Ukraine is an important transit country for supplies of oil and natural gas from Russia to countries throughout Europe.
Ukraine’s hydrocarbon resources are located in the Dnieper-Donetsk region in the east, the Carpathian region in the west, and the Black Sea-Sea of Azov region in the south. The Dnieper-Donetsk region accounts for 90% of natural gas production. The remaining 10% of natural gas production originates in the Carpathian and Black Sea-Sea of Azov regions.
Ukraine produces coal, natural gas, petroleum and other liquids, nuclear, and renewables. However, energy demand exceeds domestic energy supply; imports cover an energy gap of about 35%.
Natural gas represents nearly one-third of Ukraine’s primary energy consumption, followed by coal at 30% and nuclear at 21%. Petroleum and other liquids and renewable energy sources together account for the remaining 18% of primary energy consumption.
Even before the COVID-19 pandemic, Ukraine’s economy faced significant challenges, including excessive sovereign debt. The pandemic only increased these challenges, as both energy demand and production decreased, affecting Ukraine’s ability to repay debt.
Ukraine continues to contend with the loss of jurisdiction over the Crimean Peninsula. According to the Ukrainian Energy Ministry, the country lost 80% of its oil and natural gas deposits in the Black Sea and a substantial share of its port infrastructure.
Ukraine’s economy is one of the most energy-intensive economies in Europe. Although the country has made gains in energy efficiency in the industrial sector, its overall economic growth has slowed as a result of few investments in energy infrastructure modernization, unstable energy supplies, and inefficiencies in energy consumption.
Petroleum and other liquids
Ukraine held 400 million barrels of proved oil reserves as of the beginning of 2021.
Ukraine relies heavily on imports to meet its petroleum and other liquids demand. In 2020, petroleum and other liquids imports met about 70% of Ukraine’s liquids consumption. The country produced only 74,000 barrels per day (b/d) of petroleum and other liquids.
Ukraine imports most of its petroleum products from Belarus, Russia, and Germany. Crude oil imports, sourced increasingly from Azerbaijan and Kazakhstan, supply Ukraine’s sole operating refinery, the Kremenchug facility.
Ukraine is a transit country for Russia’s crude oil exports, which travel to Slovakia, Hungary, and the Czech Republic through the southern branch of the Druzhba pipeline network, which transports 400,000 b/d.
In late 2019, Ukraine’s pipeline operator, Ukrtransnafta, extended the contract with Russia’s Transneft to transport crude oil through 2030. In 2020, approximately 244,000 b/d of Russia’s crude oil traveled through Ukraine.
Natural gas
As of the beginning of 2021, Ukraine held 39 trillion cubic feet (Tcf) of proved natural gas reserves, according to Oil & Gas Journal.
In 2019, Ukraine’s consumption totaled approximately 1.0 Tcf of natural gas, a decrease of about 50% from 2010. Domestic natural gas production met over 70% of total consumption, and the remaining 30% relied on imports.
Historically, Ukraine has received the majority of its natural gas imports from Russia. However, following Russia’s annexation of the Crimean Peninsula, Ukraine halted direct natural gas imports from Russia and replaced those imports with natural gas from European countries. Much of the natural gas imported from Europe, however, originates in Russia and travels into Ukraine through reverse flows from central and eastern European countries.
Powered by 72 compressor stations, Ukraine’s natural gas transportation network includes almost 28,000 miles of pipelines and 13 underground storage facilities with a total working capacity of 1.1 Tcf. Ukraine holds the second-largest storage capacity in Europe and Eurasia behind Russia.
With the world’s largest natural gas transit infrastructure and its proximity to Russia, Ukraine has been an important transit country for Russia’s natural gas supplies to countries throughout Europe. European markets receive 2.9 Tcf to 3.3 Tcf of Russia’s natural gas per year through Ukraine.
Numerous countries receive Russi’s natural gas partly or exclusively through Ukraine, including Austria, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, France, Germany, Greece, Hungary, Italy, Moldova, Poland, Romania, Serbia, Slovakia, Slovenia, and Turkey. In the past, disputes between Russia and Ukraine over natural gas supplies, prices, and debts have resulted in interruptions to Russia’s natural gas exports through Ukraine.
Two major pipeline systems carry Russia’s natural gas through Ukraine to Western Europe. The Bratstvo (Brotherhood) pipeline, which originates from the Urengoy natural gas field, crosses from Ukraine to Slovakia and splits into two directions to supply northern and southern European countries. The Soyuz (Union) pipeline, which originates from the Orenburg natural gas field, links Russia’s pipelines to natural gas networks in central Asia and supplies additional volumes to central and northern European countries such as Slovakia, Hungary, and Romania. A third major pipeline through Ukraine delivers Russia’s natural gas to the Balkan countries and to Turkey.
Newly completed TurkStream and nearly complete Nord Stream 2 pipelines are expected to replace pipeline systems that previously passed through Ukraine. The decrease in flows of Russia’s natural gas through Ukraine will likely diminish Ukraine’s critical role as a transit country for natural gas flows from Russia to Europe.
Coal
Coal accounts for over 90% of Ukraine’s fossil fuel reserves. In 2019, the Ukraine had 38 billion short tons of coal reserves and ranked sixth in the world for hard coal reserves after the United States, China, India, Australia, and Russia. However, coal production has been declining and, at 28.2 million short tons, stood below the five-year average (2014–2018) in 2019.
Industrial production and coal demand further slowed in 2020 because of the COVID-19 pandemic. As a result, many larger coal mines suspended operations in early 2020.
Ukraine produces both thermal and coking coal from the Donetsk Coal Basin in East Ukraine, the Lviv-Volyn Coal Basin in West Ukraine, and the Dnieper Coal Basin in Central Ukraine.
Ukraine has increasingly begun to rely on coal imports. In 2019, almost half (45%) of the coal consumed in Ukraine was imported, rising 27% from 2010. In 2020, Russia was the source of 70% of Ukraine’s coal imports, followed by coal from the United States at 20% and from Kazakhstan at 8%.
Once a leading exporter of anthracite and bituminous coal, Ukraine exported less than 3,000 short tons of coal in 2020.
Electricity
In 2020, Ukraine generated a total of 149 billion kilowatthours (kWh) of electricity, most of which was nuclear powered. Four nuclear plants with 15 reactors generated over 51% of the total electric power supply in 2020. Fossil fuels, particularly coal and natural gas, have traditionally made up a substantial portion of electric power generation. In 2020, fossil fuels accounted for 37% of generation. Contributions from renewables and other sources have been marginal.
Ukraine has a total installed generation capacity of 55 million kilowatts (kW). Fossil fuel energy represents the largest share of capacity, at 52% (28.535 million kW); followed by nuclear at 24% (13.107 million kW); and renewables, including hydro, at 22% (12.031 million kW).
The Ukrainian government has proposed to meet at least half of future electricity demand with nuclear power. In the past, most of Ukraine’s nuclear fuel supplies came from Russia, but Energoatom, Ukraine’s national nuclear generation company, is reducing its supply from Russia by diversifying its nuclear fuel sources and buying fuel from U.S.-based Westinghouse Electric Company.