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Executive Summary
Ukraine has tremendous natural resources for meeting domestic oil and gas production needs, with estimates of approximately 900 billion cubic meters of proven reserves of natural gas. In Europe, Ukraine ranks second 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 percent of all current Ukrainian production. The structure of hydrocarbons production in Ukraine is as follows: natural gas 89 percent, oil 7.9 percent, and gas condensate 3.1 percent. The primary source of hydrocarbons in Ukraine is natural gas, though the most lucrative gas reserves are located below 5,000 meters.
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Current Market Needs
In order to move closer to energy independence, Ukraine has actively begun to further explore and develop oil & gas fields across the country. Accordingly, more and more deep drilling and completion services, such as hydraulic fracturing, have been implemented. To boost domestic oil & gas production, Ukrainian companies have to improve oil & gas services. The exact market size for oil and gas equipment is unknown. There are over 5,000 drilled, producing wells in Ukraine and approximately the same amount of depleted wells/sealed wells. By using new enhanced technologies and providing proper workover, at least 1,000 of the sealed wells could possibly be rehabilitated.
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Recent Market Trends
In Ukraine, the leading position in gas production belongs to the state-owned companies, namely: PJSC Ukrgasvydobuvannya (UGV) and PJSC Ukrnafta – accounting for 74 percent and 5 percent of production, respectfully. Six major Ukrainian private companies produce 18% and the rest of the 3% of gas production, comes from 45 small private gas producers.
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Market Entry
Partnering with a local company to develop your business strategy is the most beneficial way for market entry. The Commercial Service in Ukraine can assist with the introduction and evaluation of potential business partners.
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Best Prospects for U.S. Exporters
E&P services:
- Test Drilling Works
- Well workover operations
- 3D seismic, deposits development and geological exploration works
- Hydraulic fracture works
- Drilling bits
Oilfield Machinery:
- Drilling bits
- Drill pipes - required to meet the API Spec 5DP standards
- Coiled tubing services providers and equipment
- Compressors for Gas pump stations
Offshore:
Naftogaz, a State-owned entity, will be granted without a competition the Black Sea shelf licenses. Naftogaz will conduct a 3D seismic survey and, when completed, begin to invite potential investors. More insights on upcoming activities will be available online through the licensing rounds platform: https://www.geo.gov.ua/en/
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Technical Barriers & Tariffs
The Ukrainian government has been actively analyzing and addressing unnecessary trade barriers that encumber trade. Great efforts have been put towards making the business environment more simple and transparent for local and foreign companies. For more information please refer to https://www.export.gov/article?id=Ukraine-Import-Tariffs
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Procurement & Tenders
Most procurement is done through the public procurement system, ProZorro - https://prozorro.gov.ua/en. It is a major improvement in transparency for government tenders.
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Getting Paid / Trade Finance
Payment methods and terms vary depending upon the U.S. company’s business model and relationship with its Ukrainian trading partner. For new-to-market companies, requesting advance payment for goods and services from a Ukrainian customer may be a prudent course to follow until both parties establish a record of payment. While all internationally acceptable forms of payment are available in Ukraine (e.g. checks, bills of exchange, letters of credit, and collection arrangements), the recommended method of receiving payment for U.S. exports is through an irrevocable letter of credit.
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U.S. Commercial Service Information
Myroslava Myrtsalo, Commercial Specialist
U.S. Embassy in Kiev, Ukraine
Email: Myroslava.Myrtsalo@trade.gov
