Ukraine - Energy
Ukraine’s economy is one of the most energy-intensive economies in Europe. Although the country has made gains in energy efficiency in the industrial sector, its overall economic growth has slowed as a result of few investments in energy infrastructure modernization, unstable energy supplies, and inefficiencies in energy consumption.
Ukraine is an important transit country for supplies of oil and natural gas from Russia to countries throughout Europe. Ukraine’s hydrocarbon resources are located in the Dnieper-Donetsk region in the east, the Carpathian region in the west, and the Black Sea-Sea of Azov region in the south. The Dnieper-Donetsk region accounts for 90% of natural gas production. The remaining 10% of natural gas production originates in the Carpathian and Black Sea-Sea of Azov regions.
Ukraine produces coal, natural gas, petroleum and other liquids, nuclear, and renewables. However, energy demand exceeds domestic energy supply; imports cover an energy gap of about 35%.
Natural gas represents nearly one-third of Ukraine’s primary energy consumption, followed by coal at 30% and nuclear at 21%. Petroleum and other liquids and renewable energy sources together account for the remaining 18% of primary energy consumption.
Even before the COVID-19 pandemic, Ukraine’s economy faced significant challenges, including excessive sovereign debt. The pandemic only increased these challenges, as both energy demand and production decreased, affecting Ukraine’s ability to repay debt.
Ukraine continued to contend with the loss of jurisdiction over the Crimean Peninsula. According to the Ukrainian Energy Ministry, the country lost 80% of its oil and natural gas deposits in the Black Sea and a substantial share of its port infrastructure.
Ukraine held 400 million barrels of proved oil reserves as of the beginning of 2021. Ukraine relies heavily on imports to meet its petroleum and other liquids demand. In 2020, petroleum and other liquids imports met about 70% of Ukraine’s liquids consumption. The country produced only 74,000 barrels per day (b/d) of petroleum and other liquids.
Ukraine imports most of its petroleum products from Belarus, Russia, and Germany. Crude oil imports, sourced increasingly from Azerbaijan and Kazakhstan, supply Ukraine’s sole operating refinery, the Kremenchug facility. Ukraine is a transit country for Russia’s crude oil exports, which travel to Slovakia, Hungary, and the Czech Republic through the southern branch of the Druzhba pipeline network, which transports 400,000 b/d.
Almost all of Ukraine’s thermal power generation capabilities have been destroyed by Russian long-range strikes, Prime Minister Denis Shmigal said 15 October 2024, adding that the country must now rely on substitutes. Shmigal said Kiev is doing its best to increase energy sustainability, especially in frontline regions and areas bordering Russia. He added that “cities that depend on large thermal power plants are especially vulnerable,” given that Russia “purposefully attacked” these types of facilities, “destroying or damaging almost 90% of all thermal power generation” in the country.
The prime minister added that Kiev’s priority is to provide these regions with alternative sources of heat and electricity, noting that Kharkov, the country’s second-largest city, has received dozens of energy equipment units, including powerful electricity generators.
Ukraine suffered an acute power shortage this summer, despite importing electricity from neighboring states. The government has repeatedly urged the population to save electricity, while Ukraine’s state-run energy company, Ukrenergo, imposed power supply restrictions on industrial consumers.
In September 2024, the UN Human Rights Monitoring Mission warned that Russian strikes on Ukrainian energy infrastructure could bring “devastating consequences” to the country as winter looms. In light of this, experts interviewed by the agency predicted winter power outages of between four and 18 hours per day as cold weather sets in. However, Energy Minister German Galuschenko disagreed with this assessment, saying that while outages are possible, they would be caused by emergency repairs and would not be systemic. He also insisted that Ukraine’s power grid is now better protected by air defense systems.
Aleksandr Litvinenko, the secretary of the National Defense and Security Council, said Kiev expects new massive Russian strikes once the heating season arrives in Ukraine. Russia had intensified its strikes on Ukrainian military and energy facilities in recent months. In April, the Defense Ministry said they are a response to Kiev’s attempts to target Russian oil infrastructure, stressing that the targeted facilities support the Ukrainian defense industry, and that the strikes do not target civilians. Ukraine has repeatedly launched long-range attacks on energy infrastructure deep inside Russia, including oil depots and refineries, using kamikaze drones.
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