Ukraine’s Gas-Storage System Remains Fully Operational Despite Russian Attacks, Naftogaz CEO Says
Ukraine’s gas-storage facilities were a critical outlet for Europe last year and remain so despite Russian attacks, Naftogaz’s Chief Executive Officer Oleksiy Chernyshov said.
This year, a sharp decline in gas injected by European traders into Ukraine’s underground storage facilities—the largest in the continent—is down to market dynamics, according to Chernyshov. Russian missile and drone strikes haven’t affected the country’s ability to store or withdraw gas for customers.
Still, the volume of foreign gas into Ukraine storage so far this year has dropped to around 0.5 billion cubic meters from 2.5 billion cubic meters in 2023. Foreign customers have around 10 billion cubic meters of available storage capacity in the country.
Chernyshov spoke about Naftogaz’s storage system and its role in European energy security. The following has been edited for length and clarity.
Q: How much gas are European traders storing into Ukraine’s system?
A: Naftogaz runs a very extensive gas storage system, with 31 billion cubic meters of capacity. Most of the biggest storage facilities are located in Western Ukraine, at the border with the European Union. In terms of Ukrainian consumption of gas and storage, we normally don’t need any more than half of the storage for our own needs. We are welcoming traders to store gas in our systems because that brings more business, and if the system receives more gas the pressure parameters are better.
In 2022, we witnessed the greatest downturn, with European traders storing 0.31 billion cubic meters of gas in our system. In 2023 we were more successful and managed to get 2.5 bcm. This year, the spread isn’t so attractive for traders and, at the moment, the volume of gas stored in our system [by foreign customers] is around 0.5 bcm. The main motivation is the price spread, which this year isn’t so attractive. Given the transportation costs and storage costs, it might not work in the way it worked out last year. So that is the main motivation.
Q: Are Russian attacks against your energy infrastructure playing a role?
A: We obviously have continuous attacks. In March and April, we had several attacks on our storage system. Some of our equipment was significantly damaged, but those damages didn’t affect our operational capabilities. We passed international stress tests several times, and they confirmed the reliability of the system and our operational capability to withdraw volumes. Also, the storage is located up to three kilometers underground.
Q: What conditions do you offer to foreign traders?
A: Our pricing and our price proposal are very attractive. This year, we made changes to the gas storage code, which now allows booking guaranteed capacities, not for the storage year, but for any number of months within the storage year[…] I’m willing to offer more incentives in line with the gas code.
Q: A deal allowing Russian gas to transit through Ukraine en route to Europe is set to expire at the end of the year. Is that going to have a significant impact on gas flows?
A: The volumes transiting through Ukraine aren’t exceeding 14 bcm per year, which represents roughly 4% of overall European consumption, so this stream might not have a great impact on pricing, because the volume isn’t so big. Obviously, there are countries that are more dependent on that and we want them to still be energy secure.
Q: What role does Ukrainian storage play for Europe?
A: Ukrainian storage, because of its size, location and infrastructure, is part of the European gas storage system. I’m sure, once Ukraine is a member of the EU, and probably even sooner, we should agree on a closer collaboration.
Ukraine might play a role as a strategic energy hub in the EU, and we are eager to do that. We have a very extensive transportation system that is capable of bringing more than 150 bcm of gas to Europe per year, and have extensive storage. All of that makes us a very important player in this market.
Building up sufficient strategic gas reserves ahead of the winter is no longer a commercial matter. It is a matter of Europe’s energy and economic security. We have a vast gas storage system and transportation infrastructure, and we stand ready to serve as Europe’s energy security anchor.
Write to Giulia Petroni at giulia.petroni@wsj.com
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