“Insurance policy”: why the Cabinet of Ministers is injecting UAH 8.4 billion into gas right now and what it means for people
23 October 21:19
The Cabinet of Ministers has approved UAH 8.4 billion in funding for the purchase of imported gas for the heating season. This is an element of anti-crisis preparation for the winter in the face of regular shelling of energy infrastructure, Prime Minister Yulia Svyrydenko said on October 23 on her Telegram channel, "Komersant Ukrainian" reports.
The additional resource, she said, should “insure” the heating system where its own volumes have temporarily “fallen out” due to damage to production and gas transportation hubs.
Ukraine needs more gas for a stable heating season. After all, due to massive Russian strikes on the gas infrastructure, we have temporarily lost our own production,” Svyrydenko wrote.
Why additional imports are needed
Massive attacks on gas infrastructure have led to a temporary loss of part of domestic production and increased operational risks in transportation and distribution. In such circumstances, the government is insuring the balance: imports replace the lost volumes, ensure stable pressure in the networks and reduce the likelihood of localized heat supply interruptions during peak consumption. In fact, it is a safeguard for the continuity of services provided by district heating companies and the stable operation of boiler houses, especially in large cities.
How it will work technically
Procurement will be carried out in coordination with Naftogaz of Ukraine.
The funds raised will allow us to
- promptly contract resources at Western European hubs and bring them into the system;
- flexibly balance between daily imports and injection into underground storage facilities with subsequent withdrawal during frosty periods;
- build up an emergency reserve, which is critical in case of new grid damage or additional production losses.
The choice of a specific instrument (spot purchases, short forwards, swaps, capacity reservation on interconnectors) will be determined by market conditions and the situational needs of the system operator.
Impact on tariffs: what consumers should expect
This decision concerns the wholesale resource to ensure uninterrupted supply, not the revision of final prices for households. It does not automatically change gas or heat tariffs.
The goal of the Government and Naftogaz is to guarantee a stable season. That is, the priority is reliability of services, not fiscal optimization at the expense of households.
Read also: Targeted attacks on gas hubs: what is behind Russia’s new strategy against Ukraine’s energy system
Budget and currency risk contours
Experts in the energy sector explain that the allocation of UAH 8.4 billion increases the financial cushion of the energy sector at a time when markets can be volatile. At the same time, the cost of imports is affected by:
- gas price dynamics at European hubs (seasonality, weather, balance of LNG and pipeline supplies)
- exchange rate fluctuations that determine the hryvnia equivalent of contracts;
- logistical constraints and technical availability of cross-border capacities.
Additional financing allows to buy when the price is acceptable and to avoid forced expensive purchases on peak days.
Systemic benefits for getting through the winter
The imported resource reduces the operational risk of district heating companies that depend on stable gas supply schedules. This is also important for the electricity sector: gas-fired boiler houses and CHP plants can participate in balancing in times of generation shortages if they have a guaranteed fuel resource. The combined effect is fewer emergency shutdowns, more stable heat supply parameters, and better controllability of the system during peak hours.
For district heating companies and industrial consumers in thermal areas, this decision of the Cabinet of Ministers reduces supply uncertainty. For communities, it is a chance to avoid emergency scenarios during prolonged frosts. For banks and equipment suppliers, it is a signal of priority for efficiency projects: modernization of boiler houses, reduction of technological losses in networks, and backup power supplies for control units.
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What risks remain
Despite additional funding, the gas and heat supply system will still be affected by
- the likelihood of new attacks on production, transportation and distribution hubs;
- weather factors affecting consumption and prices at hubs;
- technical limitations of certain sections of the grid that may require local solutions (overflows, mobile boiler houses, diesel generators for control facilities).
That is why the government’s strategy envisages a combination of sources: domestic production, underground storage facilities, imports, and strengthening the physical protection of critical infrastructure.
According to experts, in the coming weeks, the key indicators of the situation will be the pace of actual imports, the state of stocks in the UGS facilities, the stability of pressure in the networks and the progress of repairs in damaged areas. For consumers, the main thing is to prepare their homes for winter and conserve energy to reduce the load on the system during peak hours.
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