Ukraine - Country Commercial Guide
Energy

This is a best prospect industry sector for the country. Includes a market overview and trade data.

Last published date: 2021-09-24

Oil and Gas

Overview

Data in bcm

 

2018

2019

2020

(estimated)

2021

(estimated)

Total Local Production

21.3

20.6

20.2

21.5

Total Exports

 

 

 

 

Total Imports

10.6

10.6

10.1

8.5

Total Market Size (Consumption) bcm

32.3

29.8

30.0

30.0

(total market size = (total local production + imports) - exports)

Data Source: Naftogaz Ukraine, Gas Traders of Ukraine Association

*There is no available statistical data on the size of the oil & gas machinery equipment market.

The Government of Ukraine (GOU) considers the oil and gas industry as a strategic sector to achieve independence from foreign oil and gas imports. The GOU continues to improve the output and production of electricity, oil, and natural gas, all efforts aimed at increased energy independence. Ukraine continues to follow its path to energy security and independence though legislative reforms. The strategic goal of the Ukrainian government is to meet domestic gas production demands by 2030. This was outlined in its National Economic Strategy. The fulfilment of this ambitious target requires $25-30 billon investment.

2020 was one of the most difficult for Ukraine’s gas and oil industry since 2014. The difficulties of Ukrainian natural gas producers began at the beginning of the year with an extended downward trend in prices for natural gas, the main commodity resource. Overall in 2020, Ukrainian natural gas production was cut by 2%, down to 20.2 bcm.

Oil and Gas Production - Ukraine has tremendous natural resources for ensuring domestic needs in energy resources, with estimates of approximately 900 billion cubic meters of proven reserves of natural gas. In Europe, Ukraine ranks # 2 in Europe for gas reserves. Three Ukrainian regions contain hydrocarbons resources: the Dnipro-Donetsk basin, the Carpathian region in western Ukraine, and the Black Sea and Crimea region in the south. The Dnipro-Donetsk basin is a major oil and gas producing region accounting for 90 % of all current Ukrainian production. The structure of hydrocarbons production in Ukraine is natural gas 89 %, oil 7.9 %, and gas condensate 3.1 %. The primary source of hydrocarbons in Ukraine is natural gas, though the most lucrative gas reserves are located below 5,000 meters.

The leading position in gas production in Ukraine belongs to state-owned companies, namely: PJSC Ukrgasvydobuvannya (UGV) a subsidiary of Naftogaz Group, PJSC Ukrnafta – accounting for 70.5% and 5.3% of production, respectively. Six major Ukrainian private companies produce 17.6% and the remaining 6.7% of gas production comes from 45 small private gas producers. Overall, for 2020 the breakdown of gas production in Ukraine in bcm was as follows: PJSC Ukrgasvydobuvannya – 14.23 bcm, PJSC Ukrnafta – 1 bcm, and private companies 4.9 bcm. Gas imports via reverse flow from the European Union cover lapses in domestic production.

Throughout 2021, UGV plans to conduct over 99 hydraulic-fracturing operations, 260 workovers, 642 coiled tubing operations and 1,417 geological surveys. The company signed several major framework agreement contracts attracting the world’s leading services companies including Weatherford, Schlumberger, Halliburton, and Baker Hughes.

UGV itself has 204 licenses (138 brownfields, 62 greenfield and 4 PSAs). Currently, UGV’s focus is to increase production efficiency, particularly the modernization of land infrastructure, including pressure compressor stations and drying units.

Primary market obstacles in Ukraine’s oil and gas sector include currency devaluation, customs clearance problems, delays in reforms (permit system and licensing). Although there are a sufficient number of potential local partners and subcontractors in the oil and gas industry, the lack of a qualified and well-experienced workforce is also a major hindrance.

Leading Sub-Sectors

E&P services:

The main trend of 2021 is the widespread introduction of sidetracking technology including:

  • Directional drilling (horizontal) with over 2 km or more horizontal sections
  • Bits and bit engineering services
  • Drilling waste management
  • Coiled tubing services
  • Geophysical services and explosives
  • Construction of gas pipelines, linear part
  • Hydraulic fracturing services
  • Construction and reconstruction of surface infrastructure facilities (BCS, IGTP, etc.),
  • Downhole drilling motor and servicesm 

Opportunities

Upstream: Ukraine has great offshore reserves in the Black Sea. In November 2020, the GOU granted the state-owned oil and gas company Naftogaz the right to develop the Black Sea shelf. Naftogaz is ready to invest $126 million during the next five years to develop four blocks of the Black Sea shelf and in summer 2021, a 3D seismic survey is expected to be conducted by Norwegian company PGS. It is thought that the Black Sea shelf contains Ukraine’s largest gas resources, with the possibility of extracting up to 10 bcm per annum.

To learn more about the upcoming license auctions please follow the link: https://www.geo.gov.ua/en/main/

Midstream: Another opportunity for U.S. firms may be with Ukraine’s Gas TSO (GTSO) - a natural monopoly that provides gas transportation services through Ukraine’s main gas pipelines. The GTSO has put forth a “Development Strategy for 2020-2024” in critical areas such as optimization and modernization of the gas transportation system (GTS) infrastructure and operations. The current GTS development plan provides for investments of nearly $1.5 billion over the next 10 years.

Resources

  • Ministry Energy of Ukraine
  • Naftogaz Ukrainy National JCS
  • Ukrgasvydobuvannya PJSC
  • Gas TSO of Ukraine LLC
  • Nadra of Ukraine NJSC
  • Association of Gas Producers of Ukraine
  • Ukrainian Geological Survey: https://www.geo.gov.ua/en/main/

Civil Nuclear

Overview

 

2018

2019

 

Total Net Generation (TWh)

159.96

148.9

 

Nuclear

86.20

76.4

 

Thermal (coal)

46.71

46.71

 

Hydro

8.46

8.46

 

CHP

11.33

11.33

 

Hydro-Accumulative

1.46

1.46

 

Wind

2.1

2.9

 

Solar

2.9

5.5

 

Biomass

0.8

1.6

 

Final Consumption (TWh net) without net loses

120.22

117.7

 

Generation Park

2019 Production Share %

2020 Production Share %

Thermal (gas, coal)

29.50

27

Nuclear

54.33

51

Hydro / Hydro-Accumulative

7.81

5

CHP, other co-generation

6.45

9

Wind, solar, bio

1.91

8

Total

100.00

100.00

Ukraine currently operates 15 nuclear reactors at four facilities with a total installed capacity of 14,148 MW: Zaporizhzhya (6,000 MW, 6 VVER-1000 units), South-Ukraine (3,000 MW, 3 VVER-1000 units), Rivne (2,835 MW, 2 VVER-1000 units and 2 VVER-440 units) and Khmelnytska (2,000 MW, 2 VVER-1000 units) and according to the ITA Industry and Analysis office, the country was ranked as the 12th largest market for U.S. nuclear exports. Ukraine’s nuclear power utility, Energoatom, operates all these facilities, generating 76.4 billion kWh, more than half the nation’s electrical needs. Energoatom is the largest energy generating company in Ukraine, 8th in the world, and the 3rd in Europe. Planned dates for withdrawal of most of Ukraine’s operating nuclear reactors accounts will occur by 2020. Currently, all units are Russian VVER pressurized water reactors. Rivne 1 and 2 are 440 MWe V-312 models, and the rest are larger 1,000 MWe units, V-320 models. Energoatom’s current priorities are to increase safety, bring load factors up to 83-85 %, and extend the working lives of the reactors by 10-15 years (at about $150 million per VVER-1000 reactor).Because Ukraine relies heavily on nuclear power; there are significant opportunities for U.S. equipment suppliers in Ukraine’s civil nuclear sector. Because of the Russian-backed separatist conflict in Eastern Ukraine, energy has become a high-profile political and economic issue. First, because of the conflict in the east, Ukraine’s coal production has fallen by about one-fifth since 2014, thereby increasing the importance of the nuclear energy sector in limiting large-scale electricity shortages. Second, before the conflict, Ukraine significantly relied on Russia for energy. Though it is working to diversify its energy production, in this time of conflict and crisis, 51 % of the country’s electricity comes from nuclear power plants. Ukraine set a goal of sourcing 25 % of its total energy mix from renewables by 2035, while also maintaining the role of nuclear power plants Ukraine. It will remain at 55% - 58% until 2035. This generation structure roughly meets the requirements of the European policy of “green” transition.

Leading Sub-Sectors

Life Extension and Upgrades - In 2008 and 2009, Energoatom successfully extended the operating licenses of three of its reactors by 20 years. Based on these and other subsequent successes with NPP life extensions, Energoatom is working with the European Bank for Reconstruction and Development (EBRD) as well as Euratom to upgrade additional reactors. Though the life extension program is being challenged under the UN Convention on Environmental Impact Assessment in a Transboundary Context, Energoatom continues with life extensions. In 2017, Ukraine extended the Zaporozhe-3 nuclear plant’s 10-year operational license.

Fuel - For decades, Ukraine had been nearly entirely dependent on Russian nuclear fuel procurement from Rosatom because Ukraine does not convert, enrich, or fabricate its fuel. Despite a lack of domestic enrichment capacity, Ukraine does possess mineral uranium resources, including approximately 2 % of the world’s uranium reserves. Traditionally, Ukraine sent its uranium concentrate and zirconium alloy to Russia for enrichment.

To reduce the risk of complete dependence on Russia, however, in December 2014, Ukraine signed a contract with Westinghouse Electric Company to begin diversifying its nuclear fuel supply. Historically, Russia supplied 100% of fuel, but in 2021 it dropped to 47%, with 53% supplied by Westinghouse (seven blocks out of 15). Ukraine took an additional step towards diversification in August 2016 when it signed a supply contract for enriched uranium with the Anglo- German-Dutch company, URENCO.

Waste Management - Ukraine has an open fuel cycle and two storage facilities for spent fuel, one dry at the Zaporozhye plant and one wet at the Chernobyl plant. Currently, Ukraine sends its spent fuel to Russia and Energoatom pays Russia $200 million per annum to accept and store this spent nuclear fuel. In January 2015, Energoatom and the U.S. firm Holtec signed a contract to construct a centralized dry storage facility for spent fuel (CSFSF) in the Chernobyl Exclusion Zone to reduce Ukraine’s reliance on Russia. The nuclear waste storage facility is expected to be fully operational by the end of 2021. 

Opportunities

Energoatom plans to refocus on small modular reactor (SMR) construction that vary from the existing high-capacity units that can operate only in the base load. In February 2018, Energoatom signed a Memorandum of Understanding with Holtec International related to the adoption by Ukraine of Holtec’s small modular reactor technology and desire to become a manufacturing hub for SMR-160 reactor components. In June 2019, the Ukrainian Module Consortium – a consortium between Holtec International, Energoatom, and the State Scientific and Technical Center for Nuclear and Radiation Safety– announced its plan to build six SMR-160s at the country’s Rivne nuclear power station site and have wide deployment of SMR-160 units to complement intermittent renewables in Ukraine.

U.S. suppliers should note that alongside local manufacturers of equipment for the nuclear industry, such as Turboatom, UTEM, and Westron, are major foreign competitors. These include Germany (Siemens), Switzerland (ABB) and France (Alstom, Areva), Rosatom, TVEL (Russia), Westinghouse (Japan) and Holtec (U.S.). Ukrainian manufacturers supply turbines, generators, transformers, and electric cable at very competitive prices, but they are less efficient and longlasting.

In December 2018, the Cabinet of Ministers of Ukraine approved a plan of measures for the synchronization of the Unified Energy System (UES) of Ukraine with the European Network of System Operators of Electricity (ENTSO-E). The action plan created a joint control unit for UES of Ukraine and the energy system of Moldova, worked on ensuring the availability of thermal power plants for work in the ENTSO-E, the organization of communication channels for the technological control of the UES of Ukraine, the construction of air lines and substations, certification of the transmission system operator (NEC Ukrenergo”), the transition to isolated work with the grid systems of countries outside the ENTSO-E (RF, Belarus), and the attraction of international technical assistance. Within the framework of the plan, by 2023 Ukraine will have to build a number of trunk transmission lines (power lines).

Resources

  • The Ministry of Energy of Ukraine
  • NNEGC Energoatom
  • World Nuclear Industry Status report
  • Energobusiness Magazine (energy sector news, statistics and facts - in Ukrainian only)