BMI View: A v olatile security situation and continuing geopolitical tensions hamper exploration and production activities in Ukraine. Regulatory challenges, ill ustrated by recent tax hikes on oil, gas and mineral extractio n , are expected to act as a further deterrent to investment in Ukraine's oil and gas sector . Despite Ukraine's significant gas supply diversification efforts, we expect the country will continue to depend to some extent on Russian gas supplies over the coming winters.
|f = BMI forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||60.0||58.8||56.4||54.2||52.1||50.0||48.0|
|Dry natural gas production, bcm||20.0||19.7||19.5||19.3||19.1||18.9||18.5|
|Dry natural gas consumption, bcm||42.6||37.5||35.8||34.9||33.9||33.6||33.2|
|Refined products production, 000b/d||116.6||115.5||114.3||113.2||112.0||110.9||109.8|
|Refined products consumption & ethanol, 000b/d||294.5||261.4||263.0||269.8||276.4||286.8||298.5|
Key forecasts and developments:
We maintain our forecasts for oil and gas reserves this quarter. However, we note that Chevron and Shell's exits from their respective shale gas exploration projects create increasing downside risk to our gas reserves forecasts.
Most of Ukraine's refineries remain closed as of 2016 leading to a severe underutilisation of its refining capacity. We maintain this situation will endure until an amelioration in the political, economic and security situation comes through.
Given the country's disastrous refining sector, crude net imports have fallen substantially over the past decade and are expected to remain low over the coming decade. Nevertheless, this has also translated into increasing refined products import requirements, as domestic production is insufficient to meet demand. Net imports of refined products will pick up speed as consumption recovers. This is unlikely to change unless the refining sector undergoes a significant revamp.
Despite large reserves and an active exploration scene, gas production in Ukraine is forecast to shrink across our forecast period to 2025. Upstream activities will suffer from an unpredictable regulatory and fiscal environment, the legal uncertainties regarding offshore Crimean licenses and the ongoing security situation in the east of the country.
While the government has enacted legislation early 2016 to reduce subsoil taxes to the same levels that were in effect prior to the increase in 2014, the unpredictable environment is clearly not incentivising for companies wanting to explore and develop hydrocarbon projects in Ukraine.
2015 gas consumption is expected to have contracted further taking overall consumption down to 37.5bcm in 2015, down from a peal of 87.2bcm in 2005. This quarter, we maintain our forecast for continued, albeit weaker contraction over the coming years on the back of increased gas prices and the government's gas efficiency plans. However, gas consumption contraction could have been more extreme then provisional estimates, and we could revise this to the downside over the coming quarter.
Ukraine has successfully diversified its gas import sources and substantially reduced dependence on Russian gas over the past two years. In 2015, Naftogaz data highlighted that imports over 2015 from Russia decreased from 14.5bcm in 2014 to 6.1bcm in 2014, with Russian supplies in Ukraine's gas consumption decreasing from 34% in 2014 to 18% in 2015. In 2015, imports of gas from the European market more than doubled from 5.0bcm to 10.3bcm.
Rapidly falling domestic gas consumption will push Ukraine's gas imports lower until 2019. As the consumption stabilises and domestic production continues to shrink, we expect a slight recovery in the country's gas import levels in the second half of our forecast period. Despite strong reductions in Russian gas imports, Ukraine will remain dependent on Russian gas during the winter months over the short to medium term.
The Ukraine Oil & Gas Report has been researched at source and features BMI Research's independent forecasts for Ukraine including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, national and multinational companies and changes in the regulatory environment.
BMI's Ukraine Oil & Gas Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and competitive intelligence on the Ukrainian oil and gas industry.
- Benchmark BMI's independent oil and gas industry forecasts for Ukraine to test consensus views - a key input for successful budgeting and strategic business planning in the Ukrainian oil and gas market.
- Target business opportunities and risks in the Ukrainian oil and gas sector through reviews of latest industry trends, regulatory changes and major deals, projects and investments in Ukraine.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity) and Competitive Landscape Tables.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, covering oil and gas reserves, supply, demand and refining, plus analysis of landmark company developments and key changes in the regulatory environment.
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Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the upstream and downstream sectors and within the broader political, economic and business environment.
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Historic data series and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecast:
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BMI’s Oil & Gas Risk Reward Index
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A profile of the upstream and downstream sectors, including analysis of reserves, output, consumption and trade of energy products; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Comparative company analyses by USD sales, % share of total sales, number of employees, year established, ownership structure, oil production (‘000b/d), gas production (bcm), downstream capacity (‘000b/d) and % market share.
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Regional perspective on size and value of the industry. Plus comparative rankings by production, refining, imports and exports of oil, gas and LNG.
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