This week, most of Ukraine's regions will finish the third in a row difficult heating season in the conditions of large-scale aggression. Most domestic and international experts did not believe that it might be passed without long-term restrictions. However, thanks to the Armed Forces of Ukraine, the professional selfless performance of domestic energy workers and a record-breaking warm winter, the country coped with gas shortage better than in the most optimistic forecasts.
Still, it should be noted that due to the aggressor's massive air attacks on gas production facilities and the end of the autumn/winter period with historic low extractable gas volumes (less than 1 BCM), an extremely complex problem arose with gas storage filling before the start of the next heating season. According to the optimistic forecast, gas shortage in 2025 will make 3.3–3.9 billion m3, worth $1.9–$2.2 billion.
I don't believe that NJSC Naftogaz of Ukraine will be able to bear this additional financial burden, due to the need to import these volumes by the year end in order to provide gas to households, heating and power generating companies. This forecast does not take into account the sharp reduction in domestic gas production due to Russian attacks, which, after the latest attacks, is 25% lower than in January 2025. Taking into account the destructions and production drop, the total deficit may reach 7.3–7.9 BCM, worth around $4.1–4.5 billion. To prevent such a scenario, it is necessary to urgently invest in the restoration of the destroyed infrastructure of all enterprises critical for gas supply.
Under the existing monopolized gas market model, Naftogaz of Ukraine will not be able to cover the deficit in the gas balance on its own. Firstly, the Company does not have sufficient funds for this, and secondly, the commercial component that allowed it to sell gas on the domestic market much cheaper than its imports cost is no longer available. The Company’s main problem is to preferentially supply gas to electricity producers at gas-fired plants.
In 2025, it plans to spend 3.0–3.4 BCM of gas on subsidized gas generation, including the so-called “distributed gas generation” — producing electricity by burning natural gas. Naftogaz has to sell these volumes of gas at UAH 8,750–13,750 per thousand m3 (less VAT), while the commercial price is UAH 16,600 per thousand m3 (less VAT). This year, Naftogaz of Ukraine will lose UAH 16–18 billion on subsidies to natural gas-fired electricity producers. This money would be enough to import 0.7–0.8 BCM of gas.
I believe that in this situation, Ukrainian and European traders and large gas consumers should have a role in imports and filling UGS. To do this, it is necessary to switch to the European liberalized gas market model with market coupling as soon as possible.
