Ukraine steps up efforts to boost gas output, upgrade gas grid

Ukraine is aiming to increase its energy resources-especially natural gas and condensate production-with a view to meeting at least half of domestic demand by 2010.

As a result, Ukraine is inviting direct foreign investment in gas development, Ukrgazprom Chairman Bogdan Klyuk told the second Gas Executives' Summit in Paris last month.

Ukrgazprom, a joint stock company, is the leading energy company in Ukraine and one of the world's largest gas companies. It is in charge of the vast majority of the country's gas transportation system (see map, p. 27).

Ukrgazprom's transmission system is the second largest in Europe, behind Russia's. The Ukrainian system includes 34,000 km of main gas lines and 121 compressor stations.

According to Klyuk, 95% of Russia's gas exports to central and western Europe are transported through the Ukrainian gas system. In 1996, Ukrgazprom delivered 86 billion cu m of gas to consumers in Ukraine and transported 116.5 billion cu m of Russian gas-an increase of 6.3 billion cu m from 1995.

An important part of Ukrgazprom's transport system is its 12 underground gas storage caverns, with 30 billion cu m of capacity. Currently only 50-60% of the capacity is in use.

Russian exports

The transmission of Russian gas to Europe moves in four major directions: through the Uzhgorod metering station to Solvakia and on to points in central and western Europe; through the Beregovo station to Hungary and on to central and southern Europe; through the Crozdovichi station to Poland; and through the Orlovka station to Romania and on to southeastern Europe, including Turkey.

Because flows from Russia vary according to the season, month, day, and even hour, unsteady flow rates are one of Ukrgazprom's main worries, said Klyuk. This is especially true for the Uzhgorod and Orlovka stations, where uneven flow causes considerable problems in maintaining operating pressures. These problems entail considerable costs because additional compressor stations and underground storage capacity are needed.

As a result, Klyuk has called for the creation of a unified dispatching coordination center. The center would work with the dispatching centers of other European countries to gather and assess the information needed to forecast demand in the importing countries.

Klyuk says such a system would ensure the smooth and reliable functioning of Europe's gas grid. To do its part, Ukrgazprom is revamping its gas transmission system by installing Ukrainian gas turbines and compressors, which Klyuk says meet world technical standards.

Oil and gas program

The transmission of Russian gas to Europe gradually increased in recent years-to 116 billion cu m in 1996 from 92 billion cu m in 1992. During this period, there has been a decline in gas consumption in Ukraine, said Klyuk.

While the share of natural gas in Ukraine's energy consumption mix exceeds 45%, its resources satisfy only 20% of its needs. Most of its supplementary supplies come from Russia and Turkmenistan-a pattern that is expected to continue for a number of years.

Klyuk pointed out that, unlike other European countries, Ukraine has so far been unable to diversify its gas import sources. This is because there is only one import channel into the country. Both Russian and Turkmen gas is delivered via Russian lines.

Gas production in Ukraine started in 1920 and peaked at 68.7 billion cu m in 1975. It fell thereafter because of a lack of exploration and development. In recent years, Ukraine gas production has stabilized at 18 billion cu m/ year.

Under a new national program, however, Ukraine is attempting to increase its gas and condensate production. The program, called Oil and Gas of Ukraine to 2010, has identified investments needed to bring new wells into production, boost production from old ones, develop coalbed methane production, and increase the processing of condensates.

The program's goal is to provide at least half of domestic gas needs and decrease dependence on imports. Klyuk said Ukraine is "interested in attracting direct foreign investment" in its gas industry.