Oleksiy Chernyshov, CEO of Naftogaz Group
Creating an energy market is a requirement of the times
25.10.2023 17:43

The topic of Ukraine's energy security was predictably among the main ones discussed at the 6th German-Ukrainian Business Forum held in Berlin on October 24. No one has any doubt that the terrorist country called Russia will continue to try to destroy Ukraine's energy infrastructure and, as German Chancellor Olaf Scholz put it, "use cold as a weapon."

So, it is no coincidence that Oleksii Chernyshov, Chairman of the Board of Naftogaz of Ukraine, became one of the most "sought-after" participants of the business forum, both by his colleagues and journalists. Everyone wants to know what to expect in the 2023-2024 heating season, what indicators Ukraine is using to enter the second military winter, and what strategy it has for the future. Oleksiy Chernyshov, who literally radiates confidence, answered these and other questions in an interview with Ukrinform.

WE HAVE CREATED A GAS RESERVE IN CASE OF EXPECTED SHELLING OF THE ENERGY STRUCTURE

- Mr. Chernyshov, you confidently stated at the panel and to journalists on the sidelines of the conference that Naftogaz would be able to go through the heating season without importing gas. But in the event of a harsh winter and an increase in gas combustion for electricity generation, will the company still be able to attract imported resources?

- I would like to emphasize that we have systematically prepared for this winter in terms of accumulating natural gas volumes, and we do not expect this winter to be particularly cold. Therefore, this gives us confidence that in terms of reserves, as well as if Ukrainian gas production continues, we will be completely self-sufficient.

- But there may be additional challenges? For example, on the night of October 12, the Russians damaged a gas distribution station in Kharkiv region, which temporarily left some residents of the region without gas...

- Additional challenges include an increase in electricity generation from natural gas. This could happen as a result of the expected shelling of our energy structure, which could lead to additional gas consumption. But we have also created such a reserve. Therefore, with limited losses, we will get through this winter with natural gas as a resource.

TRADERS ENTRUSTED US WITH 2 BILLION CUBIC METERS OF GAS FOR STORAGE

- You said that Naftogaz has increased gas production by 7 percent this year. Are the Russians trying to target gas production facilities?

- The Russians are actually shelling all the facilities... As you know, Naftogaz operates in a fairly large number of energy sectors. This includes oil and gas production, processing, distribution, and heat generation. Therefore, we have something to worry about, but we are preparing accordingly.

- Despite the war and all the risks associated with it, there are foreign companies interested in storing gas in our underground storage facilities. Can we talk about the growth of such interest?

- Both foreign and Ukrainian companies are interested in storing natural gas in Ukrainian storage facilities.

I would like to focus on foreign companies, because this year we have actually managed to motivate European traders to store some gas in Ukraine even during the war. This is more than 2 billion cubic meters of natural gas that they temporarily store with us. Of course, we must give them this gas when it is needed. Maybe it will happen in December, maybe it will be in March, maybe it will stay until next year. It will depend on market conditions and temperature indicators. The market is an important indicator.

These companies have instructed us to store gas without additional guarantees, at their own commercial risk. More than 2 billion cubic meters of gas worth more than €1 billion as of today. We are also paid separately for storage, injection and lifting.

- Can we name the countries whose companies have approached you?

- These are different European countries, dozens of traders, "majors" as we call them, large companies that have Swiss, German, French, and Italian origins.

WE MUST NOT INCREASE OUR DEBTS

- What are the prospects for settling the debts of thermal utilities to Naftogaz for gas consumed? How can we prevent the accumulation of such debts?

- Unfortunately, you and I are already accustomed to the fact that debts haunt the energy industry. Unsettled debts, debts created as a result of certain political decisions, uncompensated grants, subsidies, etc. I mean between companies, the government, municipalities. Unfortunately, they occupy a significant part of our portfolio.

For example, our debts to Naftogaz in the utility sector alone amount to UAH 95 billion. This is a huge amount. This is a part of the old debts and those that have been accumulated over the past year and a half.

I would like to remind you that these are debts for gas consumed at a reduced, regulated price. This is important.

But we have to start this heating season on time and provide cities with gas. We are actively working. I personally work almost every day with the mayors of Ukrainian cities to build a normal, modern, responsible system of mutual settlements for gas consumption. We must not increase our debts. Cities must pay for the resource they have consumed and pay off old debts.

THOSE WHO NEED SUBSIDIES WILL RECEIVE THEM ONE WAY OR ANOTHER

- In your speech, you emphasized several times the need to introduce an energy market in Ukraine. How long can this be a prospect?

- My personal opinion is that the sooner we do it, the better. We still have to go through this winter with regulated tariffs and the moratorium in place. After that, we have to return to this conversation.

- Consumers are naturally interested in whether there will be a price increase. Ukrainians have been assured that this will not happen this winter. What's next?

- Let's see how the situation in the country develops. Of course, we have to protect the population and protect cities, so it is premature to talk about this now. But if the social and economic life is stabilized, we must implement this reform immediately.

I would not say that this will necessarily lead to higher prices. I am talking about market prices. Price is such a thing that market prices can be lower.

The state should certainly protect those segments of the population that need it. They are currently receiving subsidies. The problem is that today, those who have to pay and can afford to pay market rates also pay regulated prices. That is, those who need subsidies will receive them one way or another, but those who do not have to pay the market price.

- The Business Forum is taking place in Germany. Did you have any meetings in Berlin? And in general, what kind of help or support does Naftogaz receive from its German partners?

- There were meetings at the Chancellor's office, meetings with energy companies.

Of course, Germany plays a strategic role today. It is the country that helps Ukraine the most in all sectors of the European Union. This is very important, so during our meetings we discuss various cooperation programs.

We also talk frankly about the reform package. We talk about recovery and development, energy efficiency, green energy, and cooperation.

And we do not forget that Ukraine is important in terms of its geographical location. We are no longer even talking about aid, but about attracting investment.

Olha Tanasiichuk, Berlin

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