Ukraine has a diverse endowment of natural energy resources and continues to be a net exporter of electricity and certain types of coal.
However the country’s reserves of fossil-fuel energy are not large and neither the location nor the exploitation of these resources are ideally aligned with Ukraine’s domestic needs. As a result, Ukraine today imports additional quantities of oil and gas, including anthracite coal just to meet its current demands.
Until recently the gas sector in Ukraine was a highly regulated industry affecting all the components of the supply chain. Years of distorted state pricing led to the creation of a distorted domestic market and the consequent disincentive for investment in new exploration, production and infrastructure. Following major restructuring reforms 2015-17, the gas market has been stabilized and new investment opportunities are presenting themselves at extreme bottom level entry prices.
In a major move aimed at structural reform of the gas sector, Ukraine also passed legislation in December 2016 enabling the unbundling of the state’s largest oil and gas company, Naftohaz. The major restructuring is designed to be completed by 2017 and will allow transparent third party access to Ukraine’s gas transmission system.
Ukraine also possesses Europe’s third-largest reserves of shale gas, estimated at anywhere from 5-8 trillion trillion cubic metres of which 1.2 are technically extractable today. Ukraine has not banned fracking and the Oleksa basin in western Ukraine is attracting large foreign interest with several companies having already signed multi-year exploration agreements in the basin.
Ukraine’s electricity sector consists of more than thirty power plants of which fourteen are thermal and another four are nuclear plants. Whereas the government continues to straddle the wholesale power sector as a supplier and owner of the national grid, the distribution sector has been largely privatized with previously state owned Oblenergo companies competing with smaller independent suppliers for the right to supply heavy industry and residential markets alike
The country’s power plants vary in size and capacity and are mostly located near the country’s major coal deposits in south-eastern Ukraine.
Traditional coal production has been decreasing steadily which has necessitated that Ukraine diversify its import supplies from as far away as the USA and Australia.
Nuclear power is a major resource for generating electricity in Ukraine. The government anticipates that nuclear energy will soon be in a position to meet half of the country’s future electricity needs. In this regard the government took active steps towards this objective by signing a long term agreement with Westinghouse in 2016 in order to provide nuclear fuel for its four active nuclear power plants.
Ukraine’s need for electrical power is expected to double over the next 15 years resulting in the need for substantial and sustained investment over many years to ensure the modernization of its ageing power plants, security of its input supplies and the competitiveness of its varied producers.
Recognizing the strategic importance of this sector to Ukraine’s security, the government began in late 2016 to take steps towards updating Ukraine’s Energy Strategy to 2035.