Ukraine invites gas import bids

Ukraine's state-owned Naftogaz has invited gas import bids from Europe over the next two years, the company announced on January 29.

Ukraine relies on imports from Hungary, Poland and Slovakia to supplement its domestic production, with shipments from the three countries reaching nearly 16bn cubic metres last year. It ceased direct purchases from Russia over five years ago for political reasons.

Naftogaz is inviting offers for the supply of gas between February 15, 2021 and December 31, 2022. Interested suppliers must file their offers by February 11. The company will use €80.4mn ($97mn) in funds from the European Bank for Reconstruction and Development (EBRD), raised in a 2019 Eurobond sale, to pay for the gas.

Ukraine’s aspiration is to overcome its dependency on imports by boosting domestic supply. But so far it has fallen significantly short of the output targets set by the government.

To attract more investment in gas development, Ukraine awarded dozens of licences in recent years. But progress was slow and many of the licences were secured by Naftogaz, while few hoped-for international firms took part in the tenders.

Ukraine has started this year well, however, finally signing off earlier in January on a handful of production-sharing agreements (PSAs) with local players. Finalising the contracts was meant to take place much sooner, but the coronavirus (COVID-19) crisis and the resulting slump in gas prices disrupted the process.

PSAs were signed with Naftogaz’s production arm Ukrgazvydobuvannya (UGV) for four blocks, named Buzivska, Balakliyska, Berestyanska and Ivanivska. All other PSAs were reached with local private players. DTEK Oil & Gas obtained rights to the Zinkivska blocks, Geo Alliance the Sofiyivska area and Zakhidnadraservis the Uhnivksa site.

Canada’s Vermillion Energy had won two PSAs in partnership with UGV, and was hailed as one of the few international players to participate in the contest. But it pulled out before the awards were finalised, after reining in its development plans in response to the oil price collapse.