Gas production enhancement may add +3% to Ukraine's annual GDP

Apr 27, 2021 | Category: Official
Gas production enhancement may add +3% to Ukraine's annual GDP

Implementation of existing projects portfolio of Ukrainian gas producing companies can lead to increase in gas production to 30 bcm of gas per year for 10 years, which will allow to back down from its import completely. Such increase in production will lead to creation of 22 thousand new jobs in the industry, an increase in budget contributions by UAH 145 billion and GDP growth by UAH 345 billion. This is stated in an independent study pursued according to methodology developed by the international consulting company KPMG in Ukraine on behalf of the Naftogaz Group.

"Our key task was to get an overview of the natural gas market in Ukraine and analyse the effect of project implementation on the entire country's economy. The basis was the economy of Ukraine in 2018, for which we modelled the relationships between different sectors so that changes in a particular sector qualitatively and quantitatively affect the others. The scenarios also provided for an option to assess the impact of projects in the individual regions on the entire Ukraine's economy. In one model we have set out the development scenario, and in the other – its absence. The methodology of the analysis provided for comparison of the macroeconomic forecasts for Ukraine subject to the implementation of the strategy, and in the absence of investment in the industry development," Oleh Neplyakh, partner, head of industry practices for energy and natural resources, KPMG in Ukraine, said.

Recoverable gas in subsoil of Ukraine is enough at least for another 30 years at consumption of 30 bcm per year. However, at the same time domestic economy still remains dependent on energy imports, which poses a risk to the state's energy and economic security.

"Over the past five years, Ukraine has spent more than USD 35 billion on procurement of natural gas, oil and petroleum products. If we translate these figures into national currency, it is almost UAH 1 trillion. For comparison, this is slightly less than planned budget revenue for this year. No doubts, import substitution can significantly increase country's energy and economic security," Artem Petrenko, Executive Director of the Association of Gas Producers of Ukraine, said.

Over the past year, with participation of the Government, restrictions were lifted that did not allow implementing existing resource potential of Ukraine earlier. First of all, we are talking about opening access for gas producing companies to large and promising oil and gas areas both onshore and offshore – the most potential areas.

"Naftogaz has already commenced projects in new areas entrusted to us by the country – in Yuzivska area, in the Black Sea and new production sharing agreement areas. We are determined to increase gas reserves to 600 bcm over the next 5 years. This means not only to transfer from maintaining gas production to steadily increasing it. This also has significant consequences for economy of the country: gas production can become one of its powerful engines. We attract international investments, expertise and new technologies to make this a reality. And we hope that we will be united in our vision and our aspirations with all interested stakeholders," Otto Waterlander, Chief Operating Officer of Naftogaz Group, said.

To attract investment, including international, in gas production, it is important to introduce fiscal incentives, continue deregulating the industry and prevent an additional tax burden on gas producing companies.

"Fiscal stimulation and predictable tax policy are crucial for development of Ukrainian oil and gas branch. Only under such conditions, companies will be able to evolve, make systemic investments into their technological development, increasing efficiency and environmental friendliness of operation. Over the last year, DTEK Oil&Gas invested about 3 bln UAH into development of the national gas production, which is a substantial contribution into economic and social development of Ukraine, into approaching of its energy independence," Nataliia Grebeniuk, Executive Director of DTEK Oil&Gas, said.