Ukraine has enough natural gas in reserve to make it through the heating season

Ukraine is currently entering the heating season. Public facilities are already being heated, and heat has just begun to be supplied to household consumers. Particularly on October 30, municipal authorities in Kyiv officially announced the start of the heating season for household consumers, meaning an immediate surge in gas consumption. There is an affirmative answer to the question as to whether Ukraine has enough blue fuel in reserve to make it through this cold season, as NAK Naftogaz JSC says it has accumulated the sufficient amount of operating and backup reserves of gas in its underground storage facilities to last this winter.

Gas production is growing steadily

The state-run AT Ukrgazvydobuvannya JSC and PRAT Ukrnafta PJSC have been steadily increasing their gas production since the start of this year. Over January-September, these two companies collectively produced over 11 billion cubic meters of commercial gas, increasing production by 0.7 billion cubic meters year-on-year.

“During this heating season, like last year, we plan to provide Ukrainian household consumers and other CSR consumers (the companies’ commitment to Corporate Social Responsibility – Ed.) exclusively with own produced resources. Currently, we are two percent ahead of the target production milestone, Oleksiy Chernyshov, CEO at Naftogaz Group, told Ukrinform in a comment.

The company is drilling new wells and upgrading the existing wells, using new technologies, continues exploring gas deposits in its fields, and installing exploratory and evaluation wells in undeveloped fields.

“At one of the deposits, we have drilled an exploratory and evaluation well with a daily output of 274 tcm meters, thus boosting the deposit’s production by 17%. The deposit, despite its age and exhaustion, is still promising for further drilling of production wells,” says Serhii Lahno, interim CEO at Ukrgasvydobuvannya.

Mykhailo Svishcho, an editor at ExPro Gas&Oil analytical outlet, notes that Ukrgasvydobuvannya and Ukrnafta have shown a sustainable increase in gas production during the year, and since September, PRAT Ukrnaftoburinnia and Smart Energy have resumed gas production operations. ExPro estimates that Ukraine’s daily gas production amounted to 53.5 million cubic meters in October, over 1 million cubic meters up year-on-year.

In addition to gas production, the company Naftogaz has taken care of accumulating a sufficient amount of gas in underground storage facilities. “According to ExPro estimates, more than 12.9 billion cubic meters of natural gas were stored in Ukraine’s underground gas storage facilities as of the end of October. The accumulated resource is more than sufficient to ensure smooth passage of this heating season,” says Mykhaylo Svishcho.

At the same time, alongside traditional storage of “blue fuel”, Naftogaz has build up what it refers to as an “insurance” reserve: it buys imported fuel, which will be stored in the Customs Warehouse mode. This summer, the European Bank for Reconstruction and Development (EBRD) agreed to lend €200 million to help Naftogaz build up strategic gas reserves. Since the beginning of September and throughout October, Naftogaz has been injecting natural gas purchased with these funds to underground storage facilities in Ukraine.

Approximately 158 million cubic meters of this “insurance” gas were injected into storage facilities in September, and this amount may reach 300 million cubic meters for October, according to ExPro’s assessment. “This resource, combined with the gas accumulated by the company in the “customs warehouse” mode in previous years, will become an insurance reserve for the winter and will be used if consumption surges,” Mykhailo Svishcho said.

The role of gas in the energy system is increasing

After the destruction by Russian attacks of thermal power production capacities, which used to support power consumption at peak times, Ukraine began to actively develop a decentralized network of power generation capacities.

“In particular, courtesy of cooperation with UNDP and support from the Norwegian government, we will soon receive power generating equipment that will add 80 MW of power to the Ukrainian power grid. This will help ensure additional generation of electricity and heat for the residents of one of the regions,” said the CEO of the Ukrainian state-run gas company Naftogaz, Oleksiy Chernyshov. Naftogaz Group thus contributes to strengthening the energy system, which has lost a significant portion of its generating capacity due to Russian attacks. Other companies that require gas to run their power generation operations are also being connected to the networks.

 “Statistics is mostly classified, but from the available information we can see that gas consumption has increased compared to last year. We assume that this is due to an increase in the demand for “blue fuel” specifically for electricity generation,” says Adrian Prokip, an analyst at the “Energy” program of the think tank “Ukrainian Institute for the Future”. At the same time, according to him, available statistics on the consumption of gas by household and heat-generating consumers lies within the limits of statistical error. Thus, the key role of gas in the country’s energy balance is growing and is currently increasing higher still precisely due to the demand for power generation.

The analyst notes that the ongoing war will have its impact on the heating season. If the Russians are able to inflict any significant damage on the underground gas storage infrastructure, Ukraine will have to resort to imports. “But if there is no damage like that, gas will be in sufficient supply,” Prokip said, adding that an increase in the consumption of “blue fuel” is compensated by the increase in gas production.

Not by gas production and reserves alone

That being said, Naftogaz notes that increased gas production alone will not suffice to ensure smooth passage of the heating season. “Much depends on the effective teamwork between the energy sector and local government bodies, which allows us to quickly solve this or that problem. We closely communicate with communities regarding the rational use of energy resources, timely payments for consumed gas, and to ensure issues are resolved as quickly as possible,” Mr Chernyshov emphasizes.

According to him, by the end of October, the Gas Supply Company TOV Naftogaz Trading, LLC, which supplies gas to heat generating consumers, the public sector, and religious organizations, had already signed contracts with more than 6,000 consumers across the country.

On top of that, gas companies have prepared the gas distribution network for the heating season. Gazmerezha (TOV Gas Distribution Networks of Ukraine – ed.) made sure that a number of its branches operating in the frontline areas – particularly in the regions of Donetsk, Sumy, Chernihiv, and Kharkiv – as well as other regions have at hand the necessary resources for quick repairs. After all, the gas infrastructure in these regions all the time are subject to shelling and other attacks.

“In 2024 so far, Gazmerezha and its emergency services have repaired over 1,400 damages caused by hostilities, restoring gas supply to 58,000 Ukrainian households. Our specialists continue working in front-line communities, because gas is almost the only type of fuel available there,” says Chernyshov.

Mr Chernyshov emphasized that, in pursuance of relevant Cabinet of Ministers decision, the price of gas for household and public consumers remains stable and will not change at least until the end of the heating season. In this way, the government continues to share the financial burden with ordinary consumers amid the war.

At the same time, Naftogaz emphasizes that, although Ukraine remains to be an energy-capable country, it still has a long way to go in learning new approaches to the use of energy resources. “We have a well-developed gas infrastructure, deposits, favorable natural conditions. However, we still need to learn how to use the resources provided to us by nature effectively and efficiently. This is not so much about state policy, but primarily about the small steps by each of us. Every community, every Ukrainian should take care of energy efficiency of their own, which will allow them to survive the most difficult times together,” Chernyshov believes, and it’s hard to disagree with that assessment…

Maryna Nechyporenko, Kyiv

Headline photo via Gettyimages