Time to buy: Ukrainian underground storage facilities are being filled with gas, but the pace is insufficient
28 April 10:56
The price of gas in Europe at the TTF gas hub has fallen by almost 45% from a peak of 58 euros per MWh in the first decade of February to 32 euros per MWh today. This was announced by the former head of the Gas Transmission System Operator of Ukraine, Serhiy Makohon, "Komersant Ukrainian" reports.
According to him, this is a good opportunity to buy imported gas.
“This year, I am pleased that Naftogaz has already started imports. Although now only 9 million cubic meters enter Ukraine daily. I hope that imports will increase significantly soon,” the expert emphasized.
He said that together with its own production and existing imports, the injection is currently about 25 million m3 per day, which will allow pumping 4.5 billion m3 by November 1 (if imports are at the same level), while at least 8.3 billion m3 is needed.
As a reminder, Ukraine ended the season of gas withdrawal from underground storage facilities on April 17 and started pumping gas into the storages. This year, Ukraine came out of the heating season with reserves at 2.22% of the maximum volume of underground gas storage facilities (UGS), while last year’s withdrawal season ended on March 30 with reserves of 11.12% of the UGS volume, which means that the level of storage capacity is the lowest in the history of their operation. As of last Friday, according to Gas Infrastructure Europe (GIE), the stock level increased to 2.67%.
Earlier, Naftogaz announced plans to import 4.5-4.6 billion cubic meters of gas by November 1 this year, which should ensure a stable heating season in 2025/2026.
Last week it was reported that Naftogaz Group and ORLEN signed a new agreement for the supply of 100 million cubic meters of liquefied natural gas (LNG). This is the third contract under the partnership signed in the spring of this year. The total volume of contracted gas is 300 million cubic meters.
The gas will be supplied from the United States, regasified at the terminal in Świnoujście (Poland) and transported to Ukraine through the Polish gas transportation system.
Contracting should be improved to secure imports
Ukraine is likely to import up to 4-5 billion cubic meters of gas annually in the future to cover domestic demand. Given this, it is quite reasonable and strategic for Naftogaz to consider direct long-term purchases of LNG on the world market, especially from the United States. This is the opinion of Sergiy Makohon, former CEO of the Gas Transmission System Operator of Ukraine.
According to him, at least 2 billion cubic meters per year could be provided under long-term contracts, with delivery either through Poland’s developed LNG infrastructure or through the Trans-Balkan gas pipeline. However, access to guaranteed import capacities from Poland is currently limited to about 5 million m³ per day or about 1.8 billion m³ per year).
“This volume can potentially be increased more than threefold – up to 18 million cubic meters per day (6.6 billion cubic meters per year) – if Ukraine (Ukrainian traders) actively participate in the development and booking of new gas infrastructure in Poland. Without long-term reservations, Poles will not invest in new construction. This is how the whole of Europe works,” the expert emphasized.
In his opinion, the Ukrainian side needs to actively participate in capacity allocation auctions for both pipeline and LNG infrastructure to ensure energy security in the future
According to Sergiy Makohon, Ukraine needs to have access to the LNG market and Poland is the most strategically correct option for Ukraine.
What about financing this year’s gas purchases?
At the end of last week in Washington, D.C., the head of the Ukrainian government, Denys Shmyhal, and the President of the European Bank for Reconstruction and Development, Audrey Renaud-Basso , signed an agreement that provides for the EBRD to raise €270 million under state guarantees, which will be accompanied by a grant from the Norwegian government of €140 million. These funds will be used to purchase significant volumes of imported natural gas to prepare for the next heating season.
In addition, according to Roman Chumak, acting CEO of Naftogaz of Ukraine Roman Chumak, the company is negotiating with the Government and international financial institutions to raise EUR 1 billion in financing for the purchase of more than 2 billion cubic meters of gas.
