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The media predicted the consequences of excess gas in Ukraine

Photo: reform.energy

Total gas consumption for the year in Ukraine decreased by 31%, industrial consumption fell further – by 46%, but exports remain under the government ban.

In Ukraine, for the first time in many years, a surplus of natural gas was formed due to a reduction in consumption. However, the government maintains a ban on the export of this resource, which leads to the stagnation of the acquisition of this resource by private Ukrainian companies. Alla Eremenko wrote this in an article for EnergoBusiness.

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According to him, the reduction in gas consumption was affected by the war, the destruction of industrial enterprises and private households, as well as the migration of the population, which either became internally displaced or went abroad.

“Total gas consumption in 2022 decreased by 31% (from 28.8 billion cubic meters in 2021 to 19.8 billion cubic meters in 2022) … Gas consumption by industry decreased even more – by 46% (from 8.5 to 4.2 billion cubic meters). That is, almost half of the industrial enterprises stopped,” the report said.

As a result, private enterprise has been forced to pump unsold gas into underground gas storages (UGS), relying on the government’s best and promise. As of the beginning of May 2023, more than 1.6 billion cubic meters of unsold privately produced gas will be in UGS facilities, Eremenko said.

At the same time, on February 18, the Minister of Energy German Galushchenko said that no one is counting on gas exports, he wrote. And the head of the NAC board Naftogaz of Ukraine Alexei Chernyshev said in an interview with Bloomberg on February 23 that this year the country plans to completely abandon imported gas. We are talking about 18 billion cubic meters of forecast consumption in 2023 and 18.2 billion cubic meters of total production.

“Here is the clue: under the current conditions, even with a decrease in production, it exceeds the amount of consumption. Why then import gas? And the private production of gas can be superfluous … Although private companies supported and increased production (maximum in 2021 – 5 billion) cubic meters), when it was not enough for Ukrgasdobycha – almost 13 billion cubic meters of gas,” the author of the article pointed out.

At the same time, according to analytics under current conditions, private companies will reduce production to 3.9 billion cubic meters. But this number can be significantly lower due to the lack of funds for investment. Private mining companies claim (each in their own way) that this may lead to the need to import an additional 1.5-2 billion cubic meters and completely stop the development of the private gas sector .

After the start of the full invasion of the Russian Federation, on March 3, 2022, the Ministry of Energy banned the export of natural gas (order No. 99). In 2023, the export of Ukrainian gas was banned by the government (CMU resolutions No. 666 dated June 10, 2022 and No. 1466 dated December 27, 2022). This closed the possibility for private enterprises to sell gas abroad in the conditions of the destroyed sales market in Ukraine.

Despite the government’s decision, NAC Naftogaz of Ukraine almost never buy natural gas from private producers. Despite the direct standard of the preparation law for the autumn-winter season (OZU) 2022/2023, the NAC Naftogaz carried out a small purchase of privately produced gas, which will not significantly affect the overall picture. In total, 259 million cubic meters were sold.

However, during 2022 Naftogaz of Ukraine imported more than 1 billion cubic meters of gas. Obviously, importing gas is a more profitable business,” said Eremenko.

Currently, private production averages 350 million cubic meters per month. At the same time, the industrial segment available for sale is 220-230 million cubic meters per month. That’s why private mining companies are convinced that no one will export all the gas at once. We are talking about excess commercial gas. For investment.

By 2022, private gas production has dropped by 15% (according to ExPro). Under such conditions, in the following years it can be reduced by more than 20%. And more recently, it accounted for 25% of Ukrainian gas production, the author of the article recalled.

“Against the backdrop of a surplus market and closed exports in the context of gas purchases by private companies, NAC Naftogaz offer prices that do not encourage increased production. In the current situation, the dictation of such state conditions will lead to stagnation and further destruction of private gas production, as well as the leveling of all measures to create a transparent gas market in Ukraine . So, taking into account the lack of the possibility of selling the resource by private companies, the purchase of unsold gas from the state in relation to European indicators will be the right civilized approach,” believes Eremenko.

According to him, the purchase of gas from private gas producers must be carried out through transparent exchange trading with equal access for all market participants to ensure that the purchase of gas from private producer at a fair and transparent price and / or export restrictions are removed at least partially.

The author of the article proposes to protect the proper functioning of a free and competitive gas market in Ukraine by:

  • non-discrimination by market participants;

  • avoidance of state regulation of prices, other non-market regulation;

  • deepening the integration of the Ukrainian gas market into the pan-European market: buyout of privately produced gas Naftogaz through transparent exchange trading, equal rights are ensured for gas market participants in terms of prices, the possibility of sale and access to all market instruments.

“After all, it may happen (suddenly) that a gas surplus will again become a deficit. It is not a fact that it is out of the question. And at the most inopportune moment, “Alla Eremenko warned.

It will be recalled that the government proposed to allow the export of half of the privately produced gas. This decision allows mining companies to invest in capacity and increase production.

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Source: korrespondent

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