Ukraine is preparing for winter by targeting a stockpile of 13.2 billion cubic meters (bcm) of gas by November 1. However, according to the International Energy Agency (IEA), the country may need to import an additional 0.6 bcm to meet this crucial target. The context is marked by geopolitical tensions and significant economic constraints. Ukraine has already stored about 11.7 bcm of gas as of September 16, mainly from domestic production, but current reserves are not sufficient to cope with more severe winter conditions.
The IEA states that under normal weather conditions, Ukraine could meet its energy needs from local production and stocks. However, a colder-than-expected winter could lead to increased gas consumption, particularly for domestic heating, requiring further imports. Such a situation poses a significant financial and logistical challenge for Ukraine.
International support and import costs
Ukraine cannot afford to delay gas imports, as the cost of these purchases could amount to more than €250 million for the missing 0.6 bcm. These estimates are based on European spot prices at the beginning of September. The support of international partners is therefore essential to avoid an energy deficit this winter. The IEA calls for the mobilisation of funds through loans or grants to ensure that Ukraine can meet its storage targets.
The role of the European Bank for Reconstruction and Development (EBRD) is proving decisive. In November 2023, it grants a loan of 200 million euros to Ukraine to support the creation of strategic reserves. In July 2024, an agreement on guarantees is signed, and Naftogaz begins purchasing gas with this loan from August 2024. This international support remains fragile, however, in the face of geopolitical uncertainties that continue to affect the country’s imports and energy security.
End of Russian gas transit: a new challenge for Ukraine
One of the major challenges for Ukraine is the end of Russian gas transit through its territory, scheduled for January 2025. Currently, Ukraine benefits from the virtual reverse flow mechanism, which allows to retain part of Russian gas transiting to Europe. Once this agreement expires, the country will have to turn to direct physical imports from the European Union, which will increase costs due to transmission tariffs. This structural change in gas flows could increase Ukraine’s energy vulnerability in the long term.
The IEA also points out that import capacities from the European Union, estimated at around 60 million cubic metres per day, are not fully reliable in the long term. Some of these capacities are not guaranteed due to the variable nature of supply contracts. Ukraine and its European partners will therefore have to work to strengthen these capacities to ensure stable supplies during the coming winters.
Geopolitical risks and energy infrastructures
Ukraine’s energy security risks are heightened by Russia’s repeated attacks on its gas infrastructure. Damage from these attacks could limit Ukraine’s ability to efficiently import and distribute needed gas this winter. The IEA warns that these risks, coupled with the end of virtual reverse flows, make cooperation with the European Union essential to ensure stable and secure imports.
At the same time, Ukraine is pursuing its strategy of reducing its imports to become self-sufficient in gas. However, this ambition is being undermined by high gas prices on the European market, which is forcing the country to maintain a balance between domestic production and imports. The AggregateEU joint purchasing mechanism, set up by the European Union, could prove useful in centralising Ukrainian gas purchases, thereby reducing costs.
An uncertain energy situation
Ukraine’s energy system remains fragile, and the outlook for the coming winter is uncertain. Although Ukraine has made progress in building up its gas reserves, the country remains dependent on imports and evolving geopolitical tensions with Russia. Cooperation with the European Union and international financial support will be key to avoiding a major energy crisis this winter.
Related News :