Delo.UA has interviewed the executive director of the Association of Gas Producers of Ukraine, Roman Opimakh, about how much money should be buried in ground so that by 2020 Ukrainian's don't have to import natural gas anymore. He also explained why natural gas is not growing in Ukraine, and why businessmen are not rushing to invest in the industry.
Why did the oil and gas industry react so quickly to the increase of royalties in 2014? In 2015-2016 independent production growth has decreased. But, logically, there should have been an increase due to investments made in 2012-2013?
In 2013-2014 there was growth in production of 25-30% – it is a good precedent, which confirms that Ukraine can grow very rapidly if the necessary conditions are created (price- or tax-wise).
But in those years, natural gas price was two times higher compared to current numbers. Furthermore, starting mid-April of 2014, high royalties were implemented. We call this a "perfect storm" – the price went down, royalty went up, and the dynamics has instantaneously slowed down. In 2016 the independent market supply has grown by only 5%, and we are expecting stagnation in 2017 for the independent production, and we are not excluding the probability of a drop in production.
Overall, the industry has only grown by 0.5% in 2016. If compared to the realization of the key indicators outlined in the Concept for Development of Ukraine's Gas Production Industry by 2020, production should be 27 bcm, which means that average annual growth should be around 15%, whereas we only have a half of one percent.
Full interview is available by the link (in Russian).