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Country has potential to move from stagnation to growth: CEO

Ukraine PM Shmyhal says government committed to support

Ukraine produced 20.7 Bcm of gas in 2019

London Ukraine's state-owned Naftogaz wants the government to be "proactive" in its support for the country's domestic gas sector in order to provide the right conditions for output to grow, its CEO Andriy Kobolev said Sept. 8.

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Ukraine, whose gas production has been steady at some 20 Bcm/year for the past 25 years, has vast untapped potential in its onshore blocks -- both for conventional and unconventional resources -- as well as in the Black Sea.

Large swathes of acreage have been opened up in the past year for new exploration but there have been delays in signing off on new production sharing agreements and gas producers believe there should be more incentives afforded to the industry to boost upstream activity.

"Ukraine has the potential to move from stagnation to production growth," Kobolev said at a meeting with government officials in Kyiv.

"But new areas and projects that can provide such a result carry significant risks, require significant investment, new technologies and expertise," he said, according to comments posted to the Naftogaz website.

"We are ready to take responsibility, explore and open these opportunities for the entire industry and for the country. But their successful implementation requires a proactive position on the part of the state," he said.

Ukraine has long harbored the ambition of being self-sufficient in gas -- and even to become an exporter -- and its Prime Minister Denys Shmyhal said at the meeting that domestic gas output would bring about Ukraine's energy independence.

The country produced 20.7 Bcm of gas in 2019, almost enough to meet its consumption of 26.4 Bcm.

"At meetings with the President [Volodymyr Zelensky], we have constantly raised the issue of increasing our own production," Shmyhal said.

"It is necessary to conduct appropriate exploration phase, complete the already partially implemented exploration plans and promptly begin production. For its part, the government is exerting every effort to do such work, and we are also counting on the relevant legislative initiatives of the lawmakers," he said.

"I am confident that together we will be able to complete the necessary work and shortly strengthen Ukraine's energy independence."

Naftogaz said it stood ready to implement pilot projects in new areas of production, reducing the risk of such developments for the whole industry.

These could include the development of deep horizons, deposits of unconventional shale gas and the Black Sea shelf, it said.

"The industry also needs decisions from the state -- signing production sharing agreements after tenders that were held more than a year ago, introducing incentives for unconventional gas production, and opening access to subsoil users to the Black Sea."

Ukraine has also opened up the downstream gas market with Naftogaz now able to sell gas directly to households and businesses, rather than through third parties which used to be the case.

It is offering a number of different tariffs for customers, including annual, quarterly and monthly tariffs for business.

Its annual tariff, which it said is best suited for gas suppliers, is indexed to the German NCG hub, Naftogaz said, while its quarterly and monthly tariffs are priced off the country's energy exchange.

"Naftogaz is ready to supply gas to all market participants in Ukraine," its commerce director Willem Koppuls said.

"To do this, we have prepared proposals of various volumes, linked to both European hubs and the Ukrainian exchange," Koppuls said.

See the article here:
Ukraine's Naftogaz urges state to be 'proactive' in helping boost gas output - S&P Global