Gas balance: how ready is Ukraine for the heating season?
3 September 17:53
ANALYSIS FROM 
Ukraine’s underground storage facilities are filling up with gas, and this is raising hopes that the next heating season will be trouble-free. To what extent this is true, we found out
13.2 billion cubic meters of gas – this is the amount of gas Ukraine should accumulate in underground storage facilities by the beginning of the 2025-2026 heating season. This target was confirmed in mid-August at the presentation of the new government’s Action Program.
Experts estimate that the scenario in which 13 billion cubic meters of gas will be pumped into the storage facilities will meet basic needs, although it will not protect against problems in the event of any crises.
It is to these that the commentary to
The preparations themselves are quite normal, as they have always been. The main problem is financial and it is being solved now with additional money for the purchase of imported gas. The whole country and the Europeans are rescuing Naftogaz with money to keep the gas flowing. But everything else is more or less adequate. And we need to realize that the key risk is 90 percent – possible attacks on the energy structure, and 10 percent is what depends on us now. It is also worth remembering that last winter was very warm. Will it be as warm for the second year? This is also a question. If not, and there is not enough gas, there will be certain restrictions. Who will be restricted? It’s hard to say. So it won’t be a simple winter,” the deputy states.
In order to get through the winter without any problems, even if various unpredictable threats arise, experts estimate that up to 15 billion cubic meters of gas would need to be accumulated in underground storage facilities by November 1. This outcome is not yet in question, but exceeding the stated target of 13.2 billion cubic meters of gas is possible. At least the August dynamics of gas injection indicates this.
How much gas is currently in Ukraine’s underground storage facilities, how encouraging the injection rates are, and whether there is enough money to buy gas, the
“At the beginning of September, we had more than 11.3 billion cubic meters of gas in storage. In principle, this is a pretty good pace. In August, we pumped more than 1.5 billion cubic meters. This is one and eight times more than in August last year. This means that we need to pump less than 2 billion cubic meters in September and October to reach the level of 13.2 billion cubic meters, which seems quite realistic at the current pumping rates. Sometime in late September, perhaps in early October, I think we will already be able to exceed last year’s figures. The ratio of imports to domestic gas production is now approximately the same: 50 to 50.
What routes are currently being used and how actively?
The structure of imported natural gas supplies has hardly changed. Hungary remains in the first place, with 293 million cubic meters of gas supplied in August. This is about 45%. Poland is in second place, with 230 million cubic meters or 35% of total imports. And Slovakia – 118 million or 18%. And about 13 million cubic meters came from the Trans-Balkan direction.
Could political disputes between Ukraine and countries such as Hungary and Slovakia create problems with gas injection? This time, the Hungarian and Slovak leaders mentioned the supply of electricity to Ukraine, in the case of Hungary, and diesel in the case of Slovakia. This time they did not talk about gas, but…
In fact, earlier this year, when transit issues were being actively discussed, there were statements about gas. But, as we see, all these statements, whether about electricity or gas, are basically political statements and have no real impact. We do not see any reduction or any cessation of energy supplies from these countries. Why? Because political statements are one thing, and real market mechanisms are another. And they continue to work, in part because it is not state-owned companies that are engaged in supply, but private companies that import gas and book capacities. If any individual EU country, such as Hungary or Slovakia, starts blocking or creating any obstacles to cross-border trade, it will be a violation of the European legislation that provides for free trade between countries.
What are the dynamics of gas purchase prices? How actively are private companies involved in procurement given the price factor?
The dynamics are favorable, with prices in the domestic market exceeding those at European hubs. This difference allows both the state-owned Naftogaz and private companies to import natural gas, which in August imported more than 100 million cubic meters, the largest volume of private imports since the beginning of the year.
And finally, about money. “In August, Naftogaz signed a large loan agreement with the EBRD for €500 million, specifically to finance natural gas purchases. Naftogaz stated that it would purchase gas on a competitive basis from more than 30 pre-qualified suppliers. How does this mechanism work and how does it affect the price?
The prices of Naftogaz’s purchases through the EBRD tender do not differ much from market prices. But this is a completely market-based mechanism. Naftogaz simply buys through a special tender on the EBRD platform, where suppliers must first be registered, qualified, and go through a certain procedure to be admitted to this tender. These are large international companies that operate in many countries and are well-known traders or suppliers of natural gas. I wouldn’t say that the prices are lower than market prices, but in fact, Naftogaz often buys gas somewhat cheaper than Ukrainian private companies that import natural gas.
Does Naftogaz have enough money to buy the required volumes of gas for the winter?
Yes, it does. These 500 million euros from the EBRD plus the funds allocated by Norway in August – we are talking about a grant from the Norwegian government for 1 billion Norwegian kroner, which is about 85 million euros – are, in principle, already enough to purchase the necessary volumes of gas to accumulate 13.2 billion cubic meters of resources in storage facilities by November 1. And part of these funds will already be used for further gas purchases. Naftogaz is also continuing negotiations with other European institutions, including the European Investment Bank, and, as far as we know, at least one more loan is expected to be announced in the near future.
So, there is money, there are routes, there are suppliers, and there are hopes for a smooth heating season. All that remains is to protect Ukrainian energy facilities from attacks by the Russian aggressor.
Author – Sergey Vasilevich
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