Ukraine could need 0.6 Bcm of gas imports to meet storage target: IEA

Ukraine could need to import some 0.6 Bcm of gas before the end of October to meet its target of 13.2 Bcm of gas in stock by Nov. 1, the International Energy Agency said Sept. 19.

In a report titled "Ukraine's energy security and the coming winter", the IEA also called on Ukraine's international partners to help make sure the storage filling target was met ahead of the start of winter.

"To accelerate storage injections, Ukraine could require additional piped gas imports from the EU," the IEA said.

"We estimate that Ukraine would need around 0.6 Bcm of imports in September and October to reach its storage target ahead of Nov. 1," it said.

According to data from S&P Global Commodity Insights, Ukraine's gas stocks had reached 11.7 Bcm as of Sept. 16 with domestic production mostly being used to restock.

The IEA said that while under average weather conditions Ukraine could potentially meet all its demand from domestic production and storage, a colder-than-average winter could also increase import requirements through the season.

"A particularly cold winter -- similar to the one Ukraine faced in 2016-17 -- could increase gas used for heating in households by 25% (or 1.5 Bcm) compared with the 2023-24 winter season," it added.

Speaking to reporters later Sept. 19, IEA executive director Fatih Birol said Ukraine's energy situation had been "very fragile" and remained "delicate" following the large-scale Russian attacks against Ukrainian energy infrastructure on Aug. 26.

"The situation in Ukraine is one of the most pressing energy security issues in the world today," he said, adding: "This coming winter will be extremely fragile for the Ukrainian energy system and we cannot afford to fail."

Birol also highlighted the IEA's ability to react quickly to emergencies. "One of the hallmarks of the IEA in recent times has been our nimbleness to address emerging crisis situations," Birol said.

Import costs

The IEA said international support, including via loans and grants, was needed to support Ukrainian gas companies to ramp up imports ahead of the winter season.

It said that, based on spot prices at the beginning of September, the cost of procuring 0.6 Bcm of gas would be just over Eur250 million ($278 million).

The European Bank for Reconstruction and Development signed an agreement on a Eur200 million loan under government guarantees in November 2023 to support the creation of strategic gas reserves.

"The corresponding agreement on guarantees was signed in July 2024 and Naftogaz started buying gas using the loan in August 2024," the IEA said.

It added that AggregateEU, the EU's demand aggregation and joint purchasing platform, could also be a mechanism to support Ukraine's gas procurement.

The current 13.2 Bcm storage target is lower than the 14.7 Bcm target set before the 2023/24 winter.

The IEA estimated that net storage withdrawals met around 30% of Ukraine's gas demand requirements in the past heating season.

Ukraine has been keen to eliminate imports in order to be self-sufficient in gas and to avoid the high cost of buying gas from Europe where gas prices remain relatively high.

Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF month-ahead price on Sept. 18 at Eur35.28/MWh.

Virtual reverse flow

In its report Sept. 19, the IEA also said the expected halt of Russian gas transit via Ukraine from January 2025 would mean the end of the use of backhaul -- or virtual reverse flow from the EU.

"This means physical west-to-east gas supplies from Central and Eastern Europe will be needed to bring additional gas into Ukraine, which could raise procurement costs due to transmission tariffs," it said.

The adequacy of supply is also subject to risks from further Russian attacks on gas infrastructure.

Traders have in the past used virtual reverse flow where Russian gas transiting Ukraine is retained in Ukraine for storage rather than flowing all the way to Europe just to be physically sent back into Ukraine.

But the five-year gas transit agreement between Russia and Ukraine is due to expire at the end of 2024 and Ukrainian officials have repeatedly said Kyiv would not be party to talks with Moscow on any contract extension.

The IEA also called for the strengthening of firm gas import capacity from the EU.

Ukraine has around 60 million cu m/d of import capacity from the EU but some of the capacity cannot be considered as available on a long-term, firm basis.

"Ukraine and its European partners should work together to ensure that firm capacity offerings are extended and ensured ahead of forthcoming winter seasons," the IEA said.