BMI View: While sustained interest from major international companies in Ukraine's gas reserves illustrates substantial underground potential, a volatile security situation and continuing political instability negatively affects exploration and production (E&P) activities. Regulatory challenges, illustrated by recent tax hikes for oil, gas and mineral production are expected to act as a further deterrent to investment in Ukraine's oil and gas sector.
|e/f = BMI estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||68.5||60.0||58.8||56.4||54.2||52.0||50.0|
|Refined products production & ethanol, 000b/d||254.5||251.9||249.4||246.9||244.5||242.0||239.6|
|Refined products consumption & ethanol, 000b/d||317.7||299.2||282.5||278.9||283.7||288.8||298.4|
|Dry natural gas production, bcm||19.9||18.9||18.6||18.4||18.2||17.9||17.5|
|Dry natural gas consumption, bcm||50.4||42.6||37.5||35.8||35.2||34.7||34.4|
Recent trends and developments:
In May 2015, Ukrainian authorities awarded UK-based JKX Oil & Gas an extension to its Elizavetovskoye production licence to include the West Mashivske prospect in Ukraine. The award enhances the licence area by 33.9sq km, bringing the total area to 104.7sq km.
Ukraine made an upfront payment of USD30mn to Gazprom on May 13 to secure gas imports for the month, according to Naftogaz Ukrayiny. Naftogaz has wired a total of USD180mn for Russian gas supplies since the start of Q215, including the latest payment of USD30mn. The latest payment is said to be enough to import around 121.4mn cubic metres (mcm) of gas.
European Commission (EC) Vice President Maros Sefcovic intends to close talks with Ukraine and Russia by Q315 to ensure the security of gas supply for next winter and beyond. The EC-brokered talks secured a temporary deal, but Sefcovic aims to extend it until the arbitration in Stockholm, Sweden, can lead to a permanent solution, which is expected to take until late 2016.
Royal Dutch Shell has started exporting gas to Ukraine and is expecting supplies between 120mn and 130mn cubic metres in April, reports Ukrainian news agency Liga, citing a government source. The commercial details of the agreement have not been disclosed.
After Kyiv District Administrative Court invalidated the government decree, requiring major industrial companies to buy gas exclusively from state-owned Naftogaz, JKX Oil & Gas has restarted full production from all its wells in March 2015.
In February 2015, UK-based JKX Oil & Gas launched arbitration proceedings against the Ukrainian government under the Energy Charter Treaty, which was signed by the UK and Ukraine. JKX is hoping to recover more than USD180mn in rental fees that were paid on production of oil and gas in Ukraine since 2011.
In January 2015, one of the largest independent oil and gas investors in Ukraine, JKX Oil & Gas, announced it is to suspend its 2015 capital investment programme in Ukraine until the economic parameters for investment improve.