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Ukraine's coal industry can provide only 71% of country needs – study

The nation can become energy-independent

Ukraine's coal industry can provide only 71% of country needs – study
Photo: Photo: lisichansk.com.ua

The coal industry of Ukraine is capable of providing only 71% of the nation's need for coal, so Ukraine is forced to import 17 mn tons of coal in 2016, reads the first edition of the infographic handbook titled Energy of Ukraine, prepared by Top Lead company in cooperation with the American Chamber of Commerce in Ukraine.

The publication notes that Ukraine is an all-round energy-dependent country for all types of energy. The nation has to import 27% of consumed goal, 33% of gas, 19% oil and gas condensate, 77% of oil products, and 100% of atomic fuel.

Meanwhile, Ukraine can become energy-independent which is evidenced by the confirmed volume of reserves of energy resources. In particular, that country's gas reserves are at 591,000,000,000 m³ (which is enough for 33 years at current levels of production), coal - 34 000 mn tonnes (834 years, at the current production level). Ukraine ranks seventh in the world in terms of coal reserves.

The lack of investment in exploration, refining and energy efficiency, as well as the complex bureaucratic procedures hinder the development of the energy sector of Ukraine. Despite this, Ukraine plans to refuse, in particular, from the import of natural gas after 2020.

"[Ukraine] needs to implement a strategy of increasing our own gas production and attract investors to the energy sector. Ukraine should show a systemic approach in the implementation of gas market reforms and especially radically approach a change in the fiscal approach to taxation and the implementation of regulatory reform. In addition, you must make every effort to reform the energy market," said Andrey Gunder, President of the American Chamber of Commerce in Ukraine.

In 2016, Ukraine on the initiative of international organizations and donors began the process of liberalizing the pricing system for energy resources. Last April, the Cabinet of Ministers adopted a resolution that equalized gas prices for industry and the population. The same resolution set the formula of gas price, which is based on the quotations in the European hub NCG (near the German city of Düsseldorf) + shipment to the Slovak-Ukrainian border.

On 3 March, 2016, the national energy regulator approved a new methodology for the calculation of the wholesale market price of electricity. According to this methodology, the coal component in the electricity tariff is based on quotations of the coal hub ARA (Rotterdam) + shipment in the Ukrainian port.

According to experts and the international community, the market price for coal and gas on the basis of imported parity, set by the Düsseldorf + and Rotterdam + formulas, allows to ensure investments in domestic extraction of energy resources.

Director of the European Energy Community Janusz Kopacz noted that the EU countries have abandoned "manual" formation of energy prices and tariffs in favour of the "cost plus" formulas which contributed to the creation of competitive markets of gas, electricity, thermal energy, coal, oil and oil products. Therefore, energy and electricity prices in Ukraine should be deregulated.