Ukraine is once again becoming dependent on imported gas. Why has this happened, and what to expect?
Throughout the winter, one of the primary tasks of Ukraine’s air defense was protecting electricity generation. However, the Russians have shifted their tactics and begun targeting gas infrastructure.
"This year, the Russian army has been striking gas production facilities and infrastructure with particular intensity. The heaviest blows are landing in the eastern oblasts—Kharkiv and Poltava—where the bulk of Ukraine’s production capacity is concentrated and where the lion’s share of Ukrainian gas is extracted. The aggressor doesn’t discriminate in its targets, deliberately hitting both state-owned and private enterprises. Russia first deploys a massive number of drones to exhaust our air defenses, then follows up with dozens of various missiles. As we can see, the enemy’s main goal is not only to inflict maximum damage on companies but also to energetically cripple Ukraine," said Artem Petrenko, executive director of the Association of Gas Producers of Ukraine (AGPU).
According to the Energy Industry Research Center, the first strikes this year slashed gas production by as much as 40%. During the winter, Ukrainian companies were producing about 52 million cubic meters of gas per day, while the country’s demand ranged between 110 and 140 million cubic meters. The shortfall was covered by gas stored in underground reservoirs.
"We’re dealing with serious destruction, sometimes catastrophic, forcing companies to halt operations, unfortunately. Addressing it requires significant funds and time," said AGPU’s Artem Petrenko. "It’s not just about minor repairs—often, producers have to rebuild everything from scratch. We’re talking pipelines, compressor stations, and gas treatment facilities. This infrastructure is most frequently targeted by the Russian army, yet it’s absolutely critical for ensuring Ukrainians have gas."
Still, the situation has improved somewhat since then. According to ExPro consulting, losses in Ukrainian gas production dropped to about 30% by February. Even so, this is still a substantial figure and will likely increase Ukraine’s reliance on imported gas—reversing the welcome news that the country could get through the heating season, and even an entire year, on its own gas.
Gennadiy Ryabtsev, an energy expert and professor at the Kyiv-Mohyla School of Governance, believes the state-owned company Naftogaz Ukraine failed to stockpile enough gas in underground storage, leading to the current deficit. "Ukraine needs a strategic natural gas reserve. As of now, 2 billion cubic meters in reserve would suffice. But ideally, that volume should be at least 4 billion," he said.
Thus, Ukraine now faces the task of either restoring or even boosting its gas production levels while figuring out where and under what terms to purchase sufficient volumes of imported gas. The end of the heating season doesn’t eliminate the need to address these issues, as the hunt for imported gas must begin as early as April. The closer we get to the 2025-2026 heating season, the more expensive gas will become on global markets. Waiting it out isn’t an option—action is needed now.
The need for gas imports
Typically, Ukraine’s industry and population consume about 20 billion cubic meters of natural gas annually, while production in 2024 reached 19.1 billion cubic meters. This year, however, the situation is different—imports will need to be significantly higher than in previous years.
In 2023, Ukraine imported 1.2 billion cubic meters of gas, and in 2024, just 724 million. But this year, imports could reach 4.5 billion cubic meters, according to estimates from the Energy Industry Research Center. That would require roughly $1.8 billion to $2 billion.
Other estimates are even higher. Gas industry expert Andriy Zakrevskyi believes imports could be larger: "If production isn’t increased, we’ll need to import 4.7 billion cubic meters, plus an additional 1 billion for gas-powered electricity generation. That’s 5.7 billion cubic meters in total."
Currently, gas prices at European hubs range from $470 to $500 per thousand cubic meters, while domestically produced gas costs $426 per thousand cubic meters on the Ukrainian Energy Exchange in February. Importing, then, is a costly endeavor.
Already in February, gas imports to Ukraine surged 12-fold compared to January, reaching 512 million cubic meters. The bulk came from Slovakia, Hungary, and Poland.
"When imports happen unexpectedly, it means urgent purchases on the EU spot market at much higher prices. This, in turn, increases the financial burden on end consumers and worsens Naftogaz’s financial position as an entity tasked with special obligations to supply gas at regulated prices. On top of that, Ukraine will exit the heating season with historically low gas levels in storage. Entering the injection season with depleted reserves creates a need to replenish them at a faster pace," explained Roman Nitsovych, research director at the DiXi Group think tank.
As Ukraine grows increasingly reliant on gas supplies from Slovakia and Hungary, questions arise about whether these countries will prove to be reliable suppliers. The governments of these two neighbors have expressed displeasure over Ukraine halting the supply of Russian gas to them as of January 1, 2025, only to now ask them to sell the needed volumes of gas.
Gennadii Kobal, director of ExPro Gas & Oil, believes these issues shouldn’t arise: "There are no problematic relations with Slovakia or Hungary [on gas supplies]. We’ve always imported through Hungary, Slovakia, and Poland, and to a lesser extent, Romania. With Romania, the entry price into their pipeline system is just a bit higher."
However, gas imports should be viewed more broadly. In March, Naftogaz Ukraine representatives attended an industry event in the U.S., expressing interest in importing American liquefied natural gas (LNG). Such a deal could align with agreements under the current U.S. administration, where President Donald Trump has prioritized exporting American energy resources to foreign markets.
For instance, the private company DTEK, owned by Rinat Akhmetov, already purchased 100 million cubic meters of gas, delivered via a terminal in Greece after arriving as LNG from the U.S. in December 2024. Additionally, in March, Naftogaz and Polish company Orlen signed a deal to buy another 100 million cubic meters of gas—LNG to be received at a terminal in Klaipeda, Lithuania, and transported to Ukraine through Polish and Lithuanian gas systems.
"I view the idea of importing American LNG positively. DTEK is already supplying it via the south, and there’s experience with Orlen in the Baltics. We could also look to Persian Gulf countries. Orlen is ready to supply up to 3 billion cubic meters of gas. Apart from them, no one can provide such volumes of LNG this year. The Americans could supply about 1 billion cubic meters," said gas expert Andriy Zakrevskyi.
Dmytro Lyppa, head of Ukraine’s Gas Transmission System Operator, anticipates importing 4 billion cubic meters of gas between April and October. He expressed particular interest in American LNG, as he told Reuters.
"Technically, Ukraine has various import options. We can receive pipeline gas at the western border—from Slovakia, Hungary, Poland, and Romania. There’s also the possibility of transporting LNG through European terminals, like the nearest ones to us—Swinoujscie in Poland or Klaipeda in Lithuania. Another option is buying resources at European hubs, paying extra for delivery, which is among the costliest for us since Ukraine is the farthest eastward country," explained AGPU’s Artem Petrenko.
Gas-fired power generation also requires gas
In 2024, Ukraine’s energy system began shifting toward distributed generation—building small electricity-generating units, mostly powered by natural gas. At the time, this seemed like a clear win, as targeting these small, scattered facilities would be harder for Russian drones and missiles than hitting large ones.
According to the Energy Ministry, by the end of 2024, Ukraine had installed a number of gas-powered generation units totaling 967 megawatts (MW), with 835 MW being new capacity commissioned that year. Most of this investment came from businesses. In terms of capacity, it’s as if an extra nuclear reactor was added to the energy system—but one running on gas. Will there be enough fuel?
"The volumes of gas produced in Ukraine are entirely sufficient to meet needs, including for gas-powered generation," said Gennadiy Ryabtsev, energy expert and professor at the Kyiv-Mohyla School of Governance.
The Ukrainian Association of Renewable Energy calculated that the deficit in distributed generation capacity across Ukraine stands at 2.7 gigawatts (GW). If all these gas-piston units are purchased and installed, they’d require 5.5 billion cubic meters of gas annually. That’s a lot, considering importing an extra 4.5 billion cubic meters is already a challenge.
"There’s no major issue with gas for distributed generation right now, as there are subsidized prices for social facilities and critical infrastructure [which includes distributed generation]," said Stanislav Ignatiev, head of the Ukrainian Association of Renewable Energy’s council. "But if there’s a need to ramp up gas supplies, the question is that no one can quickly provide Ukraine with the necessary number of gas-piston units. Building gas-piston generation takes about four years, and with a four-year planning horizon, gas producers could increase domestic output."
Can gas production be increased?
Is it realistic to boost domestic natural gas production? Anders Åslund, an economist with the Stockholm Free World Forum, thinks so: "Ukraine produces and consumes about 20 billion cubic meters of gas annually, but within five years, it could produce 30 billion cubic meters, exporting it to Europe and earning revenue."
Oleksandr Sirenko, editor-in-chief of NaftoRynok, argues that a strategic policy is needed to balance gas supply, along with more freedom for private companies: "If we have a gas shortage, why are licenses being taken from private companies, halting their production? Who’s managing this process? Who is responsible for the gas balance in our country? When we desperately need gas, it turns out someone can still stop production. It’s nonsense."
For example, in December 2023, Ukrnaftoburinnya lost its license to extract gas at the Sakhalinske field in Kharkiv Oblast. However, in August 2024, the State Service of Geology and Mineral Resources restored that permit. Meanwhile, Smart Energy, a company linked to pro-Russian figure Vadim Novinsky, lost three extraction permits.
Private companies could increase production this year by 200-300 million cubic meters, and with the full return of Ukrnaftoburinnya and Smart Energy, that could rise to 500 million cubic meters, according to expert Andriy Zakrevskyi. But there’s another step.
"With a free market, trading companies could store nearly 1.5 billion cubic meters of gas in Ukraine," Zakrevskyi said. This refers to trading firms that could use Ukraine’s underground storage for gas trading in Europe. Ukraine could then buy gas from these reserves for its energy system. However, gas exports from Ukraine are currently banned, so traders aren’t stepping in.
The Association of Gas Producers also believes production can grow, but it hinges on ending the war first. "After the war ends, we expect increased international interest in Ukrainian gas production. This will be driven by resuming currently paused deals, developing the promising Black Sea shelf, tapping unconventional reserves, intensifying work on depleted fields, drilling at deeper levels, and advancing related industries and green resources like biomethane," said Artem Petrenko, head of the association.
"Restoring and further increasing production is entirely feasible in the near term—we’re seeing encouraging trends in new well drilling, and last year, special permits were issued for developing new oil and gas sites. That said, for such a capital-intensive and risky business, predictable operating rules are crucial. Naturally, resolving the security situation and liberalizing the market should also positively impact gas production," noted Roman Nitsovych of DiXi Group.
But Gennadii Kobal of ExPro Gas & Oil argues that ramping up gas production is a slow process: "How can you quickly drill a 6-kilometer-deep well in an unexplored field? Exploration takes three years, preparation for drilling takes a year, and then the drilling itself takes another year."
Bigger and better air defense
Three years of full-scale war have taught Ukrainians that, despite strategic rebuilding and development plans, they must also prepare for the worst-case scenario. For instance, Russia could intensify strikes on Ukrainian gas production and infrastructure, further reducing output. The gas transmission system, vital for imports, could also be damaged. This calls for additional protection of the country’s gas infrastructure.
"The damage is partly due to companies not protecting their most vulnerable equipment, even though they were warned of possible Russian strikes. Without engineering and technical safeguards, damage happens. I think gas market players could take a cue from what the electricity sector has done to protect its market. Right now, nearly every Ukrenergo substation is equipped with protection against both direct drone hits and shrapnel," said energy expert Gennadiy Ryabtsev.
Gennadii Kobal of ExPro Gas & Oil notes that protection isn’t just needed for gas production in eastern Ukraine but also for underground storage in the west, which Russia targeted last year. "Strikes could continue not only on production but also on transit infrastructure. It’d be wise to set up comprehensive air defenses to cover Lviv, Ivano-Frankivsk, and other locations," the analyst said.
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