Ukraine can potentially boost gas production to 25–27 BCM within 10 years, according to the Razumkov Centre energy programmes director Volodymyr Omelchenko. On the air of the Ukrainian Radio, the expert says that our companies produce about 19 BCM of blue fuel per year now. This is generally enough to meet the needs of the households and district heating and utility services, but will be insufficient for the economy when industry starts to recover. Therefore, the expert says, it is too early to talk about a significant growth and a trend towards higher production. Although "the situation with production has become stable, which is not bad," Omelchenko added.
It is still too early to talk about a trend towards a significant increase in gas production
Gas production in Ukraine rose record high after the beginning of the Big War in October. What does this indicate and why did such growth occur?
I would not exaggerate this growth, it is actually at the level of a statistical error, 2–2.5%. It is still very, very early to talk about aboom and a tendency to higher production. In order to state that this growth is a stable trend and some impressive success has been achieved, the growth for at least 3 years in a row at a level of 5–6% is needed.
"The situation with production has stabilized, which is already not bad"
Speaking about gas self-sufficiency and the heating season — do we have enough gas for that?
2% is a very small increase, it influences almost nothing. Yes, it is not bad that there is no fall, but a small increase, within the limits of a statistical error though. But I would not say that this growth will fundamentally change the situation with gas supply, because the main reason why we can survive the autumn-winter period, this and the previous one, mainly with our own gas, is not in higher production but because our consumption of natural gas has significantly decreased due to the war. Many people left the country, many industrial facilities were destroyed by the Russian invaders. This is the main reason. But we cannot do without imports, since September we have been importing natural gas under loans from the European Bank for Reconstruction and Development. So, I do not want to be too pessimistic or optimistic now. In my opinion, the situation with production has stabilized, and that is not bad.
"There must be a gas market"
What is needed for sustainable production growth — additional permits, an investment climate, regulatory changes?
A few things are needed. First and foremost, there should be a natural gas market. If there is no such market, nothing will grow. We know that before the full-scale war private companies strongly boosted production. Within 10 years, they increased gas production more than 2.5 times, while state companies did do the same. Since the beginning of the large-scale war, private companies have reduced production, now the situation has somewhat stabilized, they are even increasing it somewhat. But this is not enough, because they have nowhere to sell this gas. Naftogaz JSC took over part of the liquid industry market. They cannot export, because it is prohibited. Therefore, it makes no sense for them to make large investments in increasing gas production. In my opinion, the export ban does not contribute to the development of this industry. Neither does it contribute to the normal gas supply in the country, since any restrictions on supply to European countries have a negative impact on the gas market, production and supply — unlike in the electricity market, where there is no ban on import or export. And we see that it helps a lot in the national energy supply. Therefore, in my opinion, a wrong decision was made when natural gas export was banned. And of course the investment climate is not too good, one of the reasons being the market monopolization by Naftogaz. Monopoly never promotes development, it only promotes degradation.
Ukraine potentially can boost production to 25–27 BCM within 10 years
Naftogaz Group CEO Oleksiy Chernyshov says that Ukraine supplies itself with domestically produced gas for the second year in a row. In particular, in 2024, gas production companies will increase production volumes to almost 15 BCM, which will be enough for the households and heating companies. How realistic is this, will there be enough gas in the future, and what are the risks that the situation may change?
If we talk about supplying households and heating companies, this is not new. Ukraine always supplied households and heating companies with domestic gas. And regarding such extremely positive claims — you know, I worked at Naftogaz, too, and have been familiar with this industry for almost 30 years; all the leaders of Naftogaz reported great growth. If all these plans and reports were implemented, then Ukraine would already produce more gas than Qatar. That's why I am quite sceptical about these claims, when officials praise themselves. This is natural, one should be more cautious with forecasts. I don’t believe that there has been a major breakthrough in gas production.
What should we do then — further develop the already discovered deposits and increase production there,, or explore new ones, attracting more companies to this market?
We have already said that it is necessary to open up exports, and this was the case. Secondly, it is necessary to do away with the Naftogaz of Ukraine monopoly. Ensure market coupling, i.e. synchronization of the rules of the natural gas market in Ukraine with the rules of the EU market. This is very important. And of course more wells are needed, especially deep wells, in unconventional structures, then we can succeed. I think that if normal investment conditions are created, Ukraine can really boost production from 19 BCM to 25–27 BCM per year over the next 10 years. This is realistic, in my opinion.
Could there be problems with gas during this heating season, so that we will have to buy it in the height of the season?
I would not say that the problems have already been solved and they are gone. There is a problem because many houses are still not heated, in Kyiv and elsewhere. My apartment building, for example, it is still not heated, but it’s November 7, frosty days. Where heat is supplied, in many cases it is supplied with low pressure. So, if you work like this, then there may really be enough gas. But this, I think, is not very good.
If not enough, then what?
Then you will have to import it. Although it is already imported, for some reason they do not talk about it.
There may be problems with gas for industry
Gas for industry. How much of it do we have, is it enough for enterprises, and what are the prospects in this respect?
In my opinion, it is not enough, but we will see. If they commission the Odesa port plant and it works at least at 30-40% of its capacity, there may be problems, because it is a big consumer. In addition, our energy industry needs about 3.5 BCM during the heating season. Therefore, in principle, due to the very low consumption, there can really be enough gas. But this is only because the economy is destroyed. Under normal conditions, it would not be enough. Previously, Ukraine consumed 50-60 BCM, when the economy, industry, metallurgy, etc. were working normally. Now it consumes only about 19-20 BCM. Therefore, there is no merit to "Naftogaz" here, consumption simply dropped due to the reasons we have already discussed.
When we talk about energy carriers, there is always another "favourite" topic — prices and debts. How do we cover gas costs, in particular?
There are debts. In Kharkiv region alone, they total up to 2 billion hryvnias. That is, the debt problem has not gone anywhere, because we have a difference in prices. In this country, the price of heating has not been raised for many years, and the price of gas does not cover the costs of heat production. This difference should be covered from the budget. But it is not, and as a result, enterprises accumulate huge debts, and the heat supply system throughout the country deteriorates.
