Oil and gas shortages have dealt a severe economic blow to Ukraine.
The former Soviet republic ranks second behind Russia in population and gross domestic product among members of the Commonwealth of Independent States.
UKRAINE'S DILEMMA
Ukraine's hydrocarbon output has fallen sharply since the 1970s, and the republic's fuel problems have been exacerbated by declining coal extraction.
Cheap oil and gas imports from Russia and Turkmenistan help offset much of Ukraine's growing fuel deficit and cloaked the gravity of the situation until shortly before the Soviet Union's breakup in 1991.
Now, however, Russia can't satisfy Ukraine's oil needs and must limit volumes of natural gas exported to its neighboring republic. Turkmenistan, which had been selling a large part of its surplus gas to Ukraine, halted deliveries last February and didn't lift its embargo until late September.
For years Turkmenistan, as a member state of the U.S.S.R., had sold gas to Ukraine at prices far below costs in keeping with Moscow's policy. When the ruble plummeted in value during 1991 and accelerated its dive in 1992, Turkmenistan balked at "giving away" its most valuable mineral resource to what had become essentially a foreign country.
Ukraine agreed to pay 3,000 rubles/1,000 cu m plus transmission costs for Turkmenistan's gas during October. Early this year it was willing to pay only 800 rubles/1,000 cu m- about one tenth of production costs.
Russia has also decreed stiff increases in prices for oil and gas sold to other C.I.S. nations. Its own financial difficulties and huge debts owed Moscow by its sister republics no longer permit Russia to subsidize fuel deliveries within the C.I.S.
Since Ukraine has little cash, new contracts for purchase of Russian crude are increasingly negotiated on a barter basis. Turkmenistan has made it clear that even the vastly higher prices it is now charging Ukraine for gas are guaranteed only through October, with further hikes apparently inevitable before winter.
OIL, GAS SHORTFALLS
Ukraine has been an oil producer since the latter part of the 19th Century. Flow peaked at about 290,000 b/d in 1972 and has fallen steadily since.
Last year, Ukrainian crude and condensate production was 98,000 b/d, down from 104,000 b/d in 1990. The republic's "absolute minimum" oil requirement is 1.1 million b/d.
With its own crude and condensate flow plunging during the past several years, Russia has slashed oil exports to other C.I.S. members, Kiev officials worry Ukraine won't be able to obtain enough petroleum products for crop planting next spring,
Ukraine's gas supply plight is equally troubling.
Gas production exceeded 2.4 tcf/year in the mid-1970s but dropped to 990 bcf in 1990 and to 861 bcf last year.
The republic needs more than 4 tcf/year of gas. Renewed deliveries from Turkmenistan will provide about 1 tcf/year, so Russia must remain Ukraine's principal source of gas during the next few years at least.
KIEV INACTION
There is little evidence the Kiev government is moving quickly to increase Ukraine's oil and gas flow.
Since becoming independent, Ukraine also has been slow to encourage foreign investment in its petroleum industry.
Long accustomed to getting all the hydrocarbons it required from the "common pot" of the former Soviet Union, Ukraine has neglected its oil and gas industries since the late 1970s.
Any major effort to increase hydrocarbon output or even to stem its rate of decline without foreign assistance would put further strain on Ukraine's precarious financial situation. The republic would have to increase imports of drilling rigs, drill bits, casing, pumps, compressors, chemicals, and other materials and equipment in short supply domestically and would have to pay world prices for them.
UKRAINE POTENTIAL
Ukrainian geologists believe that most of the nation's hydrocarbon resources still to be discovered-mainly gas-will be found at depths of 5,000-10,000 m (16,404-32,808 ft).
A well targeted to 6,000 m (19,685 ft) is drilling ahead in Poltava Province, which accounts for most of Ukraine's oil, gas, and condensate production.
However, past superdeep drilling in other areas of the republic has not discovered significant gas reserves.
Ukraine has about 160 oil and gas fields, most of which are in decline. Attempts to hike flow by employing advanced well stimulation technology have achieved little success.
INADEQUATE EQUIPMENT
The Moscow newspaper Izvestia recently reported that the equipment used by Ukraine to drill deep wells is almost entirely obsolete. In Poltava Province, the rig being employed for the 6,000 m test is a G-320 purchased from Romania.
This rig is essentially a U.S. model taken out of production as obsolete 40 years ago, Izvestia said.
"Romania bought a G-320, made slight modifications, and placed it in serial production. That's typical of the 'know-how' Ukraine is now buying and introducing," a drilling supervisor in Poltava Province told Izvestia.
"We are buying our casing abroad from Japan, Austria, and other countries-since Ukraine doesn't manufacture it," he said. "Our industry does make drill bits, but whereas an American bit lasts several months and a Japanese bit several weeks, ours are good for only 5-6 days.
"Under these circumstances , it doesn't make sense to discuss the productivity of our rigs as compared with those used abroad."
Ukraine gas industry officials assert that the republic's oil fields aren't depleted by conventional definition. They say that ultimate hydrocarbon recovery is far lower than in the U.S. because of inferior equipment and methods.
"In the very near future," said Vladimir Antonov, director of the Poltava gas field administration, and Viktor Kozak, head of the province's oil and gas operations, "we will introduce the gas cycling process to increase condensate flow. That's a wonderful innovation for us.
"But it's pitiful that the equipment for gas cycling operations isn't made in Ukraine or even anywhere close by. it must come from the West."
OUTLOOK
Izvestia said many Ukrainian specialists believe the republic can substantially increase oil output if an extensive infill drilling program is carried out.
Unfortunately, it noted, oil and gas administrations have to wait months or even years to get permission from collective farms to lease drilling locations.
"Collective farm representatives demand that the oil and gas associations build roads, stores, schools, and kindergartens in exchange for drilling rights on their land. They also want the associations to provide them with cement, roofing materials, metal, and pipe for irrigation systems.
"Negotiations are long and agonizing."
Deals have been struck by Ukraine with oil producers in western Siberia's Tyumen province to trade sugar, metal, and other products for crude. Ukrainian officials have tried frantically to obtain more oil within the C.I.S. and abroad.
Purchases of gasoline from fuel-short Romania have been made "at absurdly high prices," In Ukraine's Donets coal basin, more toluene is being obtained from coke/chemical plants for use as motor fuel.
In some areas, where small fields are not connected to pipelines, facilities have been set up to produce straight run gasoline, diesel fuel, and propane and butane. These mini-installations, Izvestia said, are jokingly referred to as "moonshine stills" and only help to alleviate local fuel shortages to a small degree.
A Ukrainian Academy of Sciences chemical institute is working on a project to produce liquid fuel from lignite.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
