Ukraine's Transit Ambitions: Energy Review

According to Ukrtransgaz, operator of the Ukrainian gas transportation system, natural gas reserves in Ukrainian underground gas storage facilities (UGS) as of the beginning of August were 12.893 billion cubic meters. Thus, natural gas reserves in the UGS have increased by 592 million cubic meters since July 21, that is, the injection rates on these days averaged 54 million cubic meters per day.

Before the start of the next heating season, the government intends to accumulate 17 billion cubic meters in underground gas storage facilities - as it did last year. However, the pace of download is slightly lagging. For example, on July 29, there were 12.7 billion cubic meters of fuel in the UGS, which is 300-400 million cubic meters less than the same time one year ago.

In January-July this year, Ukraine reduced gas imports to 5.578 billion cubic meters (2.56 billion cubic meters less in comparison with the previous year).

An unexpected blow to Ukraine's transit ambitions came from Moldovan President Igor Dodon, who said he feared the unpredictability of the Ukrainian route and would prefer to buy gas bypassing Ukraine.

Ukrtransgaz, a subsidiary of Naftogaz, which is responsible for transit, posted record losses for the first half of 2018 by 17.7 billion.

The Government of Ukraine is to put up for auction 44 land plots for the extraction of natural gas, with a total volume of reserves of 150 billion cubic meters. The initial starting price of all plots is about UAH 3 billion ($106,243,590.00), but the terms of the auctions have yet to be determined.

In January-June, production fell to 10.206 billion cubic meters (-0.5% against the same period last year). And this despite the fact that Naftogaz for the third time over the summer increased the cost of gas purchases in the domestic market, from 7629 to 8088 UAH ($286.43) per thousand cubic meters. This could serve as a benchmark for the level of the price of imports which the government and the IMF will agree on, because the price of imports certainly cannot be less than the price of the domestic market.

The European Bank for Reconstruction and Development (EBRD) is offering Naftogaz of Ukraine a $100 million loan for gas purchases. It is curious that a little earlier the company's management issued a premium of almost half this ($46.5 million) following the consideration of the claim of the company to Gazprom in the arbitration court of Stockholm.

Electricity

The current tariff for electricity for household consumers will be stable for another 11 months and will be revised upwards in July 2019. According to the calculations of officials, the breakeven point today is no lower than 2.6 UAH ($0.092) per kWh.

The terms of payment for consumed electricity have been tightened. According to the new decree of the National Commission for State Regulation of Energy and Utilities (NKREC), bills must be paid within 10 days by household consumers and within 5 days by others.

In the Shirokovskiy district of the Dnepropetrovsk region, French and Ukrainian entrepreneurs are planning to begin construction of a solar power station with a capacity of 7 MW this fall. The volume of investments is EUR 8.6 million. 30% of this amount is being invested by a French company, and the rest provided by the EBRD.

Two more solar power plants began operating in the Odessa region with a capacity of 4,152 MW and 350 kW.

At present, according to the State Energy Efficiency Service, about 4,660 Ukrainian farms cover their electricity needs through solar energy. 1107 of them moved to it in Q2 2018 - twice as many as in the first quarter.

Coal

In the first half of the year, the Kyiv thermal power plant increased coal consumption to 13,045 million tons (+ 2.13 million tons in comparison with the same period last year). In part explaining why there is less coal in warehouses than a year ago.

As of August 2, total coal reserves in the warehouses of TPPs and CHPP fell to 1.67 million tons (-64 thousand tons since July 23). This is almost 700 thousand tons less than a year ago.

Sociological group "Rating" asked Ukrainians a question - where should Ukraine buy coal? According to the results of the survey, the majority of respondents (46%) believe that the government should let go its pride and negotiate deliveries with the leadership of the Donbass republics. Around a third spoke in favor of buying coal abroad, while 21% were undecided. On the issue of gas purchase, the opinion was divided equally: 40% were in favor of direct purchases from Gazprom, 20% could not choose any of the options.

Oil

The company "Ukrnafta" in its report on activities for the first half of the year, did not disclose the volumes of sales of oil and oil products. However, it is known that the net profit reached UAH 2,061 billion ($72,989,346,330.00).

The company has said it plans to increase production, offering investors a partnership in investing in new wells.

"Cooperation will be built on the basis of service contracts with the distribution of risk. The investor will provide financial resources and technical expertise, and the reward will be a part of the additional profit received due to the increase in hydrocarbon production volumes as a result of the investor's works,” the company explained.

By Dimitri Dolaberidze