Gas production in the country should continue to grow, but there are some negative factors that will have a direct impact on investment activity

Despite the war, gas production has been growing for two years in a row. Ukraine has the potential to increase production further, but is everything so easy and simple in the gas industry?

Increase in gas production

In 2024, total gross natural gas production in Ukraine amounted to 19.12 billion cubic meters. Compared to 2023 (18.7 billion cubic meters), this is an increase of 2.3%, or an additional 422 million cubic meters of the resource needed by the country.

The leaders in gas production growth are the companies of Naftogaz Group – JSC Ukrgasvydobuvannya and PJSC Ukrnafta. Today, they account for almost 82% of the country’s total gas production. By the way, last year Ukrgasvydobuvannya achieved the highest gas production in the last six years. The private sector is also showing positive dynamics. In August-December, the average daily production of independent companies increased by 25%.

It is impossible to increase Ukrainian gas production or even keep production at a stable level without new wells. In 2024, companies started drilling more than 140 wells, which is actually equal to the record-breaking year of 2023. In total, more than 360 wells have been drilled since the beginning of the great war, and if we count the period of 2018-2024, when incentive taxation was in effect, we will have more than 720.

Drilling activity, which is possible thanks to a clear and unchanged fiscal policy, once again proves that companies are ready to continue investing in the sector, and increasing Ukrainian gas production is a priority for them in the coming years. The electronic auctions held in September 2024 are a clear confirmation of this. During the open bidding, state-owned and private companies purchased five oil and gas fields in Poltava, Lviv, and Ivano-Frankivsk regions for almost UAH 1.2 billion.

To increase gas production or not?

The Association is optimistic about the future. Our baseline forecast and the positive dynamics in the sector demonstrated by public and private companies indicate that gas production in the country should continue to grow in 2025. However, there are some negative factors that will have a direct impact on investment activity and, consequently, on production volumes. And here I am not talking about military risks, which still remain extremely high for both the industry and the entire country.

One of them is a significant increase in tariffs for the Ukrainian GTS Operator for gas transportation services for entry and exit points for the next five years. The Regulator’s decision will have a direct impact on gas producers and industry. First of all, it will lead to a decrease in investment opportunities for producers, in particular in new drilling, while for industrial enterprises it will mean an increase in the prices of their products.

The EBA and other market participants have emphasized that a significant increase in the tariff will have negative consequences for both the sector and the economy, and, unfortunately, we will be able to feel them this year. We have repeatedly asked for a discussion to jointly find the right option that would be acceptable to all. However, no dialog has taken place.

Understanding all aspects of the new tariff setting is critically important for service customers. Transparent and open access to information about the calculations, as required by EU rules, optimization, constructive discussion and a comprehensive settlement of this issue are the basis for the stable development of the industry and providing the country with resources this year and in the years to come.

We need more gas

The completion of Russian gas transit means that from now on, only Ukrainian resources fully ensure the operation of our GTS. It is the second largest in Europe, with an annual capacity of 281 billion cubic meters at the inlet and 146 billion cubic meters at the outlet. Starting from this year, the gas transportation system will pump about 20 billion cubic meters per year, which actually corresponds to the volume of domestic production and consumption in the country.

Optimization of the GTS, taking into account its technical characteristics, remains important today. This will maximize the interests of Ukrainian household and industrial consumers, as well as guaranteed customers of services. In addition, adapting the gas transportation infrastructure to the new realities will preserve Ukraine’s export potential for the future. After all, increased gas production will not only strengthen our country’s energy sustainability, but will also allow us to become one of the suppliers of the resource to the European Union.