Ukraine is boosting gas production and wants to end its dependence on imports

Ukraine has recently become more active in increasing domestic natural gas production. Although the country can meet most of its needs through domestic production, it still has to import natural gas. Despite the ongoing war, production edged up last year, and a stronger increase could come this year.

Activity in natural gas production development in Ukraine increased in the first quarter of this year. The local association AGPU said, according to S&P Global, that the average number of active drilling rigs reached 46. Before the war, the average number of active rigs was 30, while in the first quarter of last year it was 37, according to AGPU.

According to AGPU Executive Director Artem Petrenko, the increased drilling activity demonstrates the industry’s efforts to maximise gas production despite the ongoing war. Citing Baker Hughes statistics, AGPU said that a total of 118 drilling rigs are operating in Europe. This would mean that almost 40% of the rigs in operation are in Ukraine.

“State-owned and private companies are doing everything they can to secure gas supplies for Ukraine from domestic production,” Petrenko said.

According to S&P Global, natural gas production in Ukraine edged up last year to 18.7 billion cubic metres. This was an increase of around 200 million cubic metres compared with 2022. UkrGazVydobuvannya (UGV) is driving further production growth this year, having increased output by 12% year on year in the first quarter.

Production continues to grow this year

In April, Naftogaz said, according to the news outlet, that UGV had started production at five highly productive fields since the beginning of this year. According to the company’s CEO, Oleksiy Chernyshov, increased efficiency at older fields is also helping to boost production. In February, the company raised output to its highest level since December 2018, reaching a more than five-year high.

“Our goal is to sustain this trend and achieve an increase in production for the year as a whole,” Chernyshov said.

According to S&P Global, increasing domestic gas production is also a priority for Ukraine for financial reasons. Although the country can meet most of its needs through domestic production, it still has to import some gas. Ukrainian importers are therefore exposed to the European market, which has experienced some very extreme price movements in recent years.

Ukraine’s natural gas consumption totalled 19.8 billion cubic metres last year, around 500 million more than the year before. According to S&P Global, higher demand associated with increased industrial activity contributed to the rise in consumption.