Ukraine: a course towards energy independence

7/12/2021
Украина: курс на энергонезависимость

For a long time, Ukraine was tied to Russia by a gas purchase contract. There was a great dependence – 90% of the consumed blue fuel was Russian. In November 2015, thanks to the efforts of the Ukrainian side, this connection was severed. According to the Kremlin’s forecasts, Ukraine could not do without Russian supplies. It was predicted that there would be a gas shortage in the country, which would be especially felt in winter. But Ukraine did not freeze, but became independent and managed to build profitable partnerships with Europe.

Resolution of the conflict between Ukraine and Gazprom

Despite the cessation of purchases in 2015, Ukrainian Naftogaz and Russian Gazprom tied a gas supply contract until 2019. The Russian side put forward a demand: if Ukraine does not buy 52 billion cubic meters every year. fuel, you will have to pay a fine. The price was made similar to the price of oil, which was higher than in the European market.

 

For Ukraine, these were predatory conditions. Financially and physically, they could not be fulfilled. As a result, Gazprom presented a debt of $ 50 billion for payment. There were also claims from Naftogaz. The conflict was resolved thanks to an appeal to the Stockholm Arbitration Court, which considers international disputes.

 

The investigation lasted three and a half years. The Ukrainian side brought many arguments and documents in its favor and won. Court decision: Gazprom must pay Naftogaz more than $ 4 billion.This saved the Ukrainian company, since the claims from Gazprom amounted to an unbearable amount of $ 80 billion.

Landmark of Ukraine to Europe

Ukraine began looking for gas suppliers in Europe even before the severance of relations with Gazprom. The search was successful, as a result of which relationships with partners from different countries were established. The conclusion of contracts with European companies allowed Ukraine to purchase gas in 2015 at a price of $ 0.3 per cubic meter. At the same time, Gazprom offered a higher price – $ 0.34. In 2020, Ukraine purchased gas in 13 European countries. The main ones were:

  • Switzerland;
  • Germany;
  • Slovakia.

The Slovak direction is now the most ambitious. Since 2020, gas settlements are being made with neighboring European countries. The fuel is not transported at the same time, which reduces costs.

Own gas production in Ukraine

Ukraine is a country with natural gas reserves. The production is carried out by state and commercial companies. The total annual demand for blue fuel across the country is 30 billion cubic meters, and 20 billion cubic meters are produced. Of these, 14 billion cubic meters. in 2020 accounted for by Ukrgasvydobuvannya (part of the Naftogaz Group). The company keeps all wells in working order and makes sure that gas production does not drop. There are plans to develop the Black Sea shelf.

 

Our own production allows us to supply gas to the population at a lower price than imported fuel. The minimum cost in November was UAH 7.80. per cubic meter, maximum – UAH 13.50. Enterprises engaged in heating the housing stock purchase gas for the winter at a wholesale price of UAH 7.42. for one cubic meter.

Ukraine’s plans for gas use

Independent gas production and imports from Europe cover Ukraine’s needs for blue fuel, but there is talk of returning cooperation with Russia. The reason is that Russian contracts are long-term, while European contracts are short-term. However, Gazprom approaches pricing from a policy perspective. Taking advantage of his monopoly, he achieved that the price of fuel on European exchanges rose to $ 2 per cubic meter, and gas was supplied to Moldova for $ 0.45.

 

Ukraine’s gas plans include:

  • drawing attention to the Asian market;
  • introduction of liquefied natural gas;
  • a proposal to transfer for use the existing gas transmission system and gas storage facilities;
  • replacement of natural gas with synthesized and biomethane.

In the future, gas independence of Ukraine should be achieved. There are opportunities in the country to exclude gas imports. To do this, it is necessary to increase our own production and at the same time look for ways to reduce fuel consumption.

 

Now the country is deciding the issue of replacing coal as an energy source with more environmentally friendly gas, so the demand for blue fuel is growing. But in the future, the entire civilized world is going to refuse from gas. Ukraine supports this direction and plans to develop alternative energy sources.


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