Daryna Krasnolutska and Volodymyr Verbyany, Bloomberg News
EnergiesNet.com 02 23 2023
The new boss of Ukraine’s biggest energy company has an ambitious plan for this year: to avoid natural gas imports by ramping up domestic production to meet the country’s needs — even amid Russia’s invasion.
The plan requires Naftogaz to raise output by 8% and private companies by 16% this year amid a fuel-export ban, Chief Executive Officer Oleksiy Chernyshov said in an interview three months into his new role. It also envisages no territorial losses or destruction of gas extraction facilities, which could pose a risk to the endeavor.
A move to circumvent gas imports would mark the first in the country’s history since achieving independence in 1991. As the war enters its second year, Ukraine is confronting a battered economy and attacks by Vladimir Putin’s forces on the nation’s energy infrastructure. Damages to its oil and gas facilities already total about $1 billion, Chernyshov said.
“An increase in domestic production is our strategic goal and we must deal with that ourselves,” he said in his office in the capital Kyiv. “It’s not just a business issue — it’s an issue of the survival and independence of Ukraine.”
The International Monetary Fund estimated at the end of last year that Ukraine would need to buy 5 billion cubic meters of gas in 2023. Naftogaz expects the same under its worst-case scenario, the CEO said.
In recent months, the state-run entity has imported less gas than planned to help generate power after infrastructure was battered by Russia’s air-strikes. The company bought about half of the 2 billion cubic meters of fuel it planned since late October, Chernyshov said.
He called efforts by the nation’s gas producers to keep output going a “heroic act”, alongside discipline by households. Warm weather has also helped Ukraine get through the winter. Naftogaz ensured gas supplies across the country and even in areas such as the Donetsk region, where heavy battles are ongoing, Chernyshov said.
The situation that materialized this winter influenced Naftogaz’s plan to avoid gas imports, though there’s a chance it might still need to buy 2 billion cubic meters of gas, he added.
“But this is not our basic plan,” he said. “That is to rely on ourselves.”
The government has frozen utility tariffs for households to help families after Russia’s invasion caused incomes to plunge, but promised to compensate Naftogaz for the difference between imported gas and domestic prices. It has not done so yet, with its debt to Naftogaz totaling 177 billion hryvnia ($4.8 billion), while municipalities and companies that distribute gas owe 112 billion hryvnia, Chernyshov said.
In the interview, Chernyshov also said aims to reach a compromise in March on a restructuring deal with some bondholders after the government effectively blocked it from making debt payments to save funds for gas purchases. Naftogaz defaulted on its 2022 and 2026 notes last year after failing to gather enough backing from bondholders for a two-year debt freeze, while it did reach an agreement to restructure its 2024 notes.
The latest debt proposal from the company faced opposition from a group that rejected previous plans to defer principal and interest payments on $835 million of already-defaulted debt.
“There are bondholders that have speculative ambitions, as the bonds’ price is low and if they buy those bonds and apply pressure, they will make money,” he said. “I want to find an agreement with everyone. Bondholders’ trust is important for us, I want them to trust me and the company.”
bloomberg.com 02 23 2023