Gas reserves in storage are at a record low. Will there be enough fuel to last until spring?

Recently, the issue of critically low gas reserves in Ukraine’s underground storage facilities and the associated challenges for the heating season has been increasingly discussed in the media.

Taking advantage of the situation, Russians have started spreading false information about the introduction of gas rationing similar to electricity restrictions for the population. Such a scenario is certainly not a threat to Ukraine. Nevertheless, the gas situation is complicated, primarily due to extensive infrastructure shelling by the enemy.

There are also concerns regarding the strategy of "Naftogaz" and the Ministry of Energy regarding stockpiling, which could cost the state hundreds of millions of dollars due to negligence. However, "Naftogaz" constantly emphasizes that there is enough blue fuel in the country and that the heating season is not under threat.

Will Ukraine have enough gas reserves to get through the winter? How much will the state overpay due to the negligence of certain leaders, and why should preparations for the next autumn-winter period start now?

Winter Preparations

After the conclusion of the previous heating season, the government set an official plan for "Naftogaz": to accumulate 13.2 billion cubic meters of gas by the next winter. Throughout 2024, the state company regularly reported that the injection was on schedule and that it would meet the set plan.

At the same time, the former head of "Naftogaz," Alexey Chernyshov, repeatedly stated that Ukraine plans to rely primarily on domestically produced gas, which is why the company imported almost no resources from EU countries between May and September.

During this period, the price of blue fuel on the European market was at its lowest, fluctuating between $300 and $350 per thousand cubic meters.

Meanwhile, in the spring of 2024, the Russians intensified their attacks on Ukraine's gas storage facilities. In particular, they attempted to disrupt preparations for the heating season by making it impossible to inject fuel into underground storage and to intimidate foreign traders who held significant volumes of resources in Ukraine. Unfortunately, they succeeded.

Throughout 2024, the volume of gas stored by foreign traders in Ukrainian facilities decreased to negligible amounts. Although "Naftogaz" declared ambitious plans to allow non-residents to inject 4 billion cubic meters of gas into underground storage. As the heating season approached, foreigners extracted almost all of their fuel from Ukraine, further impacting the fullness of Ukrainian storage facilities.

When the heating season began in October, there were 12.9 billion cubic meters of gas in storage, which is slightly less than the previously announced 13.2 billion. By then, experts were already concerned that Ukraine might emerge from winter with nearly empty storage.

How Much Gas is Left

Ukraine has already passed the halfway point of the heating season, and unfortunately, the specialists' concerns have been confirmed. In early February, gas reserves crossed the psychological mark of 10% and dropped below 3 billion cubic meters, according to data from Aggregated Gas Storage Inventory. This refers to the volume of fuel that can physically be extracted from UGS.

The total volume is just over 7.5 billion cubic meters, but this includes 4.51 billion cubic meters of so-called buffer gas, which must always remain in the system for its functioning and safe operation.

"This is a historical minimum of reserves not only for this date but for all previous winters. For example, at the end of the last heating season, on March 30, 2024, there was more gas in UGS than now, with two cold months still ahead," says former head of "Gas Transmission System Operator" Sergey Makogon.

Will There Be Enough Gas Until Winter's End

Everything depends on air temperature, production volumes, and consumption. According to experts, there should be enough gas until the end of winter, but there is a caveat: overpayments that could have been avoided by purchasing more gas in the summer at lower prices.

"There is barely enough gas. There are about 2.5 billion cubic meters in storage that can be extracted. If it gets significantly warmer, consumption will rise, and if there are shellings, additional measures will need to be taken to avoid problems," says Makogon.

Among such measures are consumption restrictions for industries or school closures.

"I do not think there will be emergency shutdowns for cities, but there may be restrictions for industries. This is possible and is a normal response to unusual situations. I am confident that Ukraine will somehow get through this winter. But the situation with gas reserves needs to be analyzed, and the actions of the leadership of the Ministry of Energy and "Naftogaz" evaluated," adds Makogon.

According to Alexander Kharchenko, director of the Energy Research Center, the situation is tense, and each new shelling and new strikes will create additional problems. "Despite this, we will have enough gas until the end of this winter. Especially considering the fact that some CHPs have already switched to fuel oil," he adds.

According to energy expert Gennady Ryabtsev, there will be enough reserves if the forecast from the Ukrainian Hydrometeorological Center is accurate, which indicates that the average temperature in February will fluctuate between minus 4 and plus 2 degrees Celsius. If the temperature drops lower, industry will have to cut back.

Ryabtsev believes that if it weren't for the cold snap in February and the Russian strikes on gas infrastructure, perhaps no one would have remembered the issues with reserves.

Makogon disagrees with this primary cause of the problems.

"Now everyone will blame the war and enemy attacks. I do not agree with this approach. The Ministry of Energy is primarily to blame, as it should have determined the necessary gas reserves and controlled their level, while "Naftogaz" should have physically created the reserves.

Basic mathematical calculations showed that the available reserves would only be sufficient under the condition of a warm winter and complete extraction of gas from UGS. It is unclear why "Naftogaz" did not import gas in the summer when the price dropped to $300-$350. "Naftogaz" had the money," says the former head of the "Gas Transmission System Operator."

According to "Naftogaz's" official reports, its "cash and account balances" in March 2024 amounted to nearly 89 billion UAH. Meanwhile, the National Joint Stock Company began significant gas imports midway through the heating season, when fuel prices on the spot market rose to record levels, exceeding $600 per thousand cubic meters.

"Entering winter with such reserves is a very risky venture for the Ministry of Energy and "Naftogaz." We will pay dearly for this venture. Due to the ill-considered actions of the leadership, "Naftogaz" will inefficiently spend billions of hryvnias on gas purchases, which it is now buying at twice the price it could have secured in the summer. Not to mention the additional losses for industries that will be forced to temporarily halt production if restrictions are imposed," says Makogon.

The Next Winter Awaits

Market participants and industry experts interviewed by the Economic Pravda agree that Ukraine, albeit with challenges, will get through this heating season. However, they all also point to problems in preparing for the next winter.

"I am more concerned about getting through not this winter, but the next one, because this issue is significantly intertwined with the outcomes of shelling. Due to them, we have lost a very significant share of our own production - about 30%," says Kharchenko.

According to him, considering possible recovery issues, Ukraine will not be able to fill storage facilities to 90% with its own gas and will have to import it.

"There are several estimates regarding the necessary import volume: from 3.5 to 4.5 billion cubic meters. Even if prices in the EU drop to €300-350 per thousand cubic meters, we are still talking about more than $1 billion. The question of where to get it is absolutely open for me," says the director of the Energy Research Center.

Makogon agrees with him. "To avoid repeating