Ukraine’s Naftogaz makes new 1 Bcm gas discovery at undeveloped field

The upstream arm of Ukraine’s state-owned Naftogaz has made a new gas discovery at a previously undeveloped field with reserves expected to total as much as 1 Bcm, the company said Aug. 29.

In a statement, Naftogaz said its subsidiary UkrGazVydobuvannya (UGV) made the discovery with an exploration well drilled to almost 4,000 meters following a 3-D seismic survey.

“By increasing reserves, we are creating a perspective for sustainable growth of gas production,” UGV acting general director Oleg Tolmachev said.

UGV has been working to bring new gas wells online quickly in recent months as part of plans to boost Ukrainian output.

Ukraine has long held the ambition of producing all the gas it consumes to eliminate imports from Europe but has failed to boost output in recent years.

In 2021, Ukraine’s gas output — of which three-quarters was produced by UGV — was 19.8 Bcm, down 2% year on year, before the war in 2022 led to a further drop in output to 18.5 Bcm.

Ukraine hopes to increase gas production by some 1 Bcm this year which — together with reduced domestic gas consumption — would help it to eliminate the need for gas imports next winter.

It also plans to boost domestic stocks to 14.7 Bcm ahead of the next heating season, which traditionally starts around mid-October. Stocks are currently built to around 13.5 Bcm.
‘All possible scenarios’

Despite relatively robust stock levels, Naftogaz CEO Oleksiy Chernyshov warned Aug. 28 that the next heating season would not be easy due to possible Russian attacks on energy infrastructure.

“Ukraine is preparing for all possible scenarios,” Chernyshov said, according to televised comments posted to the Naftogaz website.

“We have to prepare for a difficult heating season. However, we already have some experience — the events of last year strengthened the energy industry,” he said.

Halting the need for imports to meet its own demand is a key priority for Ukraine, not least given the high price of imported gas, which last summer limited Ukraine’s ability to fill its storage sites.

Stocks were built to around 14.2 Bcm ahead of the 2022/23 winter.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh on Aug. 26, 2022.

Prices have come down since thanks to healthy storage levels and demand curtailments but remain relatively high, with Platts assessing the TTF month-ahead price on Aug. 25 at Eur35.33/MWh.

Norwegian funds
Should Ukraine need new imports, however, the Norwegian government said Aug. 24 it would contribute funds for Ukraine to buy gas for “emergency” storage.
In a statement, the Norwegian government said it would offer NOK 635 million ($60 million) for the purchase of gas to put into storage as well as NOK 865 million for power sector repairs and electricity supply.

“We do not yet know how much gas Ukraine will need to import this year, but with Norway’s contribution, Ukraine is better equipped for a cold winter and new attacks from Russia,” Prime Minister Jonas Gahr Støre said.

The government said its previous support of NOK 2 billion saw Norway finance around one third of Ukraine’s gas imports needs in 2022.

Naftogaz said in February that Kyiv had purchased more than 400 million cu m on “favorable terms” from a Norwegian company over the winter.
Source: Platts