Fuel Reserves: Will Ukraine Be Able to Stockpile Petroleum Products and Store Them Safely in Underground Storage Facilities?
31 August 15:17
ANALYSIS FROM 
In just a few months, underground storage facilities for oil and petroleum products could be built in Ukraine. This step seems logical given the regular hostile attacks targeting gas stations. The government has described the project to create underground storage facilities as experimental. "Komersant Ukrainian" investigated whether this experiment will work.
The scope of the pilot project covers petroleum products from the minimum reserves of oil and petroleum products. And starting in 2027, market participants and operators will be required to store at least 20 percent of the diesel fuel from the minimum reserves in underground storage facilities for petroleum products. The Ministry of Energy has been designated as the coordinator of the pilot project, and Ukrtransnafta as the specialized custodian. The State Reserve Agency, Naftogaz, the Market Operator, and others are also involved in the project’s implementation. And all of this resembles not so much a demand to begin creating underground storage facilities as quickly as possible, directed at the private sector, but rather a government directive to relevant institutions to get the very idea of creating minimum reserves of petroleum products off the ground and to secure at least a portion of them.
As a reminder, the Law of Ukraine “On Minimum Reserves of Oil and Petroleum Products” was adopted back in November 2023 with the aim of implementing the relevant EU Directive. The law took effect in December 2024. However, liability for non-compliance with certain provisions due to security risks was deferred for the duration of martial law. The construction of underground storage facilities, meanwhile, is directly tied to the establishment of minimum oil reserves. And this creates a certain contradiction: how can we even discuss storing which fuel from the minimum reserves in underground storage facilities if the minimum reserves themselves do not exist? But that is not the main problem. Mykhailo Honchar, president of the “Strategy XXI” Center for Global Studies, explains .
“The issue of strategic oil reserves and petroleum product reserves was first discussed back in 2005. In other words, this issue has been around for over 20 years. At that time, the first conceptual decisions were made, but they never became government policy. Because then, just as now, the problem remains the same: who will do it and with what funding. But we’ve reached a point where urgent decisions are needed, and they are obvious: if we cannot reliably store anything above ground—in traditional storage facilities, which are very easily destroyed by cheap drones but are very expensive and time-consuming to rebuild—then we need to use some kind of underground storage facilities. But building such underground storage facilities is even more expensive, complicated, and time-consuming. That’s why we need synergy and joint action between the government and the private sector,” the expert notes.
In fact, the government has defined and confirmed guidelines regarding both the establishment of minimum reserves and the underground storage facilities for them, and has set 2027 as the deadline for the construction of such facilities. This should encourage the business sector to get involved in this effort. Especially since representatives of the business sector have typically attributed the inability to build up minimum reserves of petroleum products to a lack of infrastructure for their secure storage. As part of a pilot project, companies operating in the market have also been given the opportunity to build their own underground storage facilities for petroleum products, which must meet the conditions specified in the resolution. Oleksandr Sirenko, an analyst at the consulting firm “NaftoRynok,” continues :
“The resolution identifies state-owned companies that will primarily be involved in this project—namely, Ukrtransnafta. And that’s the right approach. As for private-sector participation, keep in mind that simply burying a tank to build an underground storage facility will be much more expensive than setting up an oil depot—that is, an above-ground storage facility. But the war demands it, and I think that sooner or later someone will start doing this. For example, I’ve heard that OKKO has already started discussing this, and perhaps they’ll be the pioneers,” the expert notes.
Potential underground storage facilities for petroleum products that could be developed as part of a pilot project include, not only “sections of main pipelines” but also “underground subsurface reservoirs,” which must be equipped with flow meters to measure the volume of petroleum products. Other requirements for underground storage facilities for petroleum products include: verified technical specifications; compliance with industrial and fire safety requirements; ensuring leak-tightness and physical accessibility for the withdrawal of petroleum products, as well as maintaining records of the volume and quality of petroleum products.
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Mykhailo Honchar, president of the “Strategy XXI” Center for Global Studies, believes it is appropriate to use existing oil transportation infrastructure as underground storage facilities.
“We have an option that has been considered before: for example, building something new underground, but that takes time and money. There is another option. Most of the pipelines in our oil transportation system are practically unused because there isn’t the same volume of oil traffic as there was 20 or 30 years ago. Currently, only one branch of the “Druzhba” pipeline is being used to transport oil. The rest, of course, would require a technical audit. That would also cost something. But these pipes are underground and are protected one way or another. It’s a dispersed storage tank that, even if one wanted to, couldn’t be destroyed. “It’s a viable idea, but, again, it’s been around before—it’s just that no one has pursued it. And in any case, it will be faster than building something from scratch,” the expert believes.
The main goal of the experiment is to test the feasibility of using underground storage facilities to hold minimum reserves of oil and petroleum products under martial law. The objective is to ensure that at least one-fifth of the reserves can be stored in such facilities. In other words, the country’s entire system for supplying petroleum products—just as it has been for the past four years—will continue to rely on an extensive and well-established logistics network focused on importing petroleum products from abroad. And the announced experiment is intended only to add stability to this system.
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