The ongoing internal and external battles make it easy to miss the core mission of Naftogaz – to build a competitive market in Ukraine, and thereby improve the cost and quality of products delivered to ordinary Ukrainians, argues Vitrenko.
According to a study by global advisory firm PwC, Ukraine's relatively abundant gas reserves and critical infrastructure make it a potentially promising location for a European gas hub for EU-based importers and traders.
This would help strengthen energy security, reduce prices, increase transparency and integrate Ukraine into the European Energy Community. To deliver this, however, the country needs to continue liberalising its gas market, make it easily accessible to third parties, and unbundle gas transmission.
The apex of opportunities would be to allow EU based traders to purchase gas directly on the Russian-Ukrainian border, rather than the EU-Ukraine border as now. This change – a potential, if still distant, consequence of the competition claims filed by Naftogaz with the European Commission – would allow traders to purchase transport gas directly via Ukrainian territory and sell to Ukrainian consumers directly, completing forgoing the need to deal with Gazprom.
"This would be a real breakthrough," Alexander Paraschiy, head of research at investment bank Concorde Capital, wrote in a note to investors, adding that it could make prices much cheaper for Ukrainian consumers.
In the meantime, further boosts to domestic production would be helpful. The country currently has one of the lowest extraction rates in Europe, despite having the second biggest reserves (see graph). Bringing the rate up to that of Poland or the Netherlands could provide Ukraine with almost 60 billion cubic meters a year – almost twice its current annual consumption.
All these plans all require international partnerships – for know-how, access to capital and policy support. Importantly, the role of reliable local players, operating in accordance with best global practices and a national interest mandate, is key to ensuring Ukraine derives as many advantages from these partnerships as possible.
A few players have been signalling their interest in Ukraine: Halliburton, an oil and gas energy services provider, recently signed a memorandum with Naftogaz that aims to bring advanced technologies to hydrocarbon field development in Ukraine, most notably hydraulic fracturing. Similarly, Canada's Vermilion signed a memorandum on joint participation in production distribution agreements.
However, a lack of transparency and worries about policy direction is holding back many more. Investors, including Poland's top energy player PGNiG, are ready to move back to Ukraine but are waiting for a clear signal that the administration of freshly elected president Volodymyr Zelensky will continue and even accelerate earlier reforms, argues Jakobik.
There are many ongoing discussions, but most players remain wary about limited transparency, licensing difficulties and potential corruption, particularly among regional entities.
"We don't know what to expect," says Jakobik, "the more transparency the better."