April 14. 2024. 7:01

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Ukraine offers 10 bcm of gas storage to Europe for next winter

Naftogaz, the Ukrainian state-owned oil and gas firm, is making 10 billion cubic meters (bcm) of natural gas storage available to Europe “right now”, the company’s CEO told EURACTIV.

Oleksiy Chernyshov, the CEO of Naftogaz, was in Brussels last week as part of a Ukrainian delegation visiting the European Commission as well as gas industry representatives.

In Brussels, Ukrainian and EU officials took stock of the 2022-23 winter heating season – the first without full Russian gas deliveries – and started making preparations for next winter.

As part of the talks, Kyiv said it could make its gas storage capacity available to Europe ahead of the next heating season.

“We want to offer our storages to Europeans,” Chernyshov announced, saying this “would make Ukraine an energy backup for the EU”.

“Right now, we are able to provide up to 10 bcm of storage,” he told EURACTIV in an interview.

Last year, the EU adopted a regulation mandating that gas storages be filled up to 80% by 1 November 2022 and 90% full by the same date the following years.

The regulation was adopted in June, after Moscow turned off the gas tap to Europe in retaliation for economic sanctions imposed on Russia following its invasion of Ukraine.

“Ukraine has the biggest European capacities for gas storage, which are 31 bcm,” Chernyshov said, adding this was more than enough for Ukraine’s domestic needs.

“I can guarantee that I can rent this empty space to European countries that can store gas in Ukraine. And when they need it, they can get it back to Europe.”

EU agrees gas storage rules under shadow of Russian cut-offs

At a meeting overshadowed by the threat of further Russian gas cut-offs, EU energy ministers voted unanimously on Monday (27 June) to adopt a new law ensuring Europe’s gas storage is at least 80% full by November 2022.

US-EU talks on winter preparedness

Europe’s preparedness for next winter was also at the centre of discussions during a meeting of the US–EU Energy Council, which took place in Brussels on Tuesday (4 April).

Europe has emerged from the winter heating season with storage levels that are 56% full, a historic high. Usually, at that time of the year, storages would normally be at about 26%, said US Deputy Secretary of Energy David M. Turk.

“So we’re in a remarkably good place,” Turk told reporters in a telephone briefing after the meeting. “We still can’t get complacent on the gas side, but a lot of progress was made on that front.”

The EU storage regulation adopted last year led to a buying spree to refill EU storage sites. By mid-November last year, gas stocks in Europe were more than 95% full – the equivalent of a little over 100 bcm capacity, according to industry figures cited by S&P Global Commodity Insights.

In that context, the 10 bcm of extra storage offered by Ukraine’s Naftogaz could make a significant addition to Europe’s energy security.

“We have been discussing storages, with main traders and main production companies in Europe as well as some governments,” Chernyshov said.

The main constraint, he explained, relates to the financial guarantees requested by European companies to access the gas when they need it. “European customers would like to have guarantees for their assets that are being stored,” Chernyshov said.

“And we have received from some European trading companies their proposals for further guarantees from the EU institutions on whether they can support these transactions,” he added.

Although Ukrainian storage sites are located in geological formations deep underground and protected from potential Russian strikes, Chernyshov said there was “still an overall risk” linked to the war, which creates uncertainties for European investors.

“We would like to discuss potential support from the European Union for the European clients, so they feel more secure,” Chernyshov said.

Contacted by EURACTIV, the European Commission did not elaborate on the potential support the EU could provide to European energy companies storing gas in Ukraine but told EURACTIV in emailed comments:

“We see no obstacles for EU companies to store gas in Ukraine.”

A gas export ban introduced by Kyiv for security of supply reasons during the war does not affect gas transit to the EU or the re-export of stored gas to Europe, the EU executive indicated.

And Ukrtransgaz, the operator of Ukrainian gas storage facilities, is currently undergoing a certification procedure foreseen in the EU’s Gas Storage Regulation, which Ukraine has started applying since January 2023, the Commission explained, adding that Kyiv is also taking part in the EU’s joint gas purchasing programme.

Ukraine plans investments in domestic gas production

Naftogaz also has plans to increase its domestic gas production, despite the uncertainties caused by the war.

“Our goal for this year is an additional 1 bcm,” Chernyshov said in a column for media outlet Ukrainska Pravda, a move that would bring natural gas production to 19 bcm this year.

“We want to increase our domestic production regardless of the war and investment climate,” he told EURACTIV, saying the objective is to produce enough to cover the country’s gas needs and become 100% independent from Russian imports.

“We’re in a position to have zero imports of natural gas this year.”

And for that too, Naftogaz is hoping to receive backing from Europe and the US.

“We have started to discuss the joint production and exploration of gas in certain sites,” Chernyshov said.

“We are in discussions with Halliburton, for instance. And we plan to increase our cooperation already this year,” he added, stressing that Halliburton, an American multinational energy corporation, was acting “as a service company, not as a co-investor”.

The cooperation between Ukraine and the US was confirmed by David M. Turk, the US deputy secretary of energy.

“Ukraine definitely has gas reserves and there are plans, and we’ve had some good discussions bilaterally in terms of developing those resources further,” he told journalists after the US-EU Energy Council yesterday.

Turk said 17 national labs accountable to the US Department of Energy were being mobilised to provide expertise to Ukraine in terms of planning and execution to achieve their energy goals.

“And so we look forward to continuing that collaboration going forward,” he said, praising Kyiv for its “can-do attitude” and ability “to do things very, very quickly”.

The EU is also supportive of Ukraine’s goals to expand its gas production, although it did not say how it intends to do so.

“We support Ukraine’s objective to increase domestic gas production,” the European Commission replied when asked by EURACTIV.

Ukraine lobbies for cuts in Russian Nord Stream 1 gas shipments

Ukraine is working behind the scenes to convince Western allies to shift Russia’s shipments of natural gas from the Nord Stream 1 pipeline to Ukraine’s pipeline, increasing Kyiv’s leverage in its conflict with Russia, energy officials told Reuters.