Ukraine’s state-owned Naftogaz Ukrainy is investigating ways of importing an estimated 6 billion cubic metres of gas before the end of October to boost reserves in underground storage ahead high consumption over winter.
Addressing a meeting in Washington on Tuesday, Naftogaz executive board chairman Yuri Vitrenko said Ukraine will have to borrow estimated $8 billion to replenish the storage.
He described the task as a “significant challenge” due to ongoing Russian attacks, according to news agency Interfax-Ukraina.
Latest estimates in Kiev suggest Ukraine’s economy has contracted by half since the beginning of the war in February, with the budget deficit being financed by international grants and loans.
At the end of May, Ukraine’s Prime Minister Denys Shmygal said that the government had rubber-stamped a plan from Naftogaz to seek a loan of €300 million ($320 million) from the European Bank for Reconstruction & Development for importing and storing gas.
Based on the import target and the remaining time frame to complete it, Naftogaz has calculated there is a need to import an average 40 million cubic metres of gas per day geared to replenishment until end of October, with withdrawals from storage expected to begin in November.
Although the company may buy gas flowing across the country between European customers of Gazprom, the Russian gas monopoly reduced its transit shipments across Ukraine to between 40 MMcmd and 45 MMcmd in May, despite committing to ship at the rate of least 110 MMcmd in 2022.
Nord Stream in focus
While Ukraine can also import some gas from alternative suppliers via pipeline connections with Slovakia and Hungary, there is a risk that Gazprom could halt gas transit flows entirely.
Facing this risk, executive director of Ukraine’s gas transmission authority Operator GTS Ukrainy Sergey Makogon reiterated his call for European authorities to impose restrictions on gas imports shipped to Europe via the Nord Stream pipeline when the next, seventh package of sanctions is introduced.
The package that is being debated now, is expected to limit or ban European purchases of Russian natural gas, following on from the near embargo on Russian oil supplies announced in May.
With Nord Stream becoming unavailable for Gazprom, Ukrainian officials argue that the Russian company will have to increase gas transit flows to Europe across Ukraine, thus providing Kiev with more options to securing gas imports while possibly shielding the pipeline network from military attack.
Among European states, just Poland joined the call on restricting flows via Nord Stream, with Prime Minister Mateusz Morawiecki urging Germany to close the pipeline that runs across the Baltic Sea from Russia.
Kiev is targeting a storage level of 19 Bcm by November from current holdings of 10 Bcm.
Another hotly debated proposal to reduce Ukraine’s dependence on gas imports is fostering the development of biogas and biomethane production to replace natural gas.
According to Makogon, the country may reach the output of 500 million cubic metres of biomethane within the next two years, and produce up to 8 Bcm by 2032.
Biogas that contains between 55% and 75% of methane has to be processed to remove other unwanted gases to become biomethane that is almost indistinguishable from natural gas.
The Bioenergy Association of Ukraine has estimated the 2021 output of biogas in the country at just 272 MMcm against 230 MMcm in 2020, with corn silage being mostly used as substrate for biogas production.
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