19.05.2025
“Extraction companies are being asked to increase production, but they are not confident in selling their resources. A guarantee is needed from the state to buy their entire resource, and then they will be able to plan investments and increase this production for the coming years.”
“Naftogaz has taken a large number of consumers, and all production remains in surplus. Today, it is too late to negotiate and start pumping imports. But the sooner this is explained to end consumers, the better the situation can be resolved. Demand for underground storage is more than 300 million cubic meters, but it must be understood that if there is no pressure in the system, end consumers simply will not take the gas. The problem needs to be solved globally. Without business starting to do this, we will truly be in a stalemate,” stated Volodymyr Lysenko, Commercial Director of Tepla, at the Energy Freedom talk show by Energy Club on May 15th.
The discussion on the topic “Prospects for Natural Gas Imports to Ukraine: How Can Business Secure Resources for the Future Heating Period?” also involved Roman Storozhev, founder of the Association “Gas Traders of Ukraine”; Andriy Myzovets, President of the Association “Gas Traders of Ukraine”; Kyrylo Brazhko, Head of Market and Trading Analytics Department at D.TRADING; and Oleksiy Lastovets, Head of Trading in Ukraine at Axpo Ukraine LLC.
Given the changes in the European energy market and the upcoming heating season, Ukrainian businesses face a critical question: how to guarantee their natural gas supply. During the online meeting, the talk show participants expressed their views on the key sources and routes of natural gas imports available to Ukraine, changes in gas contract terms at European hubs for Ukrainian companies, opportunities for booking capacities at the border and storing gas in UGS (Underground Gas Storage) facilities, forecasting gas prices in the second half of 2025, the role of state policy in ensuring energy resources for businesses, risks for businesses when importing gas during wartime, and ultimately – what businesses can do to avoid a resource deficit in winter.
“The availability of the necessary volumes of natural gas is one of the hottest topics,” noted the moderator of the meeting, Vice President of Energy Club Valeriy Bezus. “The entire country faces the challenge of ensuring natural gas supply in the autumn-winter period, especially for businesses, considering that many companies, in the context of energy security measures, are developing gas generation and expect to be able to provide themselves with electricity and heat. That is, demand in this segment is growing, and questions arise about the conditions and opportunities for businesses to secure the appropriate volumes of natural gas.”
“Our previous forecasts, in principle, have been justified: we see that the deficit has not gone anywhere, and the only option to ensure the balance of natural gas for the next heating period is the import of natural gas from the European Union,” said Roman Storozhev, founder of the Association “Gas Traders of Ukraine.” “Today, imports are carried out by Naftogaz, but unfortunately, there is no economic attractiveness for traders in this process, because, as we predicted, there is almost no capacity in the Hungarian direction, only the Slovak direction remains. However, domestic natural gas prices are still rising and approaching the imported parity – we have seen this trend over the past month. At the same time, spreads on the price at the Ukrainian border have also increased, and therefore there is a difference of 25%. For the commercial segment, that is, for traders – both Ukrainian and international – it currently makes no sense to import gas to Ukraine for further sale. The only remaining option is to sell this resource at the border to Naftogaz, related structures, or the distribution network operator.
The difference between the best buying and selling prices at the Ukrainian border today is +8 to +10 to TTF (Title Transfer Facility) depending on the availability of resources. Based on this, we must note: if the trend of rising prices in the domestic market continues, and this difference between domestic prices and imported parity is leveled out, which is likely as a deficit is felt even in the industrial segment, then we will reach market prices and see a direct link between prices in Europe. That is, there will be a correlated situation between domestic prices in Ukraine and the prices of imported resources. In this case, we can almost instantly see the activity of traders in this direction.”
The European Commission, after the start of the military aggression in 2022, introduced a number of mechanisms for EU member states, including a joint procurement mechanism and forecasting of storage filling volumes. Are there reserves for Ukraine in the prospects for participating in or developing similar mechanisms for interaction with European structures? – moderator Valeriy Bezus asked Roman Storozhev.
According to the founder of the Association “Gas Traders of Ukraine,” if the formation of such reserves takes place, only Naftogaz will be able to participate. And most of the resources, if they are located in Ukraine, will belong to European companies. “I don’t think Ukrainian traders will become participants in this program, unless some of them, having European branches, can sell volumes to Naftogaz for the formation of reserves. This program is targeted, with a limited number of participants, who will face very high requirements, so most Ukrainian private companies are unlikely to be able to participate in it,” believes Roman Storozhev.
The issue of gas storage filling is relevant not only for Ukraine, as Europe also experienced a cold winter. Given the decline in production, Europe will face the problem of filling gas storage facilities for the next heating season, believes Andriy Myzovets, President of the Association “Gas Traders of Ukraine”: “The risks of volatility and a cold winter have not been canceled. And this needs to be emphasized. Energy diplomacy must work – communicating with our partners so that the state at least fulfills its social obligations. Because in reality, there is no clear certainty that the resources extracted by state-owned companies will be enough to provide for the population and the production of heat and partially electricity.
One cannot envy the management of our energy giant, because underground storage facilities are empty, and how to fill them in conditions of a shortage of funds and time is a serious question. We do not understand our gas balance, and this is a rather serious uncertain quantity. We do not understand what our sources of supply will be, and accordingly, we do not understand how much gas will need to be imported. Ukraine has not faced such serious challenges in ensuring resources: our storage facilities have never been so empty, and our neighbors have never been so problematic. And where politics influences, the economy can react quite quickly, and this can be quite problematic. I am referring to Slovakia and Hungary.”
Andriy Myzovets outlined several key aspects of solving the problem:
“Working with European partners on joint procurement to ensure that there are enough resources to meet minimum social needs. We must be confident that our neighbors will ensure full gas transit from the European direction and uninterrupted imports. This is especially true for the next heating season, which will be one of the most difficult.
We also need to work with the Poles, who have expanded the capacity of the interconnector and have done everything on their part so that we can ensure an increase in pumping volumes.
Despite the fact that we are following the course of these actions, we still need to be sure that this direction will operate at full capacity and, if necessary, in case of any unforeseen situations in other directions, will cover the possibilities of gas supply at crucial times. This concerns production.
We have a worrying situation regarding future Russian strikes and the investment climate in general. Plus, let’s not forget that we have an agreement signed with the United States of America. How it will affect the desire of investors to come and work, and to what extent the preferences for our overseas partners will work compared to our domestic investors, is also a question.
Knowing that at least the commercial segment, that is, the supply to industry, should be facilitated as much as possible, the state authorities should turn their attention to suppliers. It seems to me that several easy steps could be taken here that would make it possible to be confident that gas can be purchased abroad without problems if necessary (I mean currency regulation), quickly cleared through customs. And the transition to energy units is not that difficult to make.”
The upcoming heating season will be quite serious, and Ukraine will face a number of risks in preparing for it. Volodymyr Lysenko, Commercial Director of Tepla, presented statistical information that clearly demonstrates the situation in Ukraine: “According to various estimates, Ukraine needs to import 4 to 5 billion cubic meters of natural gas, which will cost over $2 billion. The expected annual consumption is 21.5 billion cubic meters, while production is only 17-17.5 billion. Attacks on gas facilities have led to losses of 25 to 40% of production, which significantly reduces the country’s ability to provide itself with gas from domestic sources and increases dependence on imports.
Also, Naftogaz’s policy of maintaining fixed gas tariffs for a wide range of vulnerable consumer categories and expanding PSO (Public Service Obligations) to Ukrnafta from April 1, 2025, significantly reduces access to market resources for commercial consumers to 270 million cubic meters per month. At the same time, consumption by the commercial sector in the heating months ranges from 430 to 470 million cubic meters. That is, the commercial portfolio is in deficit by 40%, and these circumstances should be taken into account not only by the state, including Naftogaz, but also by private businesses that consume gas and want to have a guaranteed supply of resources in the heating season. After all, it is not the obligation of Naftogaz or the state to provide all consumers with natural gas.
The state must primarily provide for vulnerable categories of consumers, which is a major problem today, and businesses must take care of themselves.
According to weather forecasts, the temperature in summer may reach 40°C, which, in turn, will significantly increase the consumption of natural gas and gas generation to cover the electricity deficit. And if the deficit for the next heating season is placed on Naftogaz or related companies and the operator, when there is already a significant shortage of funds for purchases, we will find ourselves in a stalemate. Using the example of the electricity deficit, we all saw that businesses are the first to face restrictions.
Therefore, we consider it our duty to help cover the deficit of businesses and the state in such a difficult time. Currently, the entire volume is provided to Naftogaz mainly by Hungary and Poland. There is an opportunity to book capacity at the border with Slovakia in the volume of up to 16 million cubic meters.”
Volodymyr Lysenko proposed three products for guaranteed business access to gas resources for the heating season with maximum hedging of price and infrastructure risks:
“The first is gas in Europe at a fixed price for the future supply period. Purchasing gas in Europe with a 30% prepayment, the price in euros is fixed, futures for October or December are plus or minus in the spot range, the difference is within 20-25%. The price is fixed for a quarter, a month, or the entire season, with gas storage in underground storage facilities in Europe.
And if there are sufficient resources in the Ukrainian market, and the price situation is favorable for purchases in Ukraine, this resource, within the framework of a brokerage agreement, can be immediately sold in Europe during the contracted delivery period.
The second product is a customs warehouse. In my opinion, it is currently undervalued and needs to be developed for European and American partners. In the customs warehouse, a futures period can also be fixed with a 30% prepayment at a fixed price. Upon import, gas is delivered to the customs warehouse, customs clearance and transfer take place on the eve of or in the month of supply.
There is the possibility of its re-export or sale in the customs warehouse.
And the third product, which may be the most interesting. The main problem for the end consumer is that we operate entirely in the spot market. That is, every day the price is different, and every month the consumer changes supplier. And I would like to see a more organized market, like in the European Union, with long-term contracts.
So, we are in the process of developing a product and are ready to offer a fixed guaranteed resource without a price. The price is formed one month before the start of supply – it is the average of the bid and ask prices for each working day. Consumers will be guaranteed to receive their resource at the market price, which will be known one day before the start of the supply month.”
It is necessary to diversify risks, to have a safety margin for each type of resource – this includes production, UGS withdrawal, and imports. And it is very important that private players in such conditions are ready to invest, emphasized Kyrylo Brazhko, Head of Market and Trading Analytics Department at D.TRADING:
“Imports, which Naftogaz started in emergency mode in the first quarter of 2025, are still ongoing – from Poland and Hungary. The route uses an offer from Naftogaz, trading takes place daily, and Naftogaz continues to buy Balance of the Month for June. But regarding the balance and the estimates mentioned by the Prime Minister and representatives of the Supervisory Board of Naftogaz – 4-5 billion cubic meters – in this case, two routes – from Poland and Hungary – may not be enough, and most likely, closer to the heating season, or perhaps already in the summer, during the period of high consumption, Naftogaz will also be forced to involve Slovakia or Romania, depending on the price and efficiency of the route. The problem of high tariffs for the southern corridor in Romania and Moldova, which blocks the supply of LNG from Bulgaria and Greece, is currently being discussed with ACER (Agency for the Cooperation of Energy Regulators) and the Energy Community. I hope it will be resolved by the heating season.
It is worth mentioning that the purchase conditions at hubs have become more difficult for Ukrainian companies, because after the cessation of transit, the tariff burden on these routes has increased. The commercial segment, after the transfer of Ukrnafta to the PSO segment, has balanced, which has increased the price of Ukrainian VTP (Virtual Trading Point), but it still remains below TTF, and therefore the import of the Naftogaz group is not competitive compared to the Ukrainian price and is carried out exclusively in the PSO segment. In essence, this burden indirectly falls on the Ukrainian budget.
And regarding the Aggregate EU mechanism – joint procurement – this could improve purchasing conditions, and there were announcements that Ukraine plans to participate in this program. However, given the current price difference, including the non-competitiveness of American LNG in Europe or Asia winning the competition for this resource, this does not yet change the overall situation.
The infrastructure is still adapting to the new conditions, and we expect changes in the Southern Corridor with a reduction in Romanian tariffs. We see certain actions by Poland to increase supply security: the guaranteed volume, according to unofficial sources, is planned to be increased after the modernization of the Hermanowice gas measuring station on the border. This is a very positive step; increasing the volume of supplies monthly to 150 million cubic meters in the current conditions means an additional LNG carrier supply in accordance with the increased capacities.
Regarding prices: currently, we see a significant reduction in the spread of the Ukrainian price discount to TTF. If in the winter months this discount reached 30%, now it is about 5%. This price is already higher than the export parity – something that Ukrainian extraction companies have long tried to achieve during the period of export restrictions. But this is still not enough to carry out justified commercial imports there and ensure some free inflow of resources to balance positions using the European hedging market and these instruments.
Forecasts for the end of the year: in unstable political conditions, during active negotiations with both Russia and in the Middle East with Iran, and generally very rapid changes in the adaptation of Trump’s tariff policy, everything can change significantly. But still, from fundamental factors, there appears to be an oversupply of LNG, weak demand in Asia, meaning growth like last year is not planned, and a correction of positions by financial players who have significantly reduced their positions. However, on the other hand, there are factors of increased gas generation in the summer, volatility, and the need to ensure supplies in winter, which requires an increase in the winter spread. These two sides will determine price dynamics.
Analysts give a forecast corridor from various sources from €30-45 by the end of the year – from peak values in February to €30 in April. High uncertainty remains, and buying long-term contracts, when the winter contract in current prices will likely be undervalued, can be used to hedge one’s position and consumption in the winter period. In addition, this can provide additional security of supply in the context of new aggressor attacks. Therefore, such a contract for imported resources will be an additional element, and a multi-level strategy of preparation and contracting – from the formation of reserves and contractual flexibility to the diversification of sources and scenario planning – can provide businesses with a guaranteed stable resource at a competitive price.
Since the beginning of the war and the formation of the discount, everyone has already become unaccustomed to the fact that historically the price in Ukraine was formed at the level of import parity, and consumers are not ready to pay the current price.
In such a situation, this is an additional confirmation that domestic resources are the cheapest alternative, and we have seen how a balanced market can very easily become a deficit market. Therefore, it is necessary to diversify risks, to have a safety margin for each type of resource – this includes production, UGS withdrawal, and imports. And it is very important that private players in such conditions are ready to invest. For this, it is important to open the market, to have a free flow with Europe, which will ensure hedging of the physical portfolio and will be able to very freely, flexibly, on market terms, balance the market in cases of deficit or surplus.”
Is a joint procurement mechanism possible for Ukrainian businesses to strengthen the state and support national businesses in critical market conditions?
“As long as the price of the Ukrainian market is lower than the import alternative, there will not be many willing participants,” believes the Head of Market and Trading Analytics Department at D.TRADING. “As for Naftogaz as the main importer, it already uses various sources, in addition to bilateral partnership agreements with Poland. The mechanism for collecting offer-tenders works, and Ukrainian and foreign traders participate and try to secure resources at a fairly competitive price – a spread of approximately €5 to TTF. This is even lower than the delivery costs. This can be import, and efforts by the state and state-owned companies to diversify these conditions, to buy at the border with delivery to Ukraine something in UGS and thus add different sources where these cubic meters can be collected, because essentially every day Naftogaz is now buying on the trades from 3 to 20 million. This is a daily process, and an attempt to collect small batches to get a lower price from suppliers. Here, perhaps, if Naftogaz has such a desire, to form a platform for gas imports, where participants could submit their volumes, but larger lots or on a longer-term basis could be useful.”
Do not rely on Europe, with whom we are essentially competing for gas, be realistic and change currency legislation, urged Oleksiy Lastovets, Head of Trading in Ukraine at Axpo Ukraine LLC:
“We must understand that not only did we end this winter with low storage filling levels. Europe ended with underground storage 20% lower than last year. Recently, the European Commission approved plans-targets for injecting gas into underground storage for this year also at the level of 80%. For some German underground storage facilities, the level is generally 46-47%.
Europe started to worry about the next winter season back in January, when mechanisms for compensating injection were developed. That is, I would not count on help from Europe and expect someone to store gas for us, because we are not members of the European Union. Injection targets at the level of 80% are mandatory, and if there is no commercial spread, companies in Europe will be compensated by raising tariffs, which, in fact, we are seeing: tariffs in Europe have increased. Therefore, we are essentially competing with Europe for gas. The Aggregate EU platform, which has been operating for over two years, is ineffective; very small volumes have been purchased there. Therefore, we need to be realistic and understand that we need to cover this deficit ourselves.
Regarding the problems of transitioning to energy units – our infrastructure has been under attack, it is difficult to restore, the quality of gas in the system fluctuates, and it will be very difficult to encourage this transition now. These are the risks that traders have to take on, and we have to accept them. We certainly will not cope with this problem now. The only thing that can help now is a change in currency legislation, because there is a real problem for a Ukrainian company to import gas, hold it, and export it in terms of closing currency control, because banks do not see the M74 declaration as a basis for removing operations from currency control. A change in currency legislation could increase the number of Ukrainian companies willing to purchase gas. Non-residents do not have this problem.
How much do we need to import, from which directions, and how? Certain deficits have been mentioned here, but there is no official data on them. Our injection season lasts 182 days. We need to divide this amount by 182 days and understand how much volume Ukraine needs to import monthly to secure its underground storage with gas: 20-26 million cubic meters per day. Where can we get them from? We realistically have 9.6 million from Hungary, 6 million from Poland, 6-8 million from the Southern Corridor, and 42 million from Slovakia. But the cheapest routes have already been pre-booked by Naftogaz to save state funds. And they are doing the right thing. The most expensive route is Slovakia. Then, after Hungary, comes Poland and possibly the Southern Corridor. Essentially, three routes are available to us. There are indeed problems with our neighbors, and we cannot be sure that there will not be some kind of repair, that some interconnector will not stop, or that something will not fly there. And the market is short specifically on physical resources. How to close it? It’s simple – import, which is what Naftogaz is doing. Whoever comes to import first will take the cheapest route. Slovakia is the largest route and probably the simplest. The first come, first served principle applies there. This is convenient, but the most expensive. Slovakia does not have access to LNG, and currently, the premium on this route is at the level of TTF +10. Other routes have greater flexibility, like Hungary. In the Southern Corridor last year, spreads reached minus 10-15 to TTF, which made this route very attractive. Now there are nuances with tariffs: Moldova has raised tariffs by an average of 15-20%, and there is also a gas deficit, as Europe also takes from this route. Therefore, businesses need to get used to the new realities: for the first time in three years of war, we are moving from a surplus market domestically to a deficit one. Whoever understands this first and gains access to resources will somehow be able to win in this whole story. And we will objectively be in this market for a long time.
Andriy Myzovets, President of the Association “Gas Traders of Ukraine”: “We did not have a deficit-free balance in previous seasons; we simply covered it with the availability of gas in underground storage. We must honestly and frankly tell our clients, as we do in principle, that at a minimum, the commercial segment must get used to the fact that the price of domestic gas supply will, if not equal to import parity, then be very close to it. Sooner or later, we will still come to this, because even commercial production, with a reasonable state policy, will not be enough to cover the needs of the commercial consumption segment. Clients must understand that the state has assumed social obligations and will fulfill them; the commercial segment must be provided by private suppliers. And the less state influence there is on this segment, the more balanced, mobile, and fair in pricing it will be.”
Oleksiy Lastovets, Head of Trading in Ukraine at Axpo Ukraine LLC: “Why can’t Naftogaz buy up local resources to close these issues? Why does business think it will buy gas there all winter cheaper than import parity? It would be entirely logical to enter the domestic market, contract volumes, and close the PSO segment, and then business, as a result, will start importing premium gas. I don’t understand why business thinks it will be cheaper than import parity? We will all move to import parity, and we all have to work within it.”
There is no need to wait for a kind uncle from Europe who will fly in on a blue helicopter and bring us 5-7 billion cubic meters of gas, which he will simply put in our storage facilities; the problem will still have to be solved independently, honestly expressed the general opinion of Andriy Myzovets, President of the Association “Gas Traders of Ukraine”:
“It is incomprehensible why the state, in the form of relevant ministries and market monopolists, cannot properly communicate this point? I understand that it is politically sensitive; it is difficult to say that the rescue of drowning people is the business of the drowning people themselves, but this information needs to be conveyed to people, as it is truly objective and honest. Well, we cannot ensure consumption of 20 billion cubic meters with production, God willing, of 17 billion. We need to talk about this honestly. And as for why no one can provide it, it is because Naftogaz came out and said: okay, the population will consume at 7.95. We all understand that this is a political decision. We understand that it would have been logical to enter the minimum season, purchase the volumes that commercial producers really lack. But there is also the financial situation. Despite the fact that Naftogaz declares quite exorbitant profits in 2024, it seems to me that I want to ask: ‘Where is the money?’ It would have been logical to buy gas there at 13-14 thousand, and not at 20 plus, as it is now. Apparently, something is preventing the heads of our companies.
Perhaps it makes sense to help with ideas and, having structured our theses and presented them in an adequate form, it seems to me that we will at least find one grateful listener who will heed what we are saying. Everything we predicted during previous meetings is coming true.”
Thus, during the discussion, the proactive position of Ukrainian business regarding securing its gas resources, including through imports, became obvious. Ukrainian gas traders are proposing products and effective tools for solving the problem, which will be formulated in an official appeal from the Energy Club to state authorities so that the natural gas market can develop and increase its efficiency.
