Ukraine Focuses on Short-Term Energy Security Measures

Ukraine is putting short-term security first, penalising long-term business activities to overcome severe threat to its energy strategy. This change in policies does come at a price for the oil and gas industry, with JKX expressing some concerns for the situation.  

‘In light of this significant change to the fiscal environment for independent oil and gas operators in Ukraine, the Board of JKX is evaluating the impact on its ongoing investment programme carefully, and will be taking operational and financial measures to protect the interests of the Company and its shareholders,’ reads a note released by the company on Monday evening, commenting on the emergency budget legislation passed by the Ukrainian Government. 

Kiev did indeed increase production taxes for oil and gas companies for the period 1 August to 31 December 2014. ‘The most significant tax increase is on gas production where the rate will approximately double to a level of 55 per cent.’

UKRAINIAN GAS RESERVES: MIXED PATTERNS

Meanwhile, the Ukrainian government is trying to promote underground gas storage.

According to a document published by Ukrtransgaz, the country has increased its gas reserves in UGS facilities. The reserves registered on August 1 are 53% more than the ones registered in the same period of 2013.

‘As of August 1 this year, reserves of natural gas in Ukrtransgaz’ underground gas storages (UGS) total 14.947 billion cubic meters, accounting for 48.3% of the total capacity,’ the Ukrainian company wrote on Monday.

Despite this positive figures, the rate of pumping in July fell in comparison to the second half of June, following reduced gas imports from Hungary (3.2 mcm a day against 5.5 mcm in the June 16-June 30 period). The pipeline capacity totals 16.0 mcm per day.  

Ukrtransgaz operates 12 storage facilities for a total of 31 bcm, while Chornomornaftogaz controls one facility for 1 bcm. Chornomornaftogaz is a subsidiary of Naftogaz, but it has been seized by the region’s parliament after Russian annexation of Crimea.  

Uktransgaz now wants to step efforts to increase the usage of the gas transportation system from Hungary. Also on Monday, it published an alert on its website, saying it will start accepting applications from Ukrainian companies for gas supplies through Hungary.