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The head of Ukraine’s national energy company has called on EU countries to help protect their natural gas storage facilities from the latest wave of Russian attacks so they can continue to contribute to lower prices across the continent.
Oleksiy Chernyshov, chief executive of state-owned Naftogaz, said: “It is in the EU’s interest to protect storage, transport and production.” [facilities]“, as Ukraine’s gas infrastructure is “well integrated into the European energy system”.
Naftogaz said gas storage facilities in western Ukraine had been attacked several times in recent months, but only above-ground facilities had been damaged. Underground storage tanks, which could be up to three kilometers deep below the surface, were not affected, it said.
“Technically we are all fit and we managed to fix the problem [damaged surface] Equipment and we fulfill our obligations [to our customers]“ after the attacks, said Chernyshev.
Since March, three attacks on gas storage facilities have been made public, with these being the Kremlin’s first known attacks on these sites.
Ukraine still acts as a transit route for Russian pipeline gas to Europe, and its underground gas storage provided valuable space for European traders to park their excess gas before sites in the EU reached maximum capacity last winter.
The head of government’s comments came after US President Joe Biden signed a bill providing $61 billion in new aid to Ukraine. However, Kiev’s European allies are still haggling over the delivery of additional air defense systems. At the same time, Russian attacks on Ukraine’s energy infrastructure have increased.
U.S. assistance will support Ukraine’s defense but requires continued protection of infrastructure and assets[s] a very high number of air defenses[s]said Chernyshev.
“We may remain in a situation where we need even more air defense” even after US aid arrives, and “EU countries should of course play a crucial role in this aid,” he added.
Ukrainian gas storage played an important role in the EU’s energy security last year by allowing European nations to avoid drawing too much from their own reserves. The country emerged as a storage alternative despite the risks posed by the Russian invasion, thanks in part to incentives such as favorable storage tariffs and tariff exemptions that allow gas to be easily re-imported into the EU.
Chernyshov said there was continued interest from European parties to use the storage facilities this year. The company aims to increase European natural gas storage in Ukraine from 2.5 billion cubic meters last year to 4 billion cubic meters this winter.
Ukraine has continued to allow Russian gas to transit through the country under an agreement Naftogaz signed with Russia’s Gazprom in 2019. However, after the full-scale invasion of Ukraine and the passage of Russian gas, Russia has severely restricted the gas pipelines sent to Europe via this route. Ukraine now accounts for less than 5 percent of EU supplies.
Naftogaz’s contract with Gazprom will expire at the end of this year, and Chernyshov said Naftogaz would not renew the contract. That means Russian gas will likely stop passing through Ukraine in 2025, forcing countries like Austria and Slovakia to look for alternative supplies.
“The reason why Naftogaz continued with this transit contract [even amid the war with Russia] is to cover the EU’s gas needs and remain a reliable partner [to the bloc]said Chernyshov.
“The money that Naftogaz receives from Gazprom is less than what we spend on organizing this transit, because Gazprom has been underpaying us almost since the beginning of the large-scale invasion and our cash flow in this operation is constantly negative.”
Most analysts and traders expect the EU to avoid shortages next winter thanks to record amounts of gas stored. But some say there are still risks associated with the loss of Russian gas passing through Ukraine.
The loss of 15 billion cubic meters “alone is not good.” [is] not terrible,” said Aldo Spanjer, senior commodities strategist at BNP Paribas. However, if there is a surge in gas demand from Asia and Europe coupled with a cold winter, “gas balances would tighten significantly in the first quarter of 2025, the peak winter period,” he said.
However, Chernyshov said the loss of this gas would have negligible impact on Europe. “Can supply 3 percent of all [EU] Market consumption change the market? I don’t think it can change the market at all, either in terms of prices or volumes,” he said. “It’s not a big deal.”
Additional reporting by Fabrice Deprez in Kyiv