Maintaining critical infrastructure is the biggest challenge of the 2022/23 heating season.

05/ 07/ 2022

This opinion was expressed by experts that participated in the meeting of the European Business Association “Is the Ukrainian natural gas market ready for the eurointegration and perspectives that it brings?”. Thus, the participants discussed the current situation of all sectors within the gas market and infrastructure, preparation for the next heating season, and the technical state of the gas infrastructure in wartime conditions. At the beginning of the year, state and private gas production companies demonstrated positive dynamics and had the potential to increase production. Everything changed on February 24, however, companies are still storing production where possible, although, obviously, in smaller volumes. Currently, the situation has somewhat stabilized, and given the current dynamics, it can be assumed that the volume of production will decrease by only 10-12% by the end of the year. Unfortunately, the distribution network has been subjected to systematic shelling and damage from hostilities – about 5 thousand km of gas distribution networks have already been destroyed. Despite active hostilities, the companies carried out current repairs and restored gas supply where possible. Experts noted good progress in synchronizing Ukrainian industry legislation with European norms in recent years. However, the beginning of a full-scale war put many processes on hold. Currently, in the conditions of the regulated market, there is no question of market tariffs, moreover, payment discipline has significantly deteriorated – it is not clear when, after the end of the war, Ukrainians will be ready for the market price and, accordingly, when there will be a competitive market provided for by our course towards eurointegration. One of the biggest risks of the next heating season will be the threat of missile strikes on critical infrastructure facilities, particularly, gas storage, as well as ensuring the sufficiency of gas and resources for its purchase. Therefore, before the winter begins, the state should carry out preparatory work in advance to ensure the availability and preservation of gas reserves. Ukraine will be able to prepare for the winter, but the season will be difficult and unpredictable. In the process of preparation, the participants of the meeting consider it necessary to focus also on the operation of autonomous boiler houses, energy efficiency equipment, and measures that must be implemented now. Besides, providing heat to people in the areas of hostilities and in temporarily occupied territories will be another challenge. Igor Gotsyk. Co-Chair of the EBA Energy Committee, Natural Gas and Oil Sector. Prospects of European integration are currently being transformed into an action plan, which should consist of concrete steps for the full integration of the Ukrainian gas market. Unfortunately, now we see a certain rollback of reforms, and therefore we emphasize that any challenges must be responded to with market methods and, despite everything, market mechanisms should be preserved. Although the EU is not at war, it is currently experiencing the biggest supply crisis, so it is trying to diversify its supply sources as much as possible and increase the share of renewable sources. We believe that Ukraine should follow the same path in order not to lose the laid foundations of a competitive market. We thank our speakers and participants for the fruitful discussion!

This opinion was expressed by experts that participated in the meeting of the European Business Association “Is the Ukrainian natural gas market ready for the eurointegration and perspectives that it brings?”. Thus, the participants discussed the current situation of all sectors within the gas market and infrastructure, preparation for the next heating season, and the technical state of the gas infrastructure in wartime conditions.

At the beginning of the year, state and private gas production companies demonstrated positive dynamics and had the potential to increase production. Everything changed on February 24, however, companies are still storing production where possible, although, obviously, in smaller volumes. Currently, the situation has somewhat stabilized, and given the current dynamics, it can be assumed that the volume of production will decrease by only 10-12% by the end of the year.

Unfortunately, the distribution network has been subjected to systematic shelling and damage from hostilities – about 5 thousand km of gas distribution networks have already been destroyed. Despite active hostilities, the companies carried out current repairs and restored gas supply where possible.

Experts noted good progress in synchronizing Ukrainian industry legislation with European norms in recent years. However, the beginning of a full-scale war put many processes on hold. Currently, in the conditions of the regulated market, there is no question of market tariffs, moreover, payment discipline has significantly deteriorated – it is not clear when, after the end of the war, Ukrainians will be ready for the market price and, accordingly, when there will be a competitive market provided for by our course towards eurointegration.

One of the biggest risks of the next heating season will be the threat of missile strikes on critical infrastructure facilities, particularly, gas storage, as well as ensuring the sufficiency of gas and resources for its purchase. Therefore, before the winter begins, the state should carry out preparatory work in advance to ensure the availability and preservation of gas reserves. Ukraine will be able to prepare for the winter, but the season will be difficult and unpredictable. In the process of preparation, the participants of the meeting consider it necessary to focus also on the operation of autonomous boiler houses, energy efficiency equipment, and measures that must be implemented now. Besides, providing heat to people in the areas of hostilities and in temporarily occupied territories will be another challenge.

Igor Gotsyk Co-Chair of the EBA Energy Committee, Natural Gas and Oil Sector

Prospects of European integration are currently being transformed into an action plan, which should consist of concrete steps for the full integration of the Ukrainian gas market. Unfortunately, now we see a certain rollback of reforms, and therefore we emphasize that any challenges must be responded to with market methods and, despite everything, market mechanisms should be preserved. Although the EU is not at war, it is currently experiencing the biggest supply crisis, so it is trying to diversify its supply sources as much as possible and increase the share of renewable sources. We believe that Ukraine should follow the same path in order not to lose the laid foundations of a competitive market.

We thank our speakers and participants for the fruitful discussion!