Russian gas producer Gazprom (GAZP.MM), opens new tab said it would send 42.4 million cubic metres of gas to Europe via Ukraine on Tuesday, the same volume as on Monday, while nominations for gas flows to Austria from Slovakia edged up.
The European energy markets have been on edge over a contractual row between Gazprom and Austria’s OMV (OMVV.VI), opens new tab, which led to the Kremlin-controlled firm halting supply to the Vienna-based company on Saturday.
The flows to OMV were stopped after it threatened to impound some of Gazprom’s gas as compensation for an arbitration it had won over the contractual dispute.
Daily flows to Europe via Ukraine have remained around normal levels, however, and gas has continued to flow into Austria.
Nominations, or requests from customers, for flows to Austria from Slovakia were up 6% on Tuesday versus Monday but remained about 12% below levels seen before Gazprom halted supply to OMV.
It was not clear who was buying gas previously intended for OMV.
Nominations to the Czech Republic from Slovakia were roughly in line with levels seen in previous days this month.
Nominations for flows into Slovakia from Ukraine were also little changed while nominations for flows leaving Slovakia were mostly stable, data from transmission system operator Eustream showed.
In January-October 2024, Ukrgasvydobuvannya JSC and Ukrnafta PJSC increased commercial gas production by 6% compared to the same period last year, up to 12.3 bcm, according to the website of Naftogaz of Ukraine.
“Despite the hostilities, our specialists continue to drill new wells and steadily increase gas production. We are doing everything possible to ensure that Ukrainians can continue to use their own fuel during the heating season,” said Naftogaz CEO Oleksiy Chernyshov.
As reported, the consolidated quarterly report of Naftogaz forecasts that the group’s commercial gas production in 2024 will amount to 14.6 billion cubic meters. In February, Chernyshov noted that the group’s goal for this year is to get closer to 15 bcm of production.
NJSC Naftogaz of Ukraine plans to import 2-3 bcm of gas, according to the published memorandum on economic and financial policy for the 5th review of the EFF program with the IMF.
“For the upcoming heating season 2024/25. Ukraine plans to import additional gas for domestic consumption in the amount of up to 2-3 billion cubic meters, while additional gas may be stored by non-residents for the needs of the EU countries in accordance with the baseline scenario,” the document says.
At the same time, it is noted that restrained domestic consumption and growing domestic production limited the need for gas imports in the last heating season.
Regarding import plans for this year’s heating season, it is noted that Naftogaz has secured additional financing for gas imports from the EBRD and bilateral donors.
If Naftogaz faces a liquidity shortage, the government is ready to assess the amount of compensation for the company’s special obligations in 2025 based on its actual documented costs, verified by the State Audit Service and other stakeholders. The relevant calculations will be finalized by the end of August 2025.
“The potential pressure on costs related to gas imports and PSO compensation will be taken into account by adjusting the fiscal balance targets to take into account the above assessment, the results of the audit of the debt of district heating companies (DHCs), available funding, and limited to UAH 60 billion (about 0.8% of GDP),” the document says.
It also notes that the energy sector reform agenda, “as soon as conditions allow,” includes additional gradual increases in gas and electricity tariffs with parallel support for vulnerable consumers, and after the war ends, it will require restoring and strengthening competition in the wholesale and retail gas markets.
It is noted that the government will adopt a roadmap for the gradual liberalization of gas and electricity markets with an implementation plan indicating the timeline for the period after martial law.
As reported, Naftogaz Group CEO Oleksiy Chernyshov said in early October in a commentary to Energoreforma that as of November 1, the company’s purchases of gas in the customs warehouse (CW) mode, which is carried out as a reserve at the expense of the EBRD loan, will be “within 500-600 million cubic meters.”
At the end of 2022, Naftogaz attracted an EBRD loan for EUR 300 million under state guarantees, which created a reserve stock of natural gas in the amount of 748 million cubic meters in the customs warehouse (CU) mode.
A new agreement on the EBRD loan to Naftogaz for EUR 200 million under state guarantees was signed in November 2023. At the time, it was emphasized that it would come into force after the state guarantees were issued. Norway and the Netherlands shared the credit risk with the bank.
The CU regime allows natural gas to be stored in Ukraine’s underground gas storage facilities for three years without paying taxes and customs duties during its further transportation from the country.
In January-September 2024, the companies of the Naftogaz Group – JSC Ukrgasvydobuvannya and PJSC Ukrnafta – produced more than 11 billion cubic meters of commercial gas, which is 0.7 billion cubic meters more (about 7%) than in the same period in 2023, the group reported on its website.
“We continue to increase Ukrainian gas production. We are 2% higher than the planned production volumes. I am grateful to the teams for managing to achieve their goals even in the face of war. We will continue to support the trend of developing Ukraine’s energy independence,” said Oleksiy Chernyshov, Chairman of Naftogaz Group.
He noted that this heating season, as in the past, Naftogaz plans to provide the population of Ukraine and other categories of public service obligations exclusively with its own resources.
As reported with reference to Chernyshov, Naftogaz Group produces 43-44 million cubic meters of gas daily, with total daily production in Ukraine amounting to 53 million cubic meters (which is approximately 83% of the total).
Naftogaz’s consolidated quarterly report says that the group’s forecasted commercial gas production for 2024 is expected to reach 14.6 billion cubic meters. In February, Chernyshev said that the group’s goal for this year is to get closer to 15 bcm of production.
In January-August 2024, JSC Ukrgasvydobuvannya and PJSC Ukrnafta increased commercial gas production by 7.7% (by 0.7 bcm) compared to the same period last year – up to 9.8 bcm.
These data were made public by Oleksiy Chernyshov, CEO of Naftogaz Group, at the European Business Association’s event Global Forecast. Strengthening Unity”.
Chernyshov also clarified that the group’s oil and condensate production during this period amounted to 1.3 million tons, compared to 1.2 million tons in January-August 2023. The plan for the year is 2 million tons, with 1.8 million tons in 2023.
According to him, Naftogaz is one of the largest investors in the country’s economy with an annual volume of investments and capital expenditures of about $2 billion.
Earlier, UGV reported an increase in commercial gas production by 7.2% to 9.26 billion cubic meters over 8 months of 2024.
As reported, Naftogaz’s consolidated quarterly report says that the group’s forecasted commercial gas production for 2024 is expected to reach 14.6 bcm. In February, Chernyshov said that the group’s goal for this year was to get closer to 15 billion cubic meters.
European Commissioner for Energy Kadri Simson says the European Union is ready to completely stop the transit of Russian gas through the Ukrainian gas transportation system after the expiration of the current contract in December this year.
“When I spoke with my colleagues in Ukraine, I made it clear that we are preparing for a situation where the transit agreement between Ukraine and Russia will expire by the end of this December. We have found alternative supply routes, and the Member States or their companies that are still receiving gas from Russia have in fact been granted two additional years compared to other companies that Russia has decided to stop supplying to in 2022,” the European Commissioner said at a press conference in Brussels on Wednesday.
At the same time, Simson stated that Ukraine’s gas transportation infrastructure is also part of the EU’s infrastructure, as part of the European gas is stored in Ukraine’s storage facilities, “which provide us with additional capacity.”
“Ukraine is also a gas producer, so we have to make sure that their infrastructure still has value. But my message is very clear: there is no need to look for any new ways to continue trading with Gazprom. Alternative supplies are available, and we are engaging with affected member states to show them that alternative routes will deliver the volumes they need,” she elaborated.
Simson also referred to the words of Ukrainian President Volodymyr Zelenskyy, who said in late August that “Ukraine is not interested in extending the transit contract with Russia, and that European companies have the right to use Ukrainian infrastructure.”
According to the European Commissioner, her “main mission is to encourage companies that are still receiving Russian pipeline gas because they had contracts signed before the war to choose more predictable alternatives.”
Simson also cited figures showing that the share of Russian gas in EU imports fell from 45% in 2021 to 18% by June 2024, while imports from reliable partners such as Norway and the United States increased. In addition, the EU reduced gas demand by 138 billion cubic meters between August 2022 and May 2024.
“The EU reached its 90% winter gas storage target on August 19, 2024, well ahead of the November 1 deadline, and energy prices are more stable and remain well below the peak levels of the 2022 energy crisis,” she elaborated.
