Economy

Gas purchases at $700 per thousand cubic meters: how much more expensive will gas become for Ukrainians?

The operator of Ukrainian gas storage facilities, Ukrtransgaz, a part of the Naftogaz group, plans to purchase an additional 100 million cubic meters of imported natural gas worth up to UAH 4 billion (including VAT).

The company intends to purchase gas for delivery in February-March in order to increase the volume of its own buffer gas in underground storage facilities, according to the specialized publication ExPro. In particular, Ukrtransgaz announced the purchase of 25.6 million cubic meters of gas through the exchange, with the transfer of this volume to gas storage facilities in February. The gas is to be imported to Ukraine between February 12 and February 28.

The starting price of the resource is UAH 29,103 per thousand cubic meters (excluding VAT), which corresponds to about $700 at the current exchange rate. In December-January, Ukrtransgaz has already purchased 96.52 million cubic meters of imported gas on the Ukrainian Energy Exchange for delivery in January-March 2025 for a total of UAH 2.4 billion (excluding VAT).

Why did Naftogaz make an emergency purchase of gas at high prices, what consequences will this have for Ukraine and its citizens, and how much will gas cost for Ukrainians now? [Kommersant] analyzed in detail.

The former head of GTS Operator of Ukraine LLC Sergiy Makohon in a conversation with Komersant ukrainskyi commented on the situation with Naftogaz’s emergency gas purchases, analyzing potential risks for Ukraine and possible consequences for citizens.

Why did Naftogaz make an emergency gas purchase?

Naftogaz announced an emergency purchase of gas at a high price – about $700 per thousand cubic meters. Sergiy Makohon noted that such a step demonstrates that Naftogaz understands the possible risks in gas supplies.

“Naftogaz has realized that there may be supply problems with the existing gas reserves. That is probably why they announced this purchase,” explained Makohon.

He also noted that if the situation were less critical, it might have been more appropriate to wait until the end of the heating season, when gas prices could have dropped. The expert also drew attention to the fact that Naftogaz could have purchased gas in the summer of 2024, when prices were almost twice as low. Makohon believes that this was a very ill-considered decision by the Naftogaz management, and now Ukraine is forced to pay for gas at much higher prices.

Makohon estimates that the overpayment for the purchase of 1 billion cubic meters of gas at current prices could amount to more than $350 million:

“This is money that could have been spent on other needs, such as investing in the development of our own gas production. Instead, we spend it on imported gas,” the expert said.

Will gas become more expensive for Ukrainians?

When asked about the impact on citizens, Makohon said that currently the gas price for households will remain at UAH 7.96 per cubic meter, as it is a fixed price:

“For ordinary Ukrainians, the price of gas will not change in the near future. However, if Naftogaz spends this additional $350 million, it could affect the future. It may be forced to reduce dividends or raise gas prices in the future.”

Makohon also emphasizes that the cost of gas imports will also have a negative impact on the state budget:

“These 350 million dollars will not go to the Ukrainian budget in the form of taxes. This will be an additional blow to the state budget, which should also be taken into account.”

Meanwhile, Gennadiy Ryabtsev, Doctor of Science in Public Administration, Candidate of Technical Sciences, energy expert, in a conversation with [Kommersant] emphasized that the situation with gas reserves in Ukraine is not critical for the population, but there are risks for industry. The reason for this may be an unexpectedly low temperature in February, which will exceed the forecasts of the Ukrainian Hydrometeorological Center.

“If the temperature is lower than forecasted by the Ukrainian Weather Center, there may be a situational gas shortage. So far, everything is going according to plan, but gas production facilities have been damaged by Russian strikes, which also complicates the situation,” the expert believes.

Could the gas shortage have been avoided?

The expert explained that the problem could have been prevented if Naftogaz had fulfilled its gas accumulation plan in time for the start of the heating season:

“Naftogaz did not fulfill the plan of gas accumulation, and now we are forced to buy gas in more difficult conditions, when prices are already high.”

Mr. Ryabtsev wondered why gas purchases were not started in advance when prices were lower. He also wondered why the funds allocated for gas purchases were not used on time.

Will gas prices for Ukrainians change?

Despite the high prices for imported gas, Ryabtsev reassured citizens about possible changes in tariffs:

“Gas prices for an average Ukrainian will not change. Gas for households remains at fixed tariffs, so there is no need to panic.”

Thus, the emergency purchase of gas at high prices was the result of the lack of strategic decisions in the previous months. As a result, Ukraine is forced to pay much more for imported gas, which could have serious financial consequences for the state and its citizens. At the same time, it may also have an impact on possible gas tariff increases in the future.

Emergency gas purchases and high prices pose certain risks for the Ukrainian economy, especially for businesses that use gas as a raw material. However, the situation is currently stable for households, and there is no need to panic.