In 2017, Ukraine’s gas consumption decreased by 1.3 billion cubic metres compared to 2016 from 33.2 to 31.9 billion cubic metres, representing a decrease of 4 percent, Ukraine’s national oil and gas company Naftogaz said.
Household consumers used 11.2 billion cubic metres of gas in 2017, which is 0.7 billion cubic metres less than in 2016 (6 percent decrease), Naftogaz said in a press release on February 6. Industrial users cut their consumption by 0.6 billion cubic metres (from 9.7 to 9.1 billion cubic metres, a decrease of 6 percent).
Operational needs for gas production, transmission and distributions as well as liquefied petroleum gas (LPG) production grew by 16 percent from 3.8 to 4.4 billion cubic metres.
According to Naftogaz, the growth in this category was primarily due to Russian gas transit through Ukraine, which increased by 11.3 billion cubic metres (+14 percent) from 82.2 to 93.5 billion cubic metres. For over 85 percent of days in 2017, Gazprom was not ensuring the contractual gas pressure in the Russian gas transmission system at entry points to the Ukrainian gas transmission system. The operational needs of Ukrtransgaz, therefore, increased by 29 percent reaching 2.2 billion cubic metres.
According to Naftogaz, in 2017, Ukraine covered its gas import requirements with supplies from the European market. Compared to 2016, gas imports increased by 27 percent from 11.1 billion cubic metres to 14.1 billion cubic metres.
In 2017, 67 companies imported gas to Ukraine (34 companies in 2016).
Private traders and gas consumers increased both volume and share of gas imports last year, almost doubling their imports compared with 2016 from 2.9 billion cubic metres to 5.4 billion cubic metres.
In 2017, Naftogaz imported 8.7 billion cubic metres of gas from the European market, which is 0.5 billion cubic metres (6 percent) more than in the previous year. Naftogaz purchased gas from 13 European suppliers in 2017 (15 companies in 2016). None of them accounted for more than 30 percent of gas imported by Naftogaz.
A liberalisation of the wholesale market in Ukraine is taking place following the adoption of the Law “On the natural gas market” (effective since October 1, 2015) and other steps towards the establishment of an open and transparent gas market in Ukraine, Naftogaz said.
For over two years, Naftogaz has not been buying gas from Russian gas monopoly Gazprom, following the Russian company’s refusal to extend “the winter package” in 2016, Naftogaz said.
In 2017, Ukraine produced 20.5 billion cubic metres of gas against 20.1 billion cubic metres in 2016. Gas production increased by 0.45 billion cubic metres (+2 percent) compared with 2016, Naftogaz said.
Ukrgazvydobuvannya (UGV), a 100 percent-owned subsidiary of Naftogaz, produced 15.3 billion cubic metres of gas (74.3 percent of Ukraine’s total). This amount includes gas used for the company’s operational needs.
In 2017, UGV’s output grew by 0.64 billion cubic metres (4.2 percent) compared to 2016. Over the past two years, the company managed to increase gas production thanks to optimized field development, increased production drilling and production enhancement operations including hydraulic fractures, coil tubing, etc, Naftogaz said.
Meanwhile, delays in extending and granting licenses by the State Geology and Mineral Resources Service of Ukraine, the blocking of licensing processes by regional councils, and the overregulated land allocation procedure have all hampered a higher growth of gas output.
According to Naftogaz, all marketable gas produced by UGV in 2017 was purchased by Naftogaz at a price of UAH 4849/tcm and sold at UAH 4942/tcm to cover household demand.
Prices, conditions, and supply procedures are set out in the regulations of the Cabinet of Ministers of Ukraine. Because of the existing regulatory regime, Naftogaz does not supply to households directly but to designated private intermediaries who supply the gas to the households.
Meanwhile, in 2017, Ukrnafta, 51 percent owned by Naftogaz, decreased its gas production by 17 percent from 1.3 billion cubic metres to 1.1 billion cubic metres primarily because the State Geology and Natural Resources Service of Ukraine blocked the extension of its licenses for several months.
Private companies produced 4.1 billion cubic metres of gas in 2017, which is almost equal to the 2016 output (4.2 billion cubic metres), Naftogaz said.