In 2024, Ukrgasvydobuvannya JSC increased commercial gas production by 5.3% (by 0.7 bcm) compared to 2023 – up to 13.9 bcm, the press service of Naftogaz Group reports.
According to it, last year the company commissioned 83 new wells, of which 60 were production wells and 23 were exploration wells.
“UGV also increased the number of directional wells drilled from 51 to 60 over the year, which allows for gas production in hard-to-reach areas. In addition, the company drilled 370 thousand meters over the year, which is 14% more than in 2023.
“Naftogaz Group not only maintains stability, but also demonstrates an increase in gas production. Every day our people demonstrate the ability to adapt to current challenges and ensure development even in the most difficult conditions. I am grateful to my colleagues for their teamwork and sincere dedication to the profession,” said Roman Chumak, Acting Chairman of Naftogaz of Ukraine. Roman Chumak.
As reported, Ukrgasvydobuvannya produced 13.224 billion cubic meters of commercial gas in 2023, which is 0.679 billion cubic meters more than in 2022.
NJSC Naftogaz of Ukraine owns 100% of Ukrgasvydobuvannya shares.
Vladimir Putin might have lost a slice of revenue after Kyiv closed its gas pipeline to Russian supplies, but Moscow already has alternatives for shipping the fuel that stand to shield it from any serious economic hit.
Russia plans to expand exports of liquefied natural gas while routing pipeline gas to other buyers like China.
“We will continue to increase our share on world LNG markets” even as sanctions aim to halt this growth, Putin said during his annual press conference on Dec 19. He also expressed confidence that Russian gas-giant Gazprom PJSC would survive the end of pipeline transport through Ukraine.
Despite calls to ban such supplies, Europe is buying a record amount of the super-chilled fuel from Russia, predominantly from the Novatek PJSC-led Yamal LNG plant.
The volumes have surpassed what Russia was selling through Ukraine before Jan. 1, when Kyiv, refusing to allow any more transit that funds Moscow’s war machine, closed off the five-decade old route through its territory.
The situation highlights how hard it is for Europe to cut ties with Russia, which over the last decade entrenched itself as a key commodities supplier to the continent. It also casts a spotlight on how the February 2022 invasion of Ukraine has forced Russia to keep readjusting its trading network. Still, Moscow has shown that even when one avenue to markets closes, there are often others still open for Russia.
Russia’s LNG exports overall reached a record last year, ship-tracking data show.
Before the invasion, Russia used to sell about 155 billion cubic meters of pipeline gas to Europe per year. In 2024, the country exported roughly 30 billion cubic meters of gas to the region, with over a half of volumes going via Ukraine.
Since most of Russia’s piped gas had already stopped flowing to Europe, the discontinuation of the Ukrainian line won’t affect the economy much, said Tatiana Orlova, an economist at Oxford Economics.
“Europe will still need gas as all its efforts to wean itself from Russian gas have not been successful,” Orlova said. “It will probably end up buying more Russian LNG to make up for the drop in natural gas imports from Russia,” she said.
Gazprom sold about $6 billion worth of gas through Ukraine in 2024, Bloomberg calculations show. Yet, most economists and researchers foresee a muted effect on the economy from being deprived of those sales. Russia will lose an equivalent of about 0.2% to 0.3% of gross domestic product, according to various analyst estimates.
“The figures are too small to make a dent in Putin’s war machine,” David Oxley, an economist at Capital Economics said in a note last week. For comparison, Ukraine stands to lose roughly 0.5% of GDP, he said, stemming from an end to the fees it collected for transit of the gas.
Slovakia, heavily reliant on Russian gas and also earning from transit fees, is set to lose 0.3% of GDP, according to his estimates.
On top of LNG sales, Russia also has other pipeline options for shipping gas that will help make up for the loss of the route through Ukraine.
Shipments to China, which is overtaking Europe as the largest market for Russia’s pipeline gas, were forecast to reach around a record 31 billion cubic meters in 2024. They are set to rise to 38 billion cubic meters this year as the Power of Siberia link has reached the full design capacity.
That would compensate for half of the volumes lost when transit via Ukraine ended, according to estimates by Sergey Vakulenko, a scholar at the Carnegie Endowment for International Peace.
Gazprom may sell more through TurkStream, the direct gas pipeline between Russia and Turkey under the Black Sea that also helps supply some European clients. In 2025, Gazprom could sell 25 billion cubic meters to Turkey and 15 billion cubic meters to Europe through TurkStream, Vakulenko estimates.
Russia plans to re-direct some fuel to countries in Central Asia and will work to increase the capacity of a Soviet-era pipeline from Russia to Uzbekistan through Kazakhstan.
Politically, the gas issue gives the Kremlin an opportunity to demonstrate that Putin isn’t a pariah, said Sergei Markov, a political consultant close to the Kremlin.
“For Moscow, it is extremely important that the diplomatic blockade is being broken for the second time,” Markov said, referring to Slovak Prime Minister Robert Fico’s surprise visit to Moscow on Dec. 23 to discuss gas among other things. He was the second European leader to visit Moscow since Russia invaded Ukraine after Hungarian Prime Minister Viktor Orban’s trip in July.
Putin last month said that Russia is ready to ship gas to Europe, but he cautioned that any new deal would likely be complicated to reach, even given the rising prices from tighter supply now facing Europe.
Still, the plans for both pipeline gas and LNG may face challenges of their own. While Russia aims to launch exports via a second link to China in two years, talks for a third pipeline have stalled over disagreements about the terms.
Russia seeks to triple LNG exports to 100 million tons in 2035, from last year’s 33 million tons, but western sanctions on all key future projects and the LNG tanker fleet complicate that.
“The natural gas and LNG landscape has changed dramatically for Russia in the last three years,” said Claudio Steuer, an energy consultant and faculty member of IHRDC, Boston. It requires “far greater investment and effort for a less profitable business” now that Russia needs to search for business further afield with buyers that are more price sensitive.
Sanctions have already stifled Russia’s aims for growth in LNG. Novatek’s newest project, Arctic LNG 2, last year managed to start limited exports, but sanctions imposed by the US and its allies limited the plant’s access to ice-class tankers needed to navigate frigid northern waters and made foreign buyers reluctant to buy the shipments.
In 2025, the focus will be on what Donald Trump decides to do about sanctions on Russia. Muddying the picture are the US’s own ambitions to supply more of its LNG to Europe.
A ban on transshipping Yamal LNG cargoes in European ports could also complicate logistics for Russian supplies to Asia when the Northern Sea Route is closed, but sanctions may actually lead to more of that supply being sent to Europe instead.
According to the results of 2024, the volume of natural gas production in Ukraine is estimated at 19.1 billion cubic meters, which is 400 million cubic meters more than in 2023 (18.7 billion cubic meters) and 600 million cubic meters more than in 2022 (18.5 billion cubic meters), said Artem Petrenko, Executive Director of the Association of Gas Producers of Ukraine (AGPU).
“According to preliminary estimates of our association, this year gas production in Ukraine will amount to about 19.1 billion cubic meters. Compared to 2023, we see an increase of more than 400 million cubic meters,” he said during an online meeting on the results of the year and prospects for the development of the energy sector of Ukraine at Energy Club on December 30.
According to the Executive Director, the positive trend of gas production growth in 2024 was ensured by both state-owned JSC Ukrgasvydobuvannya and PJSC Ukrnafta and private sector companies.
“Since August, the negative trend in private companies has been broken, and we have been recording an increase in gas production by private companies since August, and in five months they have managed to increase average daily gas production by more than 25%,” Petrenko said.
Also, according to preliminary data of the AGCU, more than 140 wells were drilled in Ukraine in 2024.
“This actually repeats the record-breaking year of 2023, when more than 150 wells were drilled. In total, over almost three years of full-scale invasion, gas producers have drilled more than 360 new wells,” the expert added.
According to him, since 2018, when the state provided incentives for drilling to Ukrainian gas producers, state and private companies have started drilling more than 720 wells in the country.
According to Petrenko, amid the ban on gas exports, Naftogaz of Ukraine continues to transparently buy gas on the Ukrainian Energy Exchange (UEEX) not only from producers but also from all market participants willing to sell gas on Naftogaz’s terms. According to the AGCU, since 2023, Naftogaz has purchased almost 2 billion cubic meters of gas at the UEEX.
“Under the conditions of closed exports, this is the only effective mechanism of cooperation between Naftogaz and participants, which is an incentive for private companies to increase gas production,” he emphasized.
At the same time, the Executive Director believes that in 2025, a negative factor for Ukrainian gas production will be the level of gas transmission tariffs, which the National Energy and Utilities Regulatory Commission (NEURC) increased for GTS Operator of Ukraine LLC by more than 4.5 times for internal entry points to the GTS starting January 1.
“This will affect not only state-owned companies but also private ones, as under the moratorium on gas price increases, it will reduce the investment opportunities of companies that they could direct to increase Ukrainian gas production,” Petrenko said.
As reported, gas transportation tariffs for internal entry points to the Ukrainian gas transmission system will increase 4.6 times from UAH 101.93 per 1 thousand cubic meters per day to UAH 464.37 per 1 thousand cubic meters per day starting January 1, 2025, and 4 times for external entry points, from UAH 124.16 per 1 thousand cubic meters per day to UAH 501.97 per 1 thousand cubic meters per day.
The current gas transit deal between Russia and Ukraine expires at the end of 2024, with Vladimir Putin having already said there was no time left to renew the contract. Will eastern EU members be hit the hardest?
Currently, Russian gas is still flowing through Ukraine’s pipeline network to the European Union (EU), generating revenue for Kremlin leader Vladimir Putin and funding his war against Ukraine. The Russian has claimed without Russian gas the bloc won’t be able to meet its energy needs.
For Ukraine, by contrast, the gas transit deal has always meant first and foremost filling Putin’s war chest, even though some of the revenue Russia gains from its exports via Ukraine stay in Kyiv as transit fees.
Now, as the year 2024 ends, Ukraine will not renew the gas transit agreement with Russia, as announced by President Volodymyr Zelenskyy on December 19 in Brussels. Ukraine will no longer allow Moscow to “earn additional billions” while continuing its aggression against the country.
Russian President Putin also confirmed the contract’s termination, telling reporters in a televised briefing on December 26 that a new contract was “impossible to conclude in 3-4 days.”
Putin laid the blame firmly on Ukraine for refusing to extend the agreement.
The end of the agreement, however, raises questions about gas supply in landlocked eastern EU countries, which cannot import liquefied natural gas (LNG) by sea. Austria, Hungary, and Slovakia still rely on Russian gas via Ukraine which is why the governments there are eager to continue purchasing Russian gas.
Before the Ukraine war, Russia was the world’s largest exporter of natural and Europe was Moscow’s most important market. European governments prioritized access to cheap energy over concerns about doing business with Putin.
The mutually beneficial relationship began more than 50 years ago, when the former Soviet Union needed funds and equipment to develop its Siberian gas fields. At the time, the western part of then still divided Germany sought affordable energy for its growing economy, and signed the so-called pipes-for-gas deal with Moscow, under which West German manufacturers supplied thousands of kilometers of pipes to transport Russian gas to Western Europe.
This energy relationship persists, as European importers are often locked into long-term contracts that are difficult to exit.
According to the Brussels-based think tank Bruegel
, EU fossil fuel imports from Russia amounted to about $1 billion (€958 million) per month at the end of 2023, down from $16 billion per month in early 2022. In 2023, Russia accounted for 15% of the EU’s total gas imports, trailing Norway (30%) and the US (19%), but ahead of North African countries (14%). Much of this Russian gas flows through pipelines via Ukraine and Turkey.
Major consumers include Austria, Slovakia, and Hungary. Additionally, countries like Spain, France, Belgium, and the Netherlands still import Russian LNG by tanker, some of which mixes with other gas sources in Europe’s pipeline network. As a result, it may even reach Germany, despite its efforts to forgo Russian gas.
Following Russia’s invasion of Ukraine in 2022, gas prices surged dramatically — at times by more than 20 times — forcing some European factories to cut production and many small businesses to close. Prices have since dropped but remain above pre-crisis levels, making energy-intensive industries, particularly in Germany, less competitive.
European consumers are also suffering from high energy prices, prompting many to reduce consumption amid a severe cost of living crisis. The additional expenses are a significant burden: Nearly 11% of EU citizens struggled to adequately heat their homes in 2023, according to the EU Commission.
The termination of the Ukraine-Russia agreement is already factored into European gas market forecasts, according to an EU Commission analysis reported about by Bloomberg in mid-December.
The EU is confident in its ability to secure alternative supplies.
“With more than 500 billion cubic meters of LNG produced each year globally, the replacement of around 14 billion cubic meters of Russian gas transiting via Ukraine should have a marginal impact on EU natural gas prices,” Bloomberg cites from the commission’s document, which is not yet public. “It can be considered that the end of the transit agreement has been internalized in the winter gas prices.”
The EU has long argued that member states still importing Russian gas via the Ukraine route — particularly Austria and Slovakia — could manage without these deliveries. Therefore, the EU commission said it would not enter negotiations to keep the route open.
According to the Commission, member states have been able to reduce their gas consumption by 18% since August 2022 compared to the five-year average. Moreover, the United States is expected to create new LNG capacities over the next two years, and these supplies could help the EU address potential disruptions.
“The most realistic scenario is that no Russian gas will flow through Ukraine anymore,” the EU commission said, adding the bloc was “well-prepared” for this outcome.
Despite EU assurances, Hungary and Slovakia remain anxious about their gas supplies and their ongoing close ties to Russia. Hungarian Prime Minister Viktor Orban, for example, is seeking ways to maintain gas deliveries through Ukraine, even though the country’s current imports largely rely on the TurkStream pipeline.
Orban has floated unconventional ideas, such as purchasing Russian gas before it crosses into Ukraine. “We are now trying the trick … that what if the gas, by the time it enters the territory of Ukraine, would no longer be Russian but would be already in the ownership of the buyers,” Orban told a briefing, according to the Reuters news agency. “So the gas that enters Ukraine would no longer be Russian gas but it would be Hungarian gas.”
Hungarian Prime Minister Orban is a staunch supporter of Russian gas and wants flows via Ukraine to continueImage: Denes Erdos/AP/picture alliance
Slovakia has taken a more confrontational approach, threatening countermeasures against Ukraine. Prime Minister Robert Fico suggested halting emergency electricity supplies to Ukraine after January 1 if no agreement is reached. “If necessary, we will stop the electricity shipments that Ukraine needs during outages,” Fico said in a Facebook video.
In respons to the threat, Ukrainian President Volodymyr Zelenskyy accused Fico of acting under Russian orders, stating on social media platform X that it appears Putin directed him to “open a second energy front against Ukraine.”
Fico remains one of the EU’s strongest opponents of military aid to Ukraine. During a surprise December visit to Moscow, Fico claimed Putin reaffirmed Russia’s willingness to continue supplying gas to Slovakia.
“Naftogaz has put into operation a new exploration well with a daily flow rate of 150 thousand cubic meters of gas, the group’s press service reports.
According to it, the well depth is 5400 meters. Construction of a site for the next exploration well has also begun at the field.
“Increasing gas production is of strategic importance for the energy security of our country in times of war. I thank my colleagues for their consistent and effective work in this direction,” said Roman Chumak, acting CEO of Naftogaz.
As reported, Naftogaz Group companies Ukrgasvydobuvannya and Ukrnafta produced more than 13.5 bcm of natural gas in January-November 2024.
President Volodymyr Zelenskyy says Ukraine will not continue to transit Russian gas.
“We will not continue the transit of Russian gas, we will not allow them to earn additional billions on our blood. Any country in the world that can get something cheap from Russia will eventually become dependent on the Russian Federation, whether tomorrow or in a month or a year. This is their policy. Therefore, we will not transit Russian gas,” Zelenskyy said at a press conference in Brussels on Thursday.
Zelenskyy noted that in a conversation with the Prime Minister of Slovakia, he said that if there is not Russian gas, but gas from another country, and there is no payment to Russia until the end of the war, Ukraine is ready to consider this option.
At the same time, Zelenskyy emphasized that Ukraine would not allow additional earnings for Russia.
