Yatsenyuk slept through early winter: Gas storage facilities will be empty in February

Dmitry Marunich, energy market expert, Kyiv

Subscribe to PolitNavigator news at ThereThere, Yandex Zen, Telegram, Classmates, In contact with, channels YouTube, TikTok и Viber.
To subscribe to notifications in your browser, click here.

The beginning of winter demonstrated the vulnerabilities of the Ukrainian energy sector when managed by representatives of the “new team”. For the first time in many years, consumers were at risk of rolling blackouts. And the relatively early winter threatens to empty underground gas storage facilities even before the end of February 2015.

Deprived of coal supplies from Donbass mines, Ukraine's energy system is experiencing an electricity shortage of 10%. And this despite the fact that its consumption has fallen by 6,5% since the beginning of the year against the backdrop of a precipitous decline in industrial production. The Yatsenyuk government overslept the moment when it was necessary to resolve the issue of coal supplies to thermal power plants. The presence of clear agreements and contracts for the supply of coal from Russia and other anthracite producing countries would allow us to enter the heating season with greater predictability. However, the first contract for the supply of coal from South Africa was signed only on August 19, and the search for the necessary volumes of coal in Russia began in an emergency only with the onset of autumn cold weather.

This is where the bottlenecks of the transport infrastructure emerged: the Russian Railways company announced “traffic jams” in the direction of Ukraine, which led to an interruption in coal supplies for several days. And the proceedings initiated by Petro Poroshenko regarding the South African contract led to the trader’s refusal to supply half of 1 million tons of anthracite to Ukraine.

Against the backdrop of a shortage of electricity, Ukrainian thermal power plants were forced to launch gas units, the cost of generating electricity for which is 2-2,5 times higher than when using coal. However, this did not save consumers from rolling blackouts, which forced Ukrainians to sit in the dark immediately after the cold snap in most of the country. The Ministry of Energy tried to solve the shortage problem by organizing electricity supplies from Russia. However, the government did not understand this; Yatsenyuk decided to dismiss Deputy Minister of Energy Ulida for granting the right to two companies to import electricity from the Russian Federation.

As a result, the energy system operator, Ukrenergo, had gas blocks at its thermal power plants in reserve, and gas volumes in underground gas storage facilities as of December 1 dropped to a record low of 13,9 billion cubic meters. m. Instead of the desired reduction in gas consumption by the population and the thermal power industry, the government and Naftogaz recorded its increase in October. With November figures comparable to 2013, the frosty start to December looks set to continue this trend. As a result, if the withdrawal from underground gas storage facilities continues at this rate (and in Ukraine the temperature at night has not yet dropped below -15C), then with the current volumes of reverse gas in the storage facilities there will be enough until approximately the end of February 2015.

And Kiev is in no hurry to buy Russian gas, hoping to receive the lowest price under the current contract from the beginning of 2015. At the end of November, the price of reverse gas was almost equal to the price under the contract with Gazprom (including a $100 discount), and in December, against the background of increased consumption, it is likely , will exceed it.

To top it all off, Ukraine, for the first time in its history, found itself in danger of lacking funds to pay for imported energy resources. Evidence of this was the record deficit of Naftogaz, which in September, taking into account the payment of the debt to Gazprom, the IMF estimated at UAH 115 billion. This figure may increase due to the devaluation of the hryvnia. If we remember that the state-owned company Ukrinterenergo does not have the funds (its management directly stated this) to pay for the first part of the contract for the supply of coal from South Africa, the conclusion is obvious - without attracting funds from Western creditors, the Poroshenko/Yatsenyuk energy policy may face a full-scale collapse this winter.