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Ukraine Energy

In the past, disputes between Russia and Ukraine over natural gas supplies, prices, and debts have resulted in interruptions to Russia's natural gas exports through Ukraine. At the turn of the century, 80 percent of Russia's natural gas exports reached the EU via Ukraine, with another 20 percent through Belarus, though this dependence was reduced when the Nord Stream offshore pipeline between Russia and Germany along the Baltic seabed entered service in 2010. By 2014 Russia provided around a third of the EU's oil and gas, and 40 percent of the gas was shipped through Ukraine.

Ukraine is one of the most energy-intensive countries in the world. Ukraine is one of the most energy wasteful countries in the world. The energy intensity of Ukraine’s GDP exceeds the European average 2.5 times. It consumes more natural gas -- 74 billion cubic meters in 2003 -- than Poland, Hungary, the Czech Republic, and Slovakia combined. Despite the huge amount of energy Ukraine consumes -- 1.5 percent of the world's total energy consumption according to the US Energy Information Administration (EIA) -- Ukraine's GDP of $300 billion in 2004 was far below Poland's of $463 billion. In terms of gas consumption per GDP unit, Ukraine may be compared only to Russia, with the difference that the latter ranked first in the world by proven reserves and exports of gas, while Ukraine by 2013 could cover not more than 45% of its consumption with domestic fuel.

Its geographic position and proximity to Russia explain Ukraine's importance as a natural gas transit country, through which volumes flow to Austria, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Germany, Greece, Hungary, Moldova, Poland, Romania, Slovakia, and Turkey. In the past, disputes between Russia and Ukraine over natural gas supplies, prices, and debts have resulted in interruptions to Russia's natural gas exports through Ukraine.

At the turn of the century, 80 percent of Russia's natural gas exports reached the EU via Ukraine, with another 20 percent through Belarus, though this dependence was reduced when the Nord Stream offshore pipeline between Russia and Germany along the Baltic seabed entered service in 2010. Originally built exclusively for transit purposes, the Ukrainian pipeline system over time has become cluttered with small branch lines that connect the system's main pipelines with surrounding towns and villages. This now makes it impossible to separate domestic gas supplies from transit resources, the Naftohaz officials explained. To ensure that correct amounts of gas transit to Europe, Ukraine 'balances' its flow of incoming and outgoing transit gas by using stored gas from underground facilities at Ukraine's western border to add to export amounts and make up for volumes taken out within the Ukrainian territory.

Ukraine was the seventh-largest energy consumer in Europe and Eurasia in 2010. More than half of the country's primary energy supply came from its uranium and coal resources, although natural gas also plaed an important role in its energy mix. In 2010, Ukraine generated a total of 176 billion kilowatt-hours (BkWh) of electricity and consumed approximately 150 BkWh. The country is heavily dependent on nuclear energy—its fifteen reactors generate roughly half of the total electric power supply. The remainder of the electric power is generated with conventional thermal sources (45 percent), hydropower (7 percent), with marginal volumes contributed by wind generation.

Only a relatively small portion of the country's total consumption is accounted for by petroleum and other liquid fuels. In 2011, Ukraine consumed 300,000 barrels per day (bbl/d) of liquid fuels, but produced only 82,000 bbl/d. The remainder was imported mostly from Russia, with smaller volumes originating in Kazakhstan and Azerbaijan. In December 2013 Russia announced plans to restart oil supplies to Ukraine's Odessa refinery after a three-year drought, in a sign Moscow was ready to support its neighbor after it spurned a trade deal with the European Union. The plan to resume supplies by pipeline to the Odessa refinery would be a reward for Ukraine keeping the EU at arm's length and opting instead to revive economic ties with its former Soviet master Moscow. A preliminary Russian oil exports schedule for the first quarter of 2014 showed Russia could supply 750,000 tons of oil to the refinery worth some $600 million, traders told Reuters, citing a draft schedule.

In March 2005 Russia proposed revised rates for the transport of gas across Ukraine. By the end of the year the two sides had failed to resolve the dispute over Moscow's demand that Ukraine pay more than quadruple the current price for gas imports from Russia. Gazprom threatened to halt gas deliveries to Ukraine on January first unless Kiev agrees to its new pricing structure. Russia shut off supplies to certain pipelines 01 January 2006. Gazprom on 01 January reduced its delivery volumes to Ukraine by 25%. Italy reported drops of 14 percent in deliveries on 01 January. The stand-off with Russia and the resulting agreement 04 January 2006 raised the price of gas from $50 to $95 per 1,000 cubic meters for five years. The alternative was Gazprom's open market $230 gas.

Kyiv paid a heavy subsidy of the price of natural gas to Ukrainian homes and industries. On 23 December 2005, Gas Ukrayiny, a subsidiary of Naftohaz Ukrayiny, announced that the company planned to supply natural gas to the population and public sector at the current price of about $35-$38 per 1,000 cubic meters for the population and about $46 for public sector entities. With Ukraine buying gas for $95 per 1,000 cubic meters, household prices would continue to be heavily subsidized. And with gas so cheap, there has never been a pressing need to save it.

During the first half of January 2006, before the cold snap, Ukraine had needed 270-80 MCM a day; with the cold snap the number ranged from 280 to 420 MCM a day. To meet the difference between supply and demand during the frost, Ukraine took more gas from the pipeline, siphoning off gas from Russia that was destined for EU countries. Ukraine claimed that Russia owed that gas to Ukraine under the existing contracts. The affair resulted in a temporary mid-winter interruption in the EU gas supply. According to the Russians, Ukraine had taken 2.5 BCM more in gas than contracted and that this must be paid at the rate of USD 230 per 1000 CM.

In January 2009, Russia cut gas supplies to Ukraine, affecting at least 10 European countries for three weeks in the middle of winter. Three years earlier, an almost identical dispute briefly disrupted natural gas trans-shipments. But in 2009 Russia halted all deliveries to Europe via Ukraine’s pipeline system for two weeks. The most severely affected countries were in southeastern Europe as Bulgaria was forced to stop production at some of its industrial plants, while Slovakia even declared a state of emergency. Gazprom said several of its key customers in Eastern Europe and the Balkans were receiving less Russian natural gas since it closed the taps to Ukraine on New Year's Day because of unpaid bills. Russia said natural gas shipments to Ukraine can resume only if it paid outstanding debts of more than two-billion dollars. Ukraine pledged to pay only $1.5 billion. In addition, Gazprom raised the price of natural gas for Ukraine to $450 per 1,000 cubic meters - nearly twice the amount offered by Kyiv.

In September 2011 Russia and Ukraine were in tough talks to avoid what could be their third gas war in five years. Russian President Dmitry Medvedev warned Ukraine, “You can’t torpedo existing contracts.” Earlier, Ukrainian President Viktor Yanukovych threatened to take Russia to international arbitration to decide their fight over Ukraine’s top import - Russian gas. The move called into question the Russia-Ukraine rapprochement that was supposed to follow the 2010 election of Yanukovych, the so-called "pro-Russian candidate."

Gazprom contracts tie Russian gas prices to world oil prices. They were on a ‘take or pay’ basis. Companies had to pay for gas they did not use. World gas prices were low as shale gas production had soared in the United States, taking the US out of the market as an importer. Companies in Greece, Germany and Italy were seeking to cut the link between gas and oil prices - and to bring Russian gas prices down to world levels.

Ukraine consumed approximately 2.3 trillion cubic feet (Tcf) of natural gas in 2011, with domestic production accounting for approximately 30 percent of the total at 700 billion cubic feet (Bcf). The remainder of supply was made up by Russian natural gas, imported through the Bratstvo (Brotherhood) and Soyuz pipelines.

The IMF calculated that the amount Kyiv paid in subsidies was equivalent to about 7.5 percent of the country's GDP in 2012 so that Ukrainians paid a third to a fifth for gas compared to their neighbors in the Baltics and Poland. Ukrainian governments have been loath to reduce the subsidies because the cheap gas program is highly popular.

Ukraine's Naftogaz bought around 13 billion cubic meters of gas from Russia in 2013 at the market rate of $400 per thousand cubic meters. That price was substantially reduced in December 2013 to a friendship price of $268.5 per thousand cubic meters. The discount was part of a raft of support mechanisms devised by Russia for Ukraine following the latter’s decision in late November 2013 to back away from signing a deal that would have deepened political and economic relations with the European Union.

The United States appeared to be rethinking its aversion to natural gas exports so it could help meet Ukraine's energy needs and weaken Ukraine's dependency on Russia for its gas supply. The top U.S. energy official, Ernest Moniz, said at an energy conference in March 2014 that he "would certainly welcome" discussions with congressional leaders about easing the country's current natural gas export restrictions that limit sales to countries that are not free trade partners. He said the conflict in Ukraine, where Russian troops are occupying the country's Crimean peninsula, is "obviously a very, very serious and important situation" that merits considering whether energy exports should play a role in U.S. foreign policy.

According to some forecasts, the US and Canada, by promoting their programs of liquefied natural gas (LNG) export, will be able to gradually meet at least 25% of the European demand for natural gas from 2016. When searching for new markets, the US and Canada are expected to conduct a rather aggressive policy since low prices and excessive gas supply are two major factors constraining the development of the North American gas market. By and large, according to preliminary expert estimates, the annual export potential of the US and Canada may reach 176 BCM of gas8 after 2016 (for comparison – Gazprom OJSC exported 130 BCM of gas to Europe in 2012). Given US Government plans to keep gas prices low on the domestic market in order to boost the national economy, the actual gas exports from North America will not exceed 100 BCM/year by 2020.

The EU-U.S. Energy Council, which met in Brussels on 02 April 2014 supported Ukraine's efforts to diversify its natural gas supplies, including through the rapid enhancement of reverse flow capacities and increased gas storage capacity. A final joint statement by the Council also states that the Council supported measures by the IMF "to build a competitive energy economy" in Ukraine. The meeting, co-chaired by EU foreign policy chief Catherine Ashton and U.S. Secretary of State John Kerry, welcomed the firm commitment of the Ukrainian government to transform its system of subsidized consumer energy prices into targeted measures that mitigate the impact of price increases on the poor and vulnerable.

The EU and the United States also welcomed the determination of the Ukrainian government to pursue energy efficiency, market transparency, and the long overdue restructuring and reform of Naftogaz. "The council emphasized that all near-term actions to improve Ukraine’s energy security should be pursued in the context of a strategic vision of full integration into the European energy market," reads the statement. Council members reaffirmed their commitment to work with Ukraine on the legislative and regulatory reforms necessary to realize this vision and support it along its path.

The building of an LNG-terminal was still one of the realistic options for diversifying gas supplies to Ukraine, Ukrainian Prime Minister Arseniy Yatseniuk said 02 April 2014. "The LNG-terminal project discussed by the previous government is still on the table," he said at the 10th annual investment conference organized by Dragon Capital in Kyiv on Wednesday. The premier said that the realization of the project in Odesa region would allow Ukraine to receive several billions of cubic meters of gas every year. Other key tasks in the change of gas supplies to the country is the organization of reverse supplies from the European Union (EU), the continuation of negotiations with Gazprom, work on the increase of energy efficiency, and the reduction of gas consumption.

Commenting on reverse gas deliveries from Europe, Yatseniuk said that their volume could reach 20 billion cubic meters. He said that the boosting of this gas supply channel is hindered by Slovakia. The Ukrainian prime minister said that the settling of the issue is a political one, and the claim that the building of additional gas pipelines is required is untrue. The premier expressed hope that the European Union will help Ukraine to settle the issue and receive access to cheaper gas, the price of which could be $365 per 1,000 cubic meters. He also projected that after the denouncement of the agreements regarding the deployment of the Russian Black Sea fleet on the Ukrainian territory, the price of gas for Ukraine will be increased by $100 from $385. Ukraine and Naftogaz Ukrainy will take all measures, including legal measures, to protect their interests, he said.

Reversed gas flows from Slovakia could provide Ukraine with as much as 30 billion cubic meters of natural gas a year. The Ukrainian and Slovak energy ministers held talks on the issue 24 April 2014 in Bratislava with European Union Energy Commissioner Gunther Oettinger. Ukraine needed around 50 billion cubic meters a year. The country currently gets most of its gas from Russia, which has threatened to sharply increase the price Ukraine must pay amid high tensions between the neighboring states. Slovakia indicated in April 2014 it was willing to take the necessary technical steps to get around eight billion cubic meters per year flowing to Ukraine in the coming months. Ukraine says it's possible for Slovakia to provide much more. However, there are concerns that Russian energy giant Gazprom, which supplies around one-third of Europe’s gas demand, could accuse Slovakia of violating its contract with Gazprom by carrying out such reverse flows. The problem is the influence of the Gazprom-affiliated company to the Slovak Eustream company and they are not so optimistic and not so happy in order to organize reversed flow.

The Russian gas monopoly Gazprom on 24 April 2014 billed Naftogaz of Ukraine USD 11 billion for taking less gas than contracted in 2013, Gazprom deputy CEO Alexandr Medvedev told reporters on 24 April 2014. "Gazprom on Wednesday billed Naftogaz of Ukraine USD 11.388 billion for gas shortfall in 2013 under the take-or-pay contract," Medvedev said. He pointed out, under the terms of the contract Naftogaz was to take in 2013 41.6 billion cubic meters of gas, but took only 12.9 billion cubic meters. For 2012 Gazprom billed Ukraine USD 7 billion for pumping less gas than contracted. On April 11, Ukrainian Minister of Energy and Coal Industry Yuriy Prodan said Ukraine is preparing to file a lawsuit to the Stockholm arbitration court under the contract between Naftogaz of Ukraine and Gazprom. He said that currently Gazprom is preparing and reviewing relevant documents, "those disastrous conditions that now exist in the contract between Naftogaz and Gazprom of 2009."

Russia said starting in April 2014 it would end the 33 percent discount on the natural gas it has been selling to the one-time Soviet state. Russia's state-controlled gas giant Gazprom announced 01 April 2014 that it was increasing the price of natural gas for Ukraine to $385.5 per 1,000 cubic meters in the second quarter from the previous rate of $268.5. Gazprom's chief executive officer, Aleksei Miller, said in Moscow that Ukraine's debt for unpaid gas bills stood at $1.7 billion as of April 1. Miller said the "December discount" for gas could not be extended and cited Ukraine's failure to pay debts for 2013 and make full payments for current deliveries.

Russian President Vladimir Putin said the gas price increase "has nothing to do" with the standoff in Ukraine's Crimean peninsula. He said, "We gave them money. They failed to deliver." By some accounts Russia supplies about 70 percent of Ukraine's natural gas.

Russian energy giant Gazprom said 16 June 2014 it was cutting gas supplies to Ukraine following Kyiv's failure to meet a deadline to pay nearly $2 billion of its outstanding debt. Gazprom said Ukraine must now pre-pay for any natural gas after missing the deadline. Gazprom also filed a lawsuit in a Stockholm arbitration court to try to recover Ukraine's entire $4.5 billion debt.

Ukraine offered to pay debts to Gazprom if Moscow agrees to charge $326 per 1,000 cubic meters of gas for 18 months. An EU plan would have seen Kyiv paying a "winter" price of $385 per 1,000 cubic meters for gas and a "summer" price of around $300. Putin said $385 was his final offer. The gas price for Ukraine surged from $268.5 to $485.50 per 1,000 cubic meters in April after Russia canceled two discounts granted previously to the country. Kiev keeps rejecting the new price saying it was ready to clear its debt if Moscow agreed to sell gas at the old price.

Kiev had been buying gas from Poland and Hungary over the past two years and was close to striking another gas deal with Slovakia in a bid to reduce its dependence on Russian supplies, amid political tension over Ukraine’s previous policy of gradual economic alignment with Europe. Ukraine was expected to sign an association agreement with the European Union in November 2013, but President Viktor Yanukovich dropped the deal at the last minute, instead striking a $15 billion aid package and gas discount agreement with Russia in December 2013.

Ukraine ceased buying gas from Europe and would instead purchase the fuel solely from Russia, as it offers the lowest prices, Ukraine’s energy minister said 09 January 2014. Russian gas is “the most profitable [supply option] for today,” said Ukraine’s Energy and Coal Industry Minister Eduard Stavitsky. Russia agreed to drop its gas prices for Ukraine from $400 per 1,000 cubic meters to $268 starting January 1, in a deal between Ukraine’s state energy firm Naftogaz and Russia’s Gazprom. The new price level must be confirmed every quarter, according to the agreement, giving financial leverage for Moscow to deter Kiev from seeking closer ties with the EU in the future.

The European Union, Ukraine, and Russia agreed September 26, 2014 on some elements of an interim solution for natural-gas flows that could prevent energy shortages in both Ukraine and EU countries this winter. It seemed there was a breakthrough at a rare meeting October 17 between the Russian and Ukrainian presidents. But follow-up talks failed to deliver an agreement on the details.

Under the proposed deal, if Moscow receives the $2 billion at the end of October 2014 plus a prepayment for new gas at $385 per 1,000 cubic meters of gas, Russia would deliver 5 billion cubic meters of gas to Ukraine. Ukraine opposed the $385 price, which was higher than the market price and that which other European countries pay for natural gas from Gazprom.

According to the so-called "Winter Plan" endorsed by Russia and the European Commission, Ukraine would have to repay $3.1 billion of its gas debt to Russia and pay in advance for the delivery of five billion cubic meters of gas at the price of $385 per 1,000 cubic meters, with a discount of $100. Kiev, however, rejected Russia's offer of the discount in the form of an export-duty exemption and wants the contract price to be reduced instead. Ukraine also wanted to agree the debt repayment schedule, as well as terms and schedules of future gas deliveries and insists on amending the current gas contract with Russia in order to formally authorize the reverse deliveries of Russian gas to Ukraine from Europe.

Ukraine, by importing fuel from Slovakia and other sources can replace up to 60% of Russian gas. Prime Minister of Ukraine Arseniy Yatseniuk said 03 September 2014, opening a government meeting. "In total, we can import 15 billion cubic meters - this is 60% of fuel import. We opened 10 billion cubic meters from Slovakia, 5 billion - from other sources. We substituted 60% of Russian gas," Yatseniuk said. He also added that the latest statistics show that Ukraine managed to reduce gas consumption by 30%, compared to the same period last year.

Ukraine needed to make a choice: either to save five billion cubic meters of gas for the heating season, or to purchase these volumes from Gazprom, Naftogaz CEO Andriy Kobolev said in an interview with Ukrainian Fifth Channel on 11 September 2014. "Five billion is precisely the sum of those interest savings I'm talking about. That is, if we take the consumption of the last year, without saving anything, we lack the five billion. We either have to purchase them from Russia, because other directions are already loaded, or to reduce consumption. This is a choice that we have to make consciously and operate in either one direction or the other, " Kobolev said.

Russia and Ukraine signed an agreement on 31 October 2014 to end their dispute over gas supplies. The deal, brokered by the European Union, would relieve Kyiv’s fears that it might not have enough gas in storage to get through the coming winter. Europe would act as guarantor for Ukraine’s gas purchases. The EU and the International Monetary Fund are would also help to pay off Ukraine’s gas debts to Russia. Moscow agreed to grant Kiev a $100 discount on the price it pays per 1,000 cubic meters of gas, while Kiev assured it would pay $3.1 billion to cover part of its debt to Russia's energy giant Gazprom by the end of 2014.

Even if the sides manage to get through the winter period, in April 2015 the confrontation will emerge anew, since the new agreement basically guarantees supplies of fuel only until the end of March 2015.

On 02 April 2015 the head of Russian gas giant Gazprom has confirmed the signing of an agreement on gas supplies to Ukraine for the next three months. Gazprom CEO Aleksei Miller said Kyiv will pay $247.18 per 1,000 cubic meters of gas in the second quarter under the deal with Ukrainian state energy company Naftogaz. The agreement extends an EU-brokered "winter package" that was signed in October 2014 and expired on March 31.

Naftogaz Ukrainy has sent a request to Russia's Gazprom for the supply of 114 million cubic meters of natural gasper day which will significantly increase gas stocks in underground storage facilities in the coming days, Energy and Coal Industry Minister of Ukraine Volodymyr Demchyshyn said 11 October 2015.

Ukraine could pass the 2015/2016 winter heating season without purchasing natural gas from Gazprom if the weather is warm, Demchyshyn said at a press conference in Kyiv. According to him, this is one of the scenarios developed by Ukrainian authorities, but the weather is frosty and the country will still need supplies of Russian gas to meet peak demand.

A deal was reached 25 September 2015 with the help of the European Union, ensuring Ukraine would receive Russian gas for six months through March 2016. Moscow's offer included a cut of "about" $20 per thousand cubic meters from the provisionally set price of $252. Gazprom resumed supplies to Ukraine 12 October 2015, in a development that will help the country meet its energy needs through the harsh winter months. Gazprom CEO Alexei Miller said supplies, which were suspended in the spring, recommenced after the company received $234 million out of a promised $500 million prepayment from Kyiv.

Ukraine on 25 November 2015 said it would no longer buy Russian gas and decided to close its airspace to Russian planes. Russia's state gas company Gazprom on Wednesday morning said it stopped flows of gas to Ukraine because it refused to pre-pay for deliveries. Ukrainian officials said they stopped buying Russian gas as they could buy from neighboring countries instead. Many European countries buy Russian gas pumped through Ukraine.

The Kremlin cut off coal sales to Ukraine in retaliation for its not repairing pylons supplying electricity to Crimea. Russia-backed rebels in eastern Ukraine, where most of its coal comes from, had earlier stopped supplies to Ukrainian-controlled areas. Almost 50% of the electricity production is not based on gas but based on coal. Although there are bigger coal reserves than last year, by one calculation they had 40% less than what is needed to survive the winter.

Refusing from Donbass coal, Ukraine has not only started buying more expensive coal from South Africa and U.S., but also become even more dependent on Russia. Blocked from buying coal and coke from Ukraine’s separatist areas, ArcelorMittal boughtthese raw materials for steel production from Russia, Girish Sardana. Despite delays with Ukrainian Railways supplying locomotives and wagons, the Kryvyi Rih mills were able to work at full capacity in 2017, hitting a record level of steel production -- 7 million tons.

Ukrainian state-owned energy firm Centrenergo has signed a contract with America's Xcoal Energy & Resources to supply 700,000 tons of coal to Ukraine in 2017. The US company will deliver 700,000 tons of coal, sending a ship or two each month till the end of the year. Thanks to American coal, Kiev hopes to get through the heating season of 2017-2018 without a problem. The first batch of American coal delivered to the Ukrainian port of Odessa will be priced at $113 per ton. “This partnership will provide Ukraine with a secure, reliable, and competitive alternative energy source, helping to stabilize an energy supply which has historically been at the mercy of the country's volatile neighbors,” said White House Press Secretary Sarah Sanders in a statement.

Germany and Poland diverged sharply on Russia’s Nord Stream 2 pipeline to deliver Russian gas directly to the EU without going through Ukraine. German energy groups Uniper and Wintershall, Austria’s OMV, Anglo-Dutch group Shell and France’s Engie are investing in the 1,225 km pipeline. German Chancellor Angela Merkel said at a Berlin press conference: “We think this is an economic project. We are also for energy diversification. We also want Ukraine to continue to have transit gas traffic, but we believe Nord Stream poses no danger to diversification.” Polish Prime Minister Mateusz Morawiecki told reporters: “Once Nord Stream 2 is built, Putin can do with Ukraine whatever he wants… And then we potentially have his army on the eastern border of the EU.”

“More than a dozen world-famous companies have declared their desire” to participate in the modernization and management of Ukraine’s massive, East-West gas transmission system, or GTS, President Poroshenko told reporters at the Munich Security Conference.

After a two-year break, triggered by Russia’s war, Russian gas supplies to Ukraine were set to resume on 01 March 2018. But on that same day the Kremlin indefinitely shut off natural gas supplies to Ukraine. The Stockholm court ordered Ukraine’s Naftogaz to buy 5 billion cubic meters of gas annually until the end of a current contract in December 2019. It also ruled Russia’s state-controlled Gazprom to pay $2.56 billion for undelivered volume of gas. Gazprom said that it will file a new lawsuit against Ukraine.

Russian gas monopoly Gazprom said it would seek to terminate its contracts with Ukraine’s state-owned gas and oil monopoly Naftogaz in an arbitration tribunal in Stockholm on 03 March 2018. “The court attributed its decision to the sharp decline in the Ukrainian economy. We are firmly opposed to Ukraine’s economic problems being solved at our expense,” Gazprom’s CEO and Chairman Alexey Miller said. “Gazprom is forced to immediately commence the procedure of terminating its gas supply and transit contracts with Naftogaz of Ukraine at the Stockholm tribunal.”

Recent discoveries of shale gas deposits in Ukraine provided the country with a possible means to diversify its gas supplies away from Russia. According to the forecasted reserves of unconventional gas, Ukraine ranks among the 10 most promising countries of the world with the greatest extractable reserves – their aggregate volume exceeds 20 TCM. The forecasted resources of shale gas are estimated at 1.2 TCM; tight rock gas – 8.5 TCM; coal bed methane – over 12 TCM. However, proven reserves reported in the State Balance of Mineral Resources of Ukraine refer only to coal bed methane. By 2014, confirmation of reserves and discovery of promising shale gas and tight rock gas areas were estimated to require large­scale geological prospecting works, nearly $1 billionof investments and 4 to 5 years.

In January 2013, Ukraine signed a $10 billion shale gas exploration deal with Royal Dutch Shell -- a major step in weaning Ukraine off Russian gas exports. Ukrainian President Viktor Yanukovych oversaw the signing of the 50-year production sharing deal. Shell agreed to explore an area which the government estimates holds about 4 Tcf of shale natural gas in reserves. Chevron says it will invest some $350 million in exploring sites in the Lviv and Ivano-Frankivsk oblasts and that its investment in the project will eventually total some $10 billion. Plans included development of shale gas resources for domestic consumption and exports to Western Europe by 2020. Experts believe Ukraine has one of the world's largest deposits of shale gas -- enough to supply the country's energy needs for decades.

Unconventional gas reserves are found in two areas: the Ukrainian portion of the Lublin foredeep (Western Ukraine) and theDnieper-Donets depression (Eastern Ukraine). According to 2014 forecasts, the first wells can be drilled in 2015, and the first commercial gas, under a favorable scenario, will not be obtained before 2019.

Gas hydrates reserves in Ukraine are concentrated in the Black sea bed sediments. According to scientific estimates, natural gas reserves in gas hydrates deposits in the Black Sea constitute 45-75 trillion cubic meters. As stated in analytic note prepared by National Institute of Strategic Studies, as far back as in 1988-1989 expeditions organized by Ministry of geology and Academy of Science of USSR discovered methane gas hydrate deposits on the Black Sea shelf and estimated methane reserves at the level of at least 100 trillion cubic meters, out of which about 25 trillion cubic meters were located in Ukrainian part of Black sea along south shore of Crimea, in particular in 2 km deep Sorokin Trough. It can be concluded that the research activities on gas hydrates extraction perspectives in the Black sea and, in particular, in its Ukrainian part are still at initial stages and do not even foresee test extraction of natural gas.

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Page last modified: 07-03-2018 18:40:35 ZULU