Executive viewpoint
In a time of war, geopolitical tensions, and energy insecurities, Ukraine emerged as a shining example of resilience and unwavering determination this past winter, as it powered through the season, using only domestic gas sources for the first time in its history.
Supplying oil and gas equipment to Ukraine. As an American entrepreneur deeply engaged in Kyiv's oil and gas sector, I’m proud of my company’s role in this endeavor. Vorex USA, headquartered in Erie, Pa., was the leading U.S. supplier of oil and gas equipment to Ukraine in 2023, fulfilling contracts worth over $100 million with Ukrainian state-owned Naftogaz. We collaborated seamlessly with partners in the U.S. and Kyiv, to facilitate the delivery of 30,000 tons of pipe and equipment to Ukraine amidst the backdrop of ongoing conflict.
The struggle to develop gas reserves. Ukraine’s efforts to achieve energy security are the product of a decade-long struggle that began with Russia’s early invasion of the country in 2014. Ukraine has some of the biggest reserves of natural gas in Europe, but it traditionally relied on Moscow for its energy needs. The country quit importing Russian gas in 2015, so Ukraine is ahead of the curve—and ahead of Europe.
Today, the Ukrainian energy market is transformed: It is fully integrated with the natural gas and electricity markets of Europe, embracing European energy standards and regulations and completely independent of Russia. In fact, Ukraine's Transmission System Operator (TSO) recently said it planned to end its current Russian gas transit contract this year—surely sooner than European countries had expected.
The EU can learn from Ukraine. But the EU lags Ukraine in crimping its consumption of Moscow’s natural gas, which has remained fairly steady throughout the war. Though EU countries passed sanctions and swore off oil imports from Russia at the start of the current war in Ukraine, they continue to be highly dependent on Russian gas. According to statistics generated by the Reuters news agency, Moscow continued supplying about 15% of Europe’s gas supply in 2023, in line with what it historically provided. The EU has pledged to quit its reliance on Russian natural gas by 2027, but that may not be soon enough: If Ukraine closes the pipe, several countries, including Austria and Poland, will be affected.
To be sure, closing the Ukraine pipeline is a daunting task. The interconnected nature of these pipelines is challenging—Ukraine cannot simply shut the flow and strand its neighbors. And this is all happening as Russia is launching one of its largest missile and drone attacks on Ukraine's energy infrastructure.
To navigate this transition, Ukraine will depend on companies like mine to deliver crucial assistance to the adaptation process. In collaboration with cGAS, a Polish company based in Rawicz, Vorex will deliver innovative solutions tailored to Ukraine's specific needs, including four Automatic Gas Distribution Stations, each boasting a capacity of 5,000 Nm3/h, to ensure TSO pipelines are ready for use after Russian transport. We are also providing ball valves and gas regulators from Italy, essential components for managing and controlling the flow of gas within the pipeline network.
Gains in Ukrainian gas production. The current conflict in Ukraine, which began with a full-bore Russian invasion in early 2022, laid bare critical vulnerabilities inherent in Europe's reliance on Moscow for natural gas and its pipeline network. But progress during wartime seems to be the way in Ukraine. According to S&P Global, Ukrainian gas production rose to 18.7 Bcm in 2023, up from 18.5 Bcm in 2022. While that is still lower than pre-war levels, the country didn’t need any winter gas imports this season—a signal achievement for a country in the throes of a full-scale foreign invasion.
Moreover, as Naftogaz duly reported recently, Ukraine has already brought five new wells online in 2024, including a new high-throughput gas production well producing more than 500,000 cmgd (17.6 MMcfgd).
What Ukraine has achieved holds potential lessons for the broader landscape of global energy security. According to the International Trade Commission, Ukraine boasts the third-largest natural gas reserves in Europe and possesses the necessary infrastructure to facilitate the transportation of gas to European markets. The country currently has some 5,000 producing gas wells, with another 5,000 wells depleted and sealed. The Commission reckons perhaps 1,000 of the shut-in wells could become productive again by deploying modern techniques. All told, the country has some 900 Bcm (31.8 Tcf) of gas reserves, the Commission says, much of it unexploited and the second largest stockpile in Europe.
Looking forward. Through a combination of strategic investments in technology, the establishment of a robust regulatory framework, and embracing innovation and entrepreneurship, Ukraine’s energy sector is on solid footing, despite the threat of occupation by a hostile foreign power.
And there’s more to come. I believe that when hostilities cease, Ukraine will be well-placed to export natural gas to its European neighbors, perhaps filling the void left by Moscow. Though the goal of the EU is to swear off Russian natural gas by 2027, I believe this can be accomplished sooner. And with smart planning and continued resource development, Ukraine could help eliminate the need for Russian energy and transit, ensuring a more resilient and sustainable energy future for Europe.
