Russia–Ukraine gas disputes refer to a number of disputes between Ukrainian oil and gas company Naftogaz Ukrayiny and Russian gas supplier Gazprom over natural gas supplies, prices, and debts. These disputes have grown beyond simple business disputes into transnational political issues—involving political leaders from several countries—that threaten natural gas supplies in numerous European countries dependent on natural gas imports from Russian suppliers, which are transported through Ukraine. Russia provides approximately a quarter of the natural gas consumed in the European Union; approximately 80% of those exports travel through pipelines across Ukrainian soil prior to arriving in the EU.
RosUkrEnergo is a Swiss-registered venture company that transports natural gas from Turkmenistan to East European countries. 50% of the company is owned by Gazprom, through its subsidiary Swiss-registered Rosgas Holding A.G., and another 50% by Swiss-registered private company Centragas Holding A.G., acting on behalf of a consortium of GDF Group owned by Dmytro Firtash and Ivan Fursin.
Naftogaz of Ukraine is the largest national oil and gas company of Ukraine. It is a state-owned company subordinated to the Government of Ukraine. The vertical-integrated company carries out a complete cycle of exploration operations and development of deposits, operating and exploratory drilling, extraction, transportation, and refinement of natural gas and crude oil, supply of natural and liquefied gas to consumers.
Polskie Górnictwo Naftowe i Gazownictwo S.A., abbreviated to PGNiG, was a Polish state-controlled oil and gas company, headquartered in Warsaw, Poland. The company has branches and representative offices in Russia, Pakistan, Belarus and Ukraine and holds equity interests in some 30 subsidiaries, including providers of specialist geophysical, drilling and well services.
Energy in Bulgaria is among the most important sectors of the national economy and encompasses energy and electricity production, consumption and transportation in Bulgaria. The national energy policy is implemented by the National Assembly and the Government of Bulgaria, conducted by the Ministry of Energy and regulated by the Energy and Water Regulatory Commission. The completely state-owned company Bulgarian Energy Holding owns subsidiaries operating in different energy sectors, including electricity: Kozloduy Nuclear Power Plant, Maritsa Iztok 2 Thermal Power Plant, NEK EAD and Elektroenergien sistemen operator (ESO); natural gas: Bulgargaz and Bulgartransgaz; coal mining: Maritsa Iztok Mines. In Bulgaria, energy prices for households are state-controlled, while commercial electricity prices are determined by the market.
The 2005–06 Russia–Ukraine gas dispute was between Ukrainian state-controlled oil and gas company Naftogaz Ukrainy and Russian national gas supplier Gazprom. The disagreements concerned natural gas supplies, prices and debts. The conflict started in March 2005, ended in January 2006 and, in addition to the gas companies, involved politicians from both countries.
In 2009, Russian natural gas company Gazprom refused to conclude a supply contract unless Ukrainian gas company Naftogaz paid its accumulating debts for previous gas supplies. The dispute began in the closing weeks of 2008 with a series of failed negotiations, and on January 1, 2009 Russia cut off gas supplies to Ukraine. On January 7 the dispute turned to crisis when all Russian gas flows through Ukraine were halted for 13 days, completely cutting off supplies to Southeastern Europe, most of which depends on Russian gas, and partially to other European countries.
The 2004 Russia–Belarus energy dispute was a commercial and diplomatic dispute between Russia and Belarus that escalated in January 2004. Close relations between the two countries and willingness for political integration had made it possible for Belarus to purchase gas from Russia at heavily discounted prices. In the late 1990s, Russian foreign policy shifted away from geopolitics and became more pragmatic and economical, especially after the inauguration of President Vladimir Putin. As a result, Gazprom moved to ensure the reliability of gas transits to Europe by attempting to establish control over the Belarusian transit network. Belarus initially agreed to sell 50% of the network, but after disagreements over price, Belarus severed the contract. Gazprom announced price rises, and after Belarus refused, Gazprom ceased to import gas to Belarus on 1 January 2004. Belarus compensated by siphoning from gas meant for transit to Europe, which on 18 February resulted in Gazprom completely shutting off the supply to Belarus. Other companies supplied Belarus on short-term contracts until June 2004, when a new contract with Gazprom was finally signed.
The Pallas gas field is an offshore natural gas field located on the continental shelf of Ukraine in the north-eastern part of the Black Sea. It covers area of 162 square kilometres (63 sq mi). The estimated 157 billion cubic meters of natural gas in place. Recoverable reserves are estimated 75 billion cubic meters of natural gas and 490 million metric tons of oil.
Energy in Ukraine is mainly from gas and nuclear, followed by oil and coal. Ukraine has a diversified energy mix, and no fuel takes up more than a third of the country’s energy sources. Most gas and oil is imported, but since 2015 energy policy has prioritised diversifying energy supply.
The 17 December 2013 Russian–Ukrainian action plan was a de facto defunct proposed agreement between the Russian President Vladimir Putin and former Ukrainian President Viktor Yanukovych publicized on 17 December 2013 whereby Russia would buy $15 billion of Ukrainian eurobonds to be issued by Ukraine and that the cost of Russian natural gas supplied to Ukraine would be lowered to $268 per 1,000 cubic metres. The treaty was signed amid the escalating Euromaidan movement which sought closer ties between Ukraine and the European Union. The interest rate on the loan would be renegotiated every three months, based on a verbal agreement between the two leaders.
Chornomornaftogaz is an oil and gas company located along Krymgazseti in Simferopol, Crimea. The company was established with the order of the Ministry of Gas Industry of the USSR on 20 October 1978 №209-org to develop oil and gas resources in the Black Sea and the Sea of Azov.
The Oleska shale gas deposit is an unconventional gas area in Lviv, Ivano-Frankivsk and Ternopil oblasts in Ukraine. It will begin production in 2017 and will produce natural gas and condensates. The total proven reserves of the Olesska gas field are around 53 trillion cubic feet (1500 km3) and production is slated to be around 1 billion cubic feet per day. The total exploration investment is expected to be about US$350 million.
In 2021 Russia was the world's second-largest producer of natural gas, producing an estimated 701 billion cubic meters (bcm) of gas a year, and the world's largest natural gas exporter, shipping an estimated 250 bcm a year. In 2022 the export market was significantly downsized, following the Russian invasion of Ukraine and Russia reducing exports after countries refused to pay in rubles.
Andríy Kóbolyev is a Ukrainian politician and businessman, and the former chief executive officer of Ukrainian largest company, the state-owned oil and gas company Naftogaz. In October 2014, Kobolyev was named a global "Top 40 under 40" leader by Fortune in recognition of his anti-corruption reform successes.
The natural gas transmission system of Ukraine is a complex of pipelines for import and transit of gas in Ukraine. It is one of the largest gas transmission systems in the world. The system is linked with natural gas transmission systems of Russia and Belarus on one hand, and with the systems of Poland, Romania, Moldova, Hungary and Slovakia on the other hand. The system is owned by Government of Ukraine and operated by Ukrtransgaz. Some local transmission lines together with distribution sets are owned by regional gas companies.
Natural gas supplies over a quarter of Turkey's energy. The country consumes 50 to 60 billion cubic metres of this natural gas each year, nearly all of which is imported. A large gas field in the Black Sea however started production in 2023.
The Russia–EU gas dispute flared up in March 2022 following the invasion of Ukraine on 24 February 2022. Russia and the major EU countries clashed over the issue of payment for natural gas pipelined to Europe by Russia's Gazprom, amidst sanctions on Russia that were expanded in response to Russia's 2022 invasion of Ukraine. In June, Gazprom claimed it was obliged to cut the flow of gas to Germany by more than half, as a result of such sanctions that prevented the Russian company from receiving its turbine component from Canada. On 26 September 2022, three of the four pipes of the Nord Stream 1 and 2 gas pipelines were sabotaged. This resulted in a record release of 115,000 tonnes of methane (CH4) – an equivalent of 15 million tonnes of carbon dioxide (CO2) – and is believed to have made a contribution to global warming.
As part of the sanctions imposed on the Russian Federation as a result of the Russo-Ukrainian War, on 3 December 2022, the European Union (EU) agreed to cap the price of natural gas in order to reduce the volatility created by Russia in the gas market.
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.
Figure: Ukraine's gas production in 1991-2019, billion cubic meters
Today is the first anniversary since Naftogaz stopped importing gas from Russia.
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.
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.)
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.
It was expected that Olesska would produce 5 billion cubic metres per year - and possibly as much as 8-10 billion cubic metres, he said. The deal with Shell, which is at a similar level of investment, is for exploration at Yuzivska in eastern Ukraine. The two shale projects could provide Ukraine with an additional 11 to 16 billion cubic metres (bcm) of gas in five years' time, according to projections by the Kiev government.
