In preparation for the winter heating season, Ukraine’s state-owned energy giant Naftogaz took out a Hr.4.7 billion ($113 million) loan from Ukrgasbank, Ukraine’s state-owned bank specializing in energy.
The funds will be used to purchase natural gas and build up sufficient reserves in underground storage facilities to ensure Ukraine is supplied with energy resources this winter, Naftogaz CEO Sergii Koretskyi said in last week’s Naftogaz press release.
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“I am grateful to the leadership of Ukrgasbank and to the government for their support,” he says.
This year, Russia has repeatedly targeted Ukraine’s gas production, raising serious concerns that the country may face a gas shortage come winter. In response, Naftogaz implemented a range of measures to secure its gas supplies, including the Ukrgasbank loan.
“This is our joint investment in warmth and light for millions of Ukrainians,” an Ukrgasbank Facebook post quotes Rodion Moroziv, its acting chairman of the board.
According to the post, Ukrgasbank and Naftogaz have collaborated since 2009.
Naftogaz previously announced a Hr.4.7 billion ($113 million) loan from PrivatBank, also for the heating season. It is relatively new for PrivatBank to lend such a large amount, as the bank started providing credits for large enterprises only a year ago, previously focusing on small and medium-sized enterprises (SME).
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The two loans combined equal nearly Hr.10 billion ($234 million) that Naftogaz is borrowing.
US LNG, EBRD Funds, and Balkan Gas Corridor Support Ukraine’s Heating Season
Naftogaz’s loans from PrivatBank and Ukrgasbank to ramp up gas supplies ahead of the heating season will complement existing European Bank for Reconstruction and Development (EBRD) support, a new international supply route, and incoming US liquefied natural gas (LNG), all aimed at boosting injections into Ukraine’s underground storage.
Naftogaz recently secured 140 million cubic meters of LNG from the US to be transported by the Polish company ORLEN. That deal marks the fourth gas supply contract signed by Naftogaz this year, bringing the total shipped to 440 million cubic meters of LNG ahead of the winter heating season.
Apart from LNG, the state-owned company is speeding up gas injection into Ukraine’s underground storage facilities. By the start of the next heating season – Nov. 1 – Ukraine needs to accumulate at least 13 billion cubic meters of gas in storage. It has just over 9 billion cubic meters stored as of July 17, according to ExPro data.
Another loan for the heating season comes from the European Bank for Reconstruction and Development (EBRD) – the bank lent Ukraine’s state-owned gas giant €270 million ($307 million) to finance emergency gas purchases over the next two heating seasons.
The amount of gas Naftogaz will purchase with it is unknown for now, EBRD Vice President Matteo Patrone previously told Kyiv Post.
“We don’t know [how much gas Naftogaz will import]. It depends on the price of gas,” he said.
This collaboration will, however, help to ensure Ukraine has sufficient gas reserves and can meet its energy needs during peak demand, Patrone said.
Part of the loan consists of a grant from the Norwegian government of €138.6 million ($149.6 million) funded by the EBRD Crisis Response Special Fund.
Naftogaz borrowed another $41.6 million loan from EBRD to invest in modern mobile drilling rigs, boosting domestic production. Ukrgasvydobuvannya, a subsidiary of Naftogaz Group, bought new mobile drilling rigs with lifting capacities of 125 and 180 tons. This will improve the company’s ability to carry out complex well workovers, especially at greater depths.
Ukraine is also set to unveil the new Trans-Balkan gas transportation route through Bulgaria, Romania, and Moldova, providing an alternative and competitive route for natural gas supplies.
