Naftogaz and Socar in Negotiations for Gas Transit and Storage

Naftogaz is discussing gas transit and storage with Socar via Ukraine, ruling out any contract extension with Gazprom.

Partagez:

Naftogaz, the Ukrainian state-owned gas company, has entered into negotiations with the State Oil Company of Azerbaijan Republic (Socar) to establish a gas transit and storage agreement in Ukraine.
This initiative is part of Naftogaz’s strategy to diversify its sources of supply and reduce its dependence on Gazprom, the Russian company with which the current transit contract expires at the end of 2024.
Oleksiy Chernyshov, CEO of Naftogaz, recently confirmed that Ukraine has no intention of renewing this contract due to the war situation.
At present, Ukraine’s gas transit system remains operational and unaffected by attacks, paving the way for viable alternatives.

Conditions and Scenarios

Naftogaz is considering two scenarios: either a total halt to Russian gas flows, or the establishment of partnerships with alternative suppliers to maintain supply volumes to the Russian market. the European Union. No definitive agreement has yet been signed.
Naftogaz’s precondition is that Socar agrees to store gas in Ukrainian facilities.
Ukrainian storage capacity, the largest in Europe at 31 billion cubic meters (Bcm), offers a strategic opportunity.
Less than half of this capacity is used for domestic needs, with the remainder available for leasing and revenue-generating operations.

Transit challenges and opportunities

The transit of Azeri gas via Ukraine requires passage through Russia, a complex reality that Chernyshov acknowledges.
However, he emphasizes the advantages of cooperation with Socar, a major gas producer seeking to penetrate the European market.
This collaboration could reassure European markets about security of supply, especially during the winter months.
Ukrainian storage capacity could become more attractive as European storage sites fill up, already reaching over 86% of capacity according to Gas Infrastructure Europe.
This saturation of European capacity could redirect volumes to Ukraine, despite the risks associated with recent attacks on storage infrastructures.

Impact on the European Gas Market

Uncertainties over Ukrainian transit have already influenced gas prices in Europe.
Delivery contracts for January and February 2025 are currently the most expensive, with prices estimated at €40.60/MWh for January 2025, compared with €35.90/MWh for immediate delivery.

Production outlook and operational challenges

Chernyshov also discussed the prospects for gas production by Naftogaz subsidiaries.
Naftogaz’s upstream companies, UkrGazVydobuvannya and UkrNafta, produced 8.6 Bcm of gas in the first seven months of 2024, up 7% year-on-year.
Total production for 2024 is estimated at just under 15 Bcm, with an additional contribution of 3 Bcm from private companies.
Russian attacks on Naftogaz production sites pose a major challenge to business continuity.
These attacks directly affect production processes and require continuous adaptation of the company’s operational strategies.
Naftogaz hopes that the cooperation with Socar will help to secure part of the supply and strengthen Ukraine’s position as a key energy corridor for Europe, despite the continuing geopolitical tensions.

The increase in oil drilling, deepwater exploration, and chemical advances are expected to raise the global drilling fluids market to $10.7bn by 2032, according to Meticulous Research.
Enbridge Gas Ohio is assessing its legal options following the Ohio regulator's decision to cut its revenues, citing potential threats to investment and future customer costs.
The European Union extends gas storage regulations by two years, requiring member states to maintain a minimum fill rate of 90% to ensure energy security and economic stability amid market uncertainties.
Woodside finalises the divestment of a 40% stake in the Louisiana LNG project to Stonepeak, injecting $5.7 billion to accelerate developments and optimise financial returns ahead of first gas delivery scheduled in 2026.
Keranic Industrial Gas seals a sixty-day exclusivity deal to buy Royal Helium’s key assets, raise CAD9.5mn ($7.0mn) and bring Alberta’s Steveville plant back online in under fifteen weeks.
The Irish-Portuguese company Fusion Fuel strengthens its footprint in the United Arab Emirates as subsidiary Al Shola Gas adds AED4.4 mn ($1.2 mn) in new engineering contracts, consolidating an already robust 2025 order book.
Cheniere Energy validates major investment to expand Corpus Christi terminal, adding two liquefaction units to increase its liquefied natural gas export capacity by 2029, responding to recent international agreements.
A study by the International Energy Agency reveals that global emissions from liquefied natural gas could be significantly reduced using current technologies.
Europe is injecting natural gas into underground storage facilities at a three-year high, even as reserves remain below historical averages, prompting maximized imports of liquefied natural gas (LNG).
South Korea abandons plans to lower electricity rates this summer, fearing disruptions in liquefied natural gas supply due to escalating geopolitical tensions in the Middle East, despite recent declines in fuel import costs.
Russia positions itself to supply liquefied natural gas to Mexico and considers expanded technological sharing in the energy sector, according to Russian Energy Minister Sergey Tsivilyov.
Israel has partially resumed its natural gas exports to Egypt and Jordan following a week-long halt due to the closure of two major offshore gas fields, Leviathan and Karish.
Nepal reveals a significant potential reserve of methane in the west of the country, following exploratory drilling conducted with technical support from China, opening new economic prospects.
Petronas formalizes a memorandum with JOGMEC to secure Japanese LNG deliveries, including a first cargo from LNG Canada scheduled for July at Toho Gas.
Belgrade is currently finalising a new gas contract with Russia, promising Europe's lowest tariff, according to Srbijagas General Director Dusan Bajatovic, despite Europe's aim to eliminate Russian imports by 2027.
TotalEnergies and QatarEnergy have won the Ahara exploration licence, marking a new stage in their partnership with SONATRACH on a vast area located between Berkine and Illizi.
After four years of interruption due to regional insecurity, TotalEnergies announces the upcoming resumption of its liquefied natural gas project in Mozambique, representing a $20bn investment.
The French group has acquired from PETRONAS stakes in several licences covering more than 100,000 km² off Malaysia and Indonesia, consolidating its Asian presence and its exposure to the liquefied natural gas market.
In response to rising summer electricity consumption, Egypt signs import agreements covering 290 shipments of liquefied natural gas, involving major international firms, with financial terms adjusted to the country’s economic constraints.
Egyptian fertilizer producers suspended their activities due to reduced imports of Israeli gas, following recent production halts at Israel's Leviathan and Karish gas fields after Israeli strikes in Iran.