Expro.Com.Uaweekly September 7-13, 2020 №37 (224) 07-13.09.2020

expro.com.uaWEEKLY September 7-13, 2020 №37 (224) 07-13.09.2020

WEEKLY REVIEW

News Review It also became known that production sharing filled by 84%, which was record high during Annually, every second Sunday of September, agreements (PSAs), the competition for which the last 10 years. However, the rate of natu- Ukraine celebrates a professional holiday the took place more than a year ago, would result ral gas injection into UGS decreased from 110 Day of Workers of Oil&Gas Production and Re- in conclusion of contracts with the winners by mcm a day down to 87 mcm a day since the finery Industries. A few days before there was the end of the year. beginning of September due to reduced im- a meeting held between the Prime Minister of The good news of the last week was from the port supplies caused by the planned repairs Ukraine Denis Shmygal and the management UGV, as the company plans to put into oper- at Budince natural gas interconnection point. of the Naftogaz Group to present its vision of ation the Svyatogorsk tight gas field in early Noteworthy, Ukrainian UGS are again in the the market situation in Ukraine. The Naftogaz 2021. Currently, they are drilling the first well spotlight of potential foreign companies. Ac- Group believes that in the context of the eco- and laying a gas flowline from it. cording to the Chairman of Polish state oil nomic crisis, the Ukrainian oil&gas industry and Another UGV project, jointly with the Expert and gas company PGNiG Jerzy Kwieciński, the Naftogaz Group, as an integral part of it, Petroleum, will start on October 1, 2020, to the UGS in Western Ukraine in future could need the support from the state, in particular, to enhance production at 13 depleted gas fields join the Three Seas Initiative (TSI) for creation extend the incentive rent for natural gas produc- in Lviv region. The UGV transfers those hy- of a common natural gas market of Central tion from new wells for the first 5 years of opera- drocarbon deposits to the Expert Petroleum and Eastern European member-countries. tion, to simplify special permit procedure, to free to manage under long-term agreements, pro- According to Chairman Jerzy Kwiecińs- the JSC UkrGasVydobuvannya (UGV) from the viding that at least UAH 1 billion invested ki, Ukraine’s UGS are huge and much larg- Law of Ukraine «On Public Procurement». In his and production increased by 300 mcm over er than Poland actually needs. Therefore, ac- turn, the Prime Minister stressed that the gov- 5 years. cording to Kwieciński, in future the UGS could ernment, for its part, made every effort to do On September 5, 2020, Ukraine’s reserves service not only Poland, but also many other that, and would rely of the Parliament of Ukraine in underground gas storages (UGS) exceed- countries joining the TSI common natural gas to uphold relevant legislative initiatives. ed 26 bcm in natural gas. The UGS became market.

Natural Gas Prices in Ukraine, UAH/tcm Natural Gas Prices in Ukraine, UAH/tcm 5 500

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Dynamics of Brent crude quotes (ICE Index), $/bar Natural Naturalgas price gas Day price AheadDay Ahead (Open), (Open), NCG, NCG, €/MWh €/MWh Dynamics of Brent crude quotes (ICE Index), $/bar 12 60 11 10 50 9 8 40 7

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07-13.09.2020

STATE-OWNED COMPANIES

For the first time in Ukraine, Ukrnafta suc- which was not previously developed, and the and simplification of the permitting procedure; cessfully performed perforation in a hori- probability of obtaining commercial gas inflow • The introduction of incentive royalties for the zontal wellbore was low, based on geophysical survey data. production of tight gas; For the first time in Ukraine, specialists of ExPro Reference: • Reducing the Naftogaz’s burden to pay divi- Ukrnafta successfully performed perforation Sementsivske gas condensate field is located dends, which amount to 90-95%; in the horizontal section of the well, without in- on the territory of the Poltava region; it was dis- • Adoption of legislative changes to simplify ac- volving third-party service companies, which re- covered in 1976 and put into operation in 1981. cess to land areas for exploration and access to duced the cost of major well workover. This was Commercial gas-bearing potential is associated existing wells; reported by the chief geophysicist of Ukrnafta with layers of the Upper section of Serpukhovi- • Exclusion of Ukrgasvydobuvannya JSC from Andriy Starostin. an stage of the Lower Carboniferous at depths effect of the Law of Ukraine “On public procure- The main advantage of recovery of the produc- of 4,175-4,355m. Initial gas reserves in the field ment”. tive formation with a horizontal wellbore is an in- amounted to 18,783 million cubic meters (cat- crease in the drainage zone. This is especially egory C1), condensate reserves – 4,828 thou- Ukrgasvydobuvannya JSC plans to put the noticeable in reservoirs with an effective thick- sand tons (category C1). Svyatohirska field into operation in early ness of less than 10 meters. The vast majority of 2021 wells in Ukraine, where the productive horizon is Strategic directions for increasing Naf- Ukrgasvydobuvannya JSC plans to put into penetrated with a horizontal wellbore, are cased togaz’s hydrocarbon reserves have not operation the Svyatohirska field of tight gas with slotted liners. However, this method has a changed in early 2021. drawback – the complexity of infiltration zone The Naftogaz group presented to the Prime “A new well is currently being drilled at Svyato- cleaning. So, the specialists of Ukrnafta decided Minister of Ukraine Denys Shmyhal strategic di- hirska; it was drilled based on the results of a to carry out re-perforation in the intervals cased rections and projects for natural gas production, new wide-azimuth 3D seismic survey. We plan with a slotted liner. among which the prospects for the development to put the field into operation at the beginning “In a well cased with a slotted liner in the hori- of deep horizons, unconventional gas plays in of next year,” Oleksandr Romanyuk, Director of zontal section, perforation was carried out with tight rocks and the Black sea shelf are tradition- the Exploration and Production Division of the a 100% effectiveness of the tubing conveyed ally the main ones. This is reported by the press Naftogaz Group said. heat-resistant jet gun over 18-meters interval service of Naftogaz. According to him, wells had already been drilled with a density of 20 holes/meter, with 60 de- Heads of ministries, other central authorities at the field, but there was no commercial gas in- grees oriented charges” the geophysicist noted. and people’s deputies of Ukraine also partici- flow since they were drilled on the basis of 2D Teams from the СWO department, integrated pated in the discussion. seismic and did not fall into sweet spots. field management department, production de- The participants of the meeting were presented partment, OGDU, and NIPI of Ukrnafta worked the prospects for the development of deep hori- In eight months, Naftogaz paid UAH 92.5 on the project for perforation in the horizontal zons, unconventional gas plays in tight rocks billion to the state budget section of the well. and the Black sea shelf. According to operational data for January-August The presentation also emphasized that in the 2020, revenues to the state and local budgets Poltavagasvydobuvannya restored well conditions of the economic crisis, the industry from the Naftogaz Group amounted to about UAH #507 of the Sementsivske field with a flow and the Naftogaz group, as a significant compo- 92.5 billion (including the balance of dividends rate of 40 thousand cubic meters nent of it, needs serious support from the state, based on the results of 2019 – UAH 39.6 billion). The gas production office Poltavagasvydobu- namely: Revenues from Naftogaz Group enterprises ac- vannya (part of the Naftogaz exploration and • Negotiating the terms of the PSA in 4 areas; counted for more than 17% of total state budget production division) has successfully restored Access to Yuzivska area; revenues in January-August 2020. well #507 of the Sementsivske field, which has • Granting Naftogaz licenses for geological ex- Naftogaz Group remains the largest taxpayer in been waiting for abandonment for the past 5 ploration of the areas on the Black sea shelf; Ukraine. According to the results of 2019, the to- years. The company reported. Capital workover • Extension of the effect of the incentive royal- tal amount of tax and dividend payments of the of the well No. 507 was performed for the pur- ties for production from conventional gas depos- group to budgets of all levels amounted to UAH pose of additional exploration of the S-5 horizon, its for new wells for the first 5 years of operation, 121.4 billion.

07-13.09.2020

PRIVATE COMPANIES

PPC plans to drill well #147 at the Ihna- The procurement scope is 1,000 linear meters. Expert Petroleum will start operations on tivske field The delivery term of the product is scheduled for October 1 The Poltava Petroleum Company (PPC) JV a period not exceeding 90 calendar days. The The international Company Expert Petroleum plans to drill well No. 147 at the Ihnativske field bidding deadline is September 16. Bids can be will start working on production enhancement in the Poltava region to produce hydrocarbons submitted on the auction page. at 13 depleted gas fields in the Lviv region on from its deposits. This is reported in the Envi- October 1. These fields were transferred for the ronmental Impact Assessment (EIA) Register Enwell Energy will order services for the temporary management by Naftogaz Group un- on September 9. development of well No. 61 of the Svyry- der the condition of at least UAH 1 billion invest- It is planned to construct a well with a depth divske field ment and production enhancement by 300 mil- of 2,800 m, with pit drilling method, hydrau- The British Enwell Energy (formerly Regal Pe- lion cubic meters over 5 years. lic downhole motor (DDM), and setting of the troleum, part of the Smart Energy Group) has Ukrgasvydobuvannya, a member of the Naf- high-pressure casing. announced a tender for construction and instal- togaz Group, on September 11, 2020 signed It is also planned to tie-in well #147 to the re- lation works for the development of well #61 of the final package of documents with Expert Pe- serve pipeline of well #72 of the Novomyko- Svyrydivske field with the installation of com- troleum on cooperation on the terms of product laivske field, which is 130m long. Expected vol- pressor units for the operation of low-pressure enhancement contract - PEC. This allows an umes of natural gas production are up to 72 wells. This is reported in the Zakupki.prom.ua international company starting operating in the thousand cubic meters per day, condensate - procurement system on September 4, 2020 fields of Naftogaz as early as October 1, 2020. 0.6 tonnes per day. Scheduled date of works’ commencement is «According to the terms of the PEC, all gas pro- Expected drilling term is 54 days. The construc- tentatively October-December 2020. According duced remains on the balance sheet of Naf- tion works involve from 10 to 15 units of equip- to the schedule, the work completion term shall togaz, and the company’s assets are trans- ment. not exceed 90 calendar days. ferred to the partner exclusively for temporary Recall that in June of this year, PPC also pub- Bids are accepted until September 14, 2020 on management for the duration of the contract. lished its intents on the construction of well the auction page. Production plans for the transferred fields are #146 at the Ihnativske field in the EIA Regis- Installation of the Galileo Process MCP 330-3- approved by the Steering Committee, which is ter. On September 1, the Company also an- 1800-6-90 compressor unit with a Caterpillar 100%, composed of Naftogaz representatives. nounced its intent to workover the abandoned G3406TA gas engine is provided. The maxi- Thus, the interests of our company are protect- well #44 of the Novomykolaivske Ruden- mum power on the compressor shaft is 242 kW ed as much as possible. They were given an kivske field. and the shaft rotation speed is 1,800 rpm. The absolute priority,» Oleksandr Romanyuk, Direc- inlet pressure is 5.0 bar. The discharge pres- tor of the Naftogaz’s Exploration and Production DTEK Naftogaz will purchase pipes for de- sure is 90 bar. The power is 960 cubic meters Division said. velopment of the well #74 of the Semyren- per day. kivske field The Minister of Energy confirmed the re- DTEK Naftogaz conducts a procedure of open ExPro Reference fusal of the American Louisiana Natural single-stage bidding for the purchase of steel Enwell Energy plc (former Regal Petroleum plc) Gas Exports from the LNG project seamless D114x14 pipes for the construction of is a public British company, which shares are The American Louisiana Natural Gas Exports the site and the connection of well #74 of the listed on the London AIM Exchange and 100% refused cooperation with Ukraine, which provid- Semyrenkivske gas condensate field (GCF). owned by companies that operate in Ukraine: ed for long-term supplies of liquefied natural gas This was reported on September 7, 2020 on the Regal Petroleum Corporation Limited (repre- (LNG) in the amount of about 5 billion cubic me- DTEK trading platform. sentative office in Ukraine) and Arcona Gas En- ters of gas per year. According to the report, the subject of the pro- ergy LLC, operating in the Poltava region, as «Indeed, there was a refusal, there was no addi- curement is seamless hot-rolled steel pipe well as Prom-Energo Product LLC, which per- tional communication after that,» an acting Min- D114x14 TC 14-3-460-2009, chamfered, in- forms production in the Kharkiv region. They ister of Energy Olga Buslavets confirmed during sulated in the mill according to TC U 27.2- possess licenses for the hydrocarbon produc- press conference in Kyiv on September 11. 31017014-001: 2005 extruded with polyeth- tion. All companies are part of the Smart Ener- The head of the Ministry of Energy clarified that ylene, not less than 8m long. gy Group. there is no new information on this issue.

07-13.09.2020

SERVICE COMPANIES

Denimex, commissioned by Ukrburgaz, leading companies in the United States, Cana- ø630 mm in the interval from 0 to 35 m. This set a record for drilling with a single bit da and Europe. was reported on the Smarttender trading plat- Service oil and gas company Denimex Ukraine form on September 7, 2020. (Denimex Holding) in August this year set a re- Gas dehumidification unit to be recon- According to the tender documentation, the or- cord for drilling with a single bit of Ulterra pro- structed at Dashava gas storage facility der of the following stages of work is provided: duction, while drilling well No. 37 of the Kras- On August 28, according to the results of the 1. Drilling with a bit (RC) ø740 mm. in the inter- nokutske gas condensate field (GCF), by order tender, Operator of gas storage facilities of val of 0-35 m; of the branch of Ukrgasvydobuvannya JSC, Ukraine, a branch of Ukrtransgaz signed an 2. Running a welded-seam casing of 630 mm. Ukrburgaz. This is reported on the company’s agreement with Tekhpromservis Ltd on the re- in the interval of 0-35 m (the tubulars provided Facebook page. construction of the gas dehumidification unit for by the customer); According to the report, during the construction UAH 216.59 million. This was reported in the 3. Direct cementing of 630 mm. casing in the of this well, a single bit with a diameter of 444.5 ProZorro system. interval of 35-0 m using grouting materials mm U6195 5423 (produced by Ulterra) drilled For ten months the firm must complete the re- PPC-I-50 (density of the slurry =1.8 g/cm3). an interval from 343 to 2,341m in a record 116.5 construction of gas dehumidification unit with If there is no show of cement at the surface, af- hours at a speed of 17.5 m/hour. process automation in Dashava underground ter the WOC, the wellhead should be cemented gas storage in Stryi district, Lviv region. The through the casing annulus. ExPro Reference warranty period is ten years. One can submit an offer to participate in the ten- Denimex Ukraine LLC (its founder is USA Den- Most of the funds will be spent on equipment. der directly on the auction page, until Septem- imex Incorporated (USA), Director is Volodymyr The most expensive are two glycol regener- ber 11, 2020, and the start of work is scheduled Sadovych, and the beneficiary is Denis Gurvich) ation units GPD 375.00.00.000 produced by for September 25, 2020. oil and gas service company, which is part of the Tekhpromservis Ltd at UAH 29.62 million per American holding Denimex, and represents the set without VAT. ExPro Reference interests of production and service foreign com- Poltava Drilling Company LLC (Director: Ser- panies that offer a full range of oil and gas ser- PDC will order drilling services and the hiy Zherebko) is the largest private drilling vices for drilling and capital work-over of oil and conductor for the well No. 48 of the company in Ukraine that performs drilling, gas wells. Karaykozivske field capital well workovers, inflow stimulation and The company also supplies equipment for drill- Poltava Drilling Company (PDC), which is part recovery of wells. The company provides a full ing, production and processing of oil and gas, of the assets of Burisma Group, announced an range of services, with 20 drilling rigs and a equipment for automated control systems and open auction for the order of services for drilling, staff of 750 specialists. It is part of the Buris- IT for technological processes and production of running and cementing the casing “conductor” ma Group.

07-13.09.2020

INFRASTRUCTURE AND TECHNOLOGY

Universalna Burylna Technika has master using energy from renewable energy sourc- import supplies due to the planned repair of tered the production of diamond bits es),” he said. Budince. Universalna Burylna Technika (UniDrillTech) According to Volpe, there are two possible ways As of the corresponding date last year, there has mastered the production of bits with poly- to produce hydrogen from “green” electricity: were 18.654 billion cubic meters of gas in crystalline diamond cutters (PDC). This is re- purpose-built stations, that is, the case when Ukrainian UGS, which is 40% less than this ported on the company’s website unidrilltech. the entire power plant operates exclusively for year. Since the beginning of the year, as of Sep- com.ua. the needs of the electrolyser and hydrogen pro- tember 5, 10.36 billion cubic meters of gas were PDC bits are designed and manufactured spe- duction; injected into Ukrainian UGS, which is 4% (400 cifically for the needs of the company’s cus- use only the electricity from RES that is limited million cubic meters) more than last year. tomers. The bits produced by UniDrillTech are to the network by the system operator. According to ExPro, more than half (more than extremely stable, reliable and suitable for direc- “The second way is when you are limited by 13 billion cubic meters) of the total gas volume tional drilling. the OSP at peak generation, and then you can in UGS is stored by Naftogaz of Ukraine NJSC. PDC bits are designed for drilling in soft rocks use this electricity for hydrogen synthesis. But Several major foreign traders also store 1 billion with medium-hard layers. The bits are equipped this method is the least cost-effective in today’s cubic meters of gas. with replaceable cutters, hard alloy body surfac- conditions,” explained the Director of Innovation ing, anti-vibration protection of the bit and PDC DTEK. PGNiG: EU countries may be interested in inserts for back reaming. Volpe also noted that an economically viable Ukrainian UGS More information about the characteristics of model for producing hydrogen from renewable Ukrainian UGS in Western Ukraine could be the bit can be found at the link. energy sources is still being developed. used in the future by the countries of the Three “The whole story with hydrogen was created for Seas Initiative after the creation of a common ExPro Reference one reason-it is decarbonisation, and it doesn’t gas market. This opinion was expressed by the Universalna Burylna Technika (UniDrillTech) matter whether this technology is now profitable Chairman of the Board of the Polish state oil and is the only company in Ukraine that manufac- or unprofitable... In the case of hydrogen, there gas company PGNiG Jerzy Kwecinski, UKRIN- tures drilling tools; its Director is Oleksandr are no ready-made scenarios for how to do it FORM writes. Chenskyi. and how not to do it. Now everyone is exper- According to him, Ukrainian gas storage facili- imenting and learning, including Ukraine,” he ties are of a great capacity, they are much larg- DTEK will focus on projects for the pro- added. er than Poland requires. Therefore, according duction of “green” hydrogen to Kwecinski, in the future they could serve not DTEK Energy Holding will focus in the future on Gas reserves in Ukrainian UGS exceeded only for Poland, but also for many other coun- producing hydrogen using electricity from re- 26 billion cubic meters tries of the Three Seas Initiative, if they manage newable sources (so-called “green” hydrogen), On September 5, natural gas stock in Ukrainian to create a common gas market. despite the fact that the production of hydrogen underground gas storage facilities (UGS) ex- The head of PGNiG added that this market is from natural gas or coal is still more economical- ceeded the mark of 26 billion cubic meters and not yet available, since a large gas connection ly profitable. This was announced by the Direc- amounted to 26.069 billion cubic meters. This between Poland and Slovakia is only being built. tor of Innovation DTEK Emmanuele Volpe in an became known from the operational data of The Three Seas Initiative is an international eco- exclusive interview for ExPro Agency. Ukrtransgaz (UTG). nomic and infrastructure initiative that brings to- “The production of hydrogen from coal and gas Thus, Ukrainian UGS are filled by 84%, which gether 12 European Union countries located is more cost-effective than by electrolysis, using is a record figure in recent years. Since the near the Baltic, Black and Adriatic seas. It was electricity from renewable sources. DTEK cares beginning of September, the rate of gas in- founded by Poland and Croatia, and the first about the environment, so it focuses on the pro- jection has decreased by 18%, to 87 million summit of 3SI was held in the summer of Au- duction of “green” hydrogen (electrolysis of wa- cubic meters per day due to a reduction in gust 2016 in Dubrovnik, Croatia.

07-13.09.2020

STATE POLICY AND LEGISLATION

UkrSGEI appealed to the President, the • Investment Atlas of the holder of mineral energy imports. At meetings with the President, Chairman of the Verkhovna Rada and the rights: https://www.geo.gov.ua/investicijnij-at- we have repeatedly raised the issue of increas- government asking to cancel its privatiza- las-nadrokoristuvacha ing our own production. We need to conduct an tion • The only window of the holder of mineral appropriate exploration, finalise the exploration Ukrainian State Geological Exploration Institute rights: https://www.geo.gov.ua/yedine-vikno work that has already been partially completed (UkrSGEI) addressed the President of Ukraine, • Unified centre for calculating the cost of li- and start production quickly, “ the press service Verkhovna Rada of Ukraine; the Prime-Minis- censes and other paid SSGS services: http:// of the Cabinet of Ministers quotes Shmyhal. ter of Ukraine with a request to stop the de- geoinf.kiev.ua/posluhy The Prime Minister stressed that the govern- struction of the Institute is the only scientific in- ment, for its part, is making every effort to do stitution of Derzhheonadra. This was reported PSA shall be signed by the end of 2020 - this and is counting on the relevant legisla- on the website of UkrSGEI. Derzhheonadra tive initiatives of the deputies of the Verkhov- As reported, on August 12, the Cabinet of Min- Production sharing agreements with the win- na Rada. isters of Ukraine made an unexpected decision ners of the relevant competitions will be signed for the Institute to privatize the enterprise. To before the end of the year. This was stated by Ukraine cancelled anti-dumping duties for which the team reacted negatively and indig- the Chairman of the State Service for Geolo- three Chinese producers of drill pipes nantly. gy and Subsoil, Roman Opimakh, during a dis- The Interdepartmental Commission on inter- cussion on strategic directions of gas produc- national trade (consisting of representatives of Derzhheonadra urges to use services for tion development. various ministries and Executive authorities, 12 the holders of mineral rights The winners of this competition were select- people in total), headed by Deputy Minister of The State Service for Geology and Subsoil of ed a year ago, in July 2019 - then the Cabinet the Ministry of economic development, trade Ukraine (Derzhheonadra), in November last of Ministers, chaired by Volodymyr Groysman, and agriculture Taras Kachka, decided not to year, launched a number of services designed supported the proposal of the Interdepartmen- apply anti-dumping measures against manufac- to simplify communication between the state tal Commission under the Ministry of Energy turers and importers of steel pipes from China. and the license holders and speed up the work and Coal Industry to conclude production shar- The restrictions are lifted from three compa- of the Regulator. A single window, a single ing agreements (PSAs) with the winners of the nies: Shanxi Fenglei Drilling Tools, DP-Master centre for estimation of the cost of a license, competition. In total, nine areas were offered Manufacturing and the Tianjin Pipe Corpora- and an Investment Atlas for the holders of min- for the tender. The winners are WELL CO -Uh- tion group of companies. Two other compa- eral rights are constantly available services. nivska area; Oil & Gas trading overseas B. V. nies, Hubei Xinyegang Steel and Jingjiang After the launch of the single window of the li- and Naftogasekspluatatsia – Zinkivska area; Special Steel, were denied price obligations. cense holder, in which the SSGS specialists Ukrainian Energy L. L. S. – Varvynska area; This is reported in the Government Courier on provide professional advice on preparing a GEO Alliance Partnership LLC and Geo Alli- September 2, 2020. package of documents for obtaining a license, ance Partnership B. V.- Sofiyivska area; Ukrg- Recall that last year, at the initiative of the larg- extending its validity or making changes to it, asvydobuvannya – Buzivska area; Produc- est Ukrainian pipe manufacturer Interpipe, the number of refusals to applicants decreased tion company Ukrnaftoburinnya – Rusanivska an anti-dumping investigation was launched by half compared to the previous period. area, Ukrgasvydobuvannya – Berestyanska against the import of seamless hot-worked In addition, the SSGS is working to simplify ac- area; Ukrgasvydobuvannya and Vermilion steel pipes from China to Ukraine. The in- cess to geological information and its digitali- Ukraine Exploration B. V. – Balakliyska area; vestigation ended with the introduction of an- zation. Currently, active attention is being paid Ukrgasvydobuvannya and Vermilion Ukraine ti-dumping restrictions (additional duties) on tu- to digitizing the protocols of the State Commis- Exploration B. V. – Ivanivska area. bular goods in the amount of 51% in May 2020. sion on reserves (SCR): 3,200 protocols have First of all, we are talking about pipes for the oil already been made publicly available. Shmyhal is in favour of increasing the do- and gas industry. Anti-dumping duties were in- The next step is to launch an online calculator mestic gas production in Ukraine troduced to protect Ukrainian pipe manufactur- to estimate the initial cost of a license and cre- Prime Minister Denis Shmyhal promotes in- ers who suffered from the dominance of cheap ate an electronic Cabinet for a holder of min- crease of Ukraine’s domestic gas production. Chinese products. Particularly acute this issue eral rights. List of services offered by the reg- “Today we have unhindered access to the EU has become after the increase in procurement ulator: gas market, which also contributes to reducing through the system of ProZorro.

07-13.09.2020

JUDICIAL PRACTICE

RTS disputed recovery of UAH 2.1 million cluded that the claim of the Synergiya was ful- on the volumes of natural gas transferred from in favor of Synergiya Gaz Energy LLC ly substatiated to collect from RTS the UAH the GTS to regional gas distribution network The Synergiya Gaz Energy LLC (Synergiya) 2.13 million to redress losses (lost profits) suf- operator JSC Dniprogas or commercial gas filed a lawsuit with the Commercial Court of fered by the the Synergiya. metering units and their locations. Luhansk Region against Rekonstrukciya Teh- Disagreeing with the court’s decision, the At the same time, the Resolution #621 of nologichnih Sverdlovin LLC (RTS) for dam- RTS appealed to the Skhidniy Commercial March 17, 2020, of the National Energy and ages in the amount of UAH 2.13 million un- Court of Appeal, asking it to overturn the pre- Utilities Regulation Commission (NEURC) der the supply agreement dated December 5, vious court’s decision. However, the court dis- amended the template of standard contract 2019. missed the appeal due to its improper com- for transmission of natural gas, according to In support of its claims the Synergiya referred pilation and gave the company 10 days to which the former obligatory Annex #3 was ex- to the fact that the RTS did not make prepay- remedy the deficiencies in the appeal. cluded. Also, the UTG suggested that Annex ments under the agreement concluded be- #3 to the contract for transmission of natural tween the companies, as a result of which Dniprogas asks the court to oblige UTG to gas signed by the parties should be outlawed. Synergiya suffered lost profits. bring gas accounting in 2016-2019 in line The preparatory hearing of the case is sched- According to the agreement, the Synergi- with the agreement uled for September 29, 2020. ya should have supplied to RTS a well head The regional gas distribution network operator OKK2-210 (178/245/324) at the price of UAH JSC Dniprogas appealed to the Commercial Court to collect from Boryspilteplomere- 500 000, 3 well heads OKK1-210 (178/245) at Court of Dnipropetrovsk region with a claim to zha UAH 568 000 in favor of Naftogaz the price of UAH 320,000 per piece, 5 assem- the JSC Ukrtransgaz (UTG), asking to recog- The NJSC Naftogaz of Ukraine appealed to blies of X-mass tree AFK 6-65 / 210 5 at a nize as non-commercial the accounting under the Commercial Court of Kyiv region to re- price of UAH 544 520 per set. The total value the contract from December 17, 2015, for the cover UAH 1.15 million debt from the Bo- of the goods under the agreement was UAH 2016-2019 transmission of natural gas con- ryspilteplomerezha Communal Enterprise 4.18 million (incl 20 % VAT). ducted by the UTG. of District Heating Networks (CEDHN Bo- Under the terms of the agreement, the RTS In addition, the JSC Dniprogas asks the court ryspilteplomerezha) operator of the town of had to make a 100% prepayment for the to oblige the UTG to bring gas accounting for Boryspil. The amount under the claim consists equipment sets by December 27, 2019, and the specified period in line with the terms of of UAH 614 000 as penalty, UAH 147 000 as deliver them until December 30, 2019. Later, the natural gas transmission contract. 3% per annum interest, and UAH 391 000 as the parties extended the delivery period until The claims were substantiated by the fact that inflation losses. February 29, 2020 the parties did not concluded Annex №3 on The Naftogaz referred to the fact that the Bo- To fulfill the agreement, the Synergiya pur- the distribution volumes of the natural gas for ryspilteplomerezha breached the gas supply chased the bespoke equipment sets from each gas metering units (GMU) specified in contract and did not timely pay off the cost of Kvant Plus LLC for the total amount of UAH the contract. The absence of specified vol- the gas transferred by the Naftogaz during Oc- 1.69 million. As the RTS did not make a pre- umes for each GMU indicated to the absence tober-December 2016 and January-March 2017. payment for the goods, on April 20, 2020, the of proper commercial accounting under the Naftogaz as the supplier transferred to the Bo- Synergiya sold the goods to Alfa Trade Prom contract, which made it impossible to deter- ryspilteplomerezha as consumer during Octo- LLC for a total amount of UAH 2.05 million. mine the exact volumes of natural gas trans- ber 01- March 31, 2016, the 13.304 mcm of According to the Synergiya, it suffered losses mitted. The Dniprogas noted that the volumes natural gas priced at 5 930.4 UAH/tcm (incl. of UAH 2.13 million due to the RTS’s failure accounting of natural gas transmitted by UTG 20 % VAT). to comply with the agreement, and that led to breached the terms of the contract and the During October-December 2016, Janu- a lawsuit. GTS Code. ary-March 2017, the Naftogaz transferred to the The court finds that due to the violation of the The UTG objected to the lawsuit and stat- Boryspilteplomerezha the gas for UAH 76 mil- terms of the agreement and non-fulfillment by ed that there existed a clear subject under lion (incl. 20 % VAT).The Natfogaz noted that the RTS of its obligation to pay 100% due for transmission contract, namely the notion of Boryspilteplomerezha belatedly paid, which the equipment sets, the Synergiya was forced services in transmission of natural gas. Ac- was the reason for the Naftogaz to go to court. to sell the equipment sets to Alfa Trade Prom cording to the UTG, when signing the acts of The court decided to partially satisfy the at a lower price than bespoke with the RTS. acceptance and transfer of natural gas, the claims of the Naftogaz and to collect from the Taking into account the above, the court con- parties never had any objections or comments Boryspilteplomerezha the UAH 568 000.

07-13.09.2020

INTERNATIONAL NEWS

Energy Minister announces gas extraction to increase the efficiency of the extraction of Rystad Energy: Giant Tuna-1 discovery in the Black Sea in 2021 oil fields. Also, the UAE has recently discov- could save Turkey $21 billion Starting next year, investors will extract 10% ered the world’s fourth largest gas field which If Turkey develops the giant Tuna-1 (Dan- of Romania’s gas from the Black Sea, Depu- it expects to start extracting soon, he added. ube-1) gas discovery, it could potentially save ty Minister of Economy, Energy and Business On another subject, Szijjártó noted that the the country up to $21 billion in import costs, Environment Niculae Havrileţ said while tak- UAE last month started up the Arab world’s Rystad Energy estimates. ing the floor at FOREN 2020, the Eastern and first nuclear power plant, saying that Hunga- «The prospect of a new competitive source Central European Renewable Energy Confer- ry’s more than 30 years of experience with nu- of gas, and the confidence that Turkey will ence held every two years. clear power and safety would provide a sound be less reliant on imports in the future, will The Romanian official did not specify the name basis for advancing energy cooperation be- increase the country’s bargaining pow- of the company, although Black Sea Oil & Gas tween the two countries. er concerning its current suppliers. Turkish is rumored to be the company-in question, buyers will likely be keen to move away from which announced that it will start production at Shell Becomes the First Western Firm to oil-indexed contracts and instead use a Eu- the offshore Midia plot in the first half of 2021. Sell LNG to Hungary ropean price benchmark, such as TTF, to Romania consumes about 10-11 billion cubic Royal Dutch Shell plc RDS.A recently inked a which they can index their contracts.», Rys- meters of gas annually. deal with Hungary whereby it will supply 250 tad said Havrileţ also stressed that, despite the million cubic metres of liquefied natural gas Actual savings could be even higher as glob- Covid-19 crisis, investment continues and re- (LNG) annually for six years to the country. al gas prices and import costs are expected to ferred to the interest of many energy produc- The gas will be delivered through an LNG ter- rise in coming years. ers in offshore wind farms. As he explained, a minal on the island of Krk in Croatia. The ter- World Bank report states that on the Roma- minal is planned to commence operations in Turkey in talks to secure Libyan oil and nian side of the Black Sea there is a possibil- the next few months. gas exploration rights ity of producing 80,000 MW of wind energy, This is the first time that Hungary entered into Turkey is in talks over oil and gas explora- which could help the country achieve the goal a long-term gas supply pact with a Western en- tion in Libya, as President Recep Tayyip Er- of renewable energy consumption by 30.7% ergy company. As a bold attempt in the coun- dogan’s administration seeks business op- in 2030, from today’s 24%. try’s energy diversification, the country will ob- portunities in the conflict-ridden North African tain 10% of its gas supply from the West. country. MOL is looking to break into the UAE’s en- By and large, Hungary has been dependent Turkey and Libya’s United Nations-recog- ergy market on Russia for its gas supply and has never nized government, which controls the capi- Peter Szijjártó paid a visit to Abu Dhabi where been in any long-standing supply agreement tal Tripoli and other parts of the west, are dis- he held talks with the foreign minister, the with any gas seller except Russia’s Gazprom. cussing onshore and offshore energy blocks, minister of industry and advanced technolo- Gazprom Export signed four long-term con- according to a Turkish energy official, who gy, the minister of energy and infrastructure, tracts with the Hungarian gas importer Pan- asked not to be identified because the infor- the minister of state for food and water secu- rusgas for a total of 4.2 billion cubic meters mation isn’t public. rity and the minister of state for foreign trade. per year. Of the four, two contracts ended last Turkish officials also held talks with Libya’s He said that Hungarian oil and gas company year while the remaining two are scheduled to National Oil Corp. about power generation MOL was looking to break into the UAE’s en- conclude next year. and pipeline operations, the person said. The ergy market with unique technology. Demand Notably, Hungary settled on a 6.2-billion cubic official did not specify whether the NOC was for the technology would be guaranteed, metre pact with Gazprom and is intended to have included in negotiations about energy explo- Szijjártó said, noting that the UAE was looking a flexible long-term agreement with the company. ration.

07-13.09.2020

GAS MARKET

Trade Natural Gas Prices in Ukraine, UAH/tcm The reporting week was marked by September booked resource September booked resource a decline in natural gas prices on the 5 600 Ukrainian market, and a gradual in- 5 456 5 475 crease in trade activity, in particular in the October resource. 5 400 5 348 5 300 5 275 5 270 5 218 5 230 5 350 Domestic Market. 5 300 5 196 5 200 Natural gas in the Ukrainian market 5 200 5 200 during the reporting week gradually 5 026 5 150 5 150 5 100 5 100 became cheaper, after its rise in price 5 000 5 050 during the recent weeks. Thus, prices on the domestic market completely re- 4 900 4 800 peat the dynamics of the quotations at 31-Aug 1-Sep 2-Sep 3-Sep 4-Sep 7-Sep 8-Sep 9-Sep 10-Sep 11-Sep the European hubs. Offer Prices Bid Prices Trading activity in the first half of the week was relatively low, but as the end of the first decade of the month UGS booked resource UGS booked resource approached, the activity gradually in- 5 600 creased. Increased trade also contrib- 5 492 5 468 5 500 uted to the decline in prices. 5 400 September resource at the beginning 5 400 5 340 5 306 5 309 of the week was traded at UAH 5,350- 5 300 5 245 5 220 5 330 5,500 per tcm, and during the week it 5 300 5 200 5 165 fell by about UAH 200 (4%). On Fri - 5 200 5 200 day September resource was traded at 5 100 5 175 5 150 5 120 UAH 5,150-5,300 per tcm 4 970 5 000 5 050 At the same time, a significant part 5 000 4 900 of market participants notes that they have already sold the main volumes 4 800 4 850 31-Aug 1-Sep 2-Sep 3-Sep 4-Sep 7-Sep 8-Sep 9-Sep 10-Sep 11-Sep of the September resource, and the end consumers have purchased the Offer Prices Bid Prices planned volumes in August. Gas in UGS at the beginning of the October booked resource week was traded at UAH 5,370- October booked resource 5,540 per tcm, and at the end of the 5 700 week - at UAH 5,200-5,350 per tcm. 5 550 5 570 Thus, gas in storages fell in price by 5 500 5 510 5 492 5 500 5 450 3% (UAH 170-190). 5 350 5 368 The activity of trading in the October 5 450 5 345 resource is growing. Prices for the Oc- 5 400 5 400 5 300 5 350 5 234 tober resource at the beginning of the 5 300 5 300 week were in the range UAH 5,450- 5 250 5 200 5750 per tcm. By the end of the week, 5 100 5 150 they dropped to UAH 5,170-5,320 per 5 100 tcm, 6% (UAH 280-430) lower than at the beginning of the week. 4 900 31-Aug 1-Sep 2-Sep 3-Sep 4-Sep 7-Sep 8-Sep 9-Sep 10-Sep 11-Sep According to the market participants, a further decline in prices for October Offer Prices Bid Prices

07-13.09.2020

Auctions Held on Ukrainian Energy Exchange (UEEX) over the past week purchase Auction Initial price, Terms of Realized price, UAH/ Average price, № Seller/buyer Proposition Gas date Volume, tcm UAH/tcm VAT payment volume, tcm tcm VAT UAH/tcm VAT inclusive inclusive inclusive 1 Craft Energy selling September 07.09.2020 500 5 500 Prepayment - - - UGS 2 Craft Energy selling (September) 07.09.2020 500 5 550 Prepayment - - - 25% - until 08.09.2020, 3 Craft Energy selling October 07.09.2020 500 5 650 75% - until - - - 21.09.2020 4 Naftogas Trading selling September 07.09.2020 1 000 5 460 Prepayment 1 100 5 472 - 5 484 5 473,09 UGS 5 Naftogas Trading selling (September) 07.09.2020 1 000 5 520 Prepayment 1 500 5 520 - 5 538 5 531,87 6 Naftogas Trading selling October 07.09.2020 1 000 5 694 * - - - 7 Naftogas Trading selling UGS (October) 07.09.2020 1 000 5 754 * - - - 8 Naftogas Trading selling November 07.09.2020 1 000 6 474 * - - - UGS 9 Naftogas Trading selling (November) 07.09.2020 1 000 6 534 * - - - UGS 10 DE Trading purchase (September) 07.09.2020 2 500 4 500 Prepayment - - - 11 Centreenergy selling September 07.09.2020 250 5 500 Prepayment - - - 12 Centreenergy selling October 07.09.2020 250 5 750 Prepayment - - - UGS 13 Centreenergy selling (September) 07.09.2020 250 5 600 Prepayment - - - 14 Energy 365 selling November 07.09.2020 1 000 6 400 * - - - 15 Gas-Oil Harant selling September 07.09.2020 1 000 5 400 Prepayment - - - 16 Naftogas Trading selling September 08.09.2020 1 000 5 610 Prepayment - - - UGS 17 Naftogas Trading selling (September) 08.09.2020 1 000 5 658 Prepayment - - - 18 Naftogas Trading selling October 08.09.2020 1 000 5 532 * - - - 19 Naftogas Trading selling UGS (October) 08.09.2020 1 000 5 580 * - - - 20 Naftogas Trading selling November 08.09.2020 1 000 6 330 * - - - UGS 21 Naftogas Trading selling (November) 08.09.2020 1 000 6 366 * - - - 22 Craft Energy selling September 08.09.2020 500 5 540 Prepayment - - - UGS 23 Craft Energy selling (September) 08.09.2020 500 5 500 Prepayment - - - 24 Craft Energy selling October 08.09.2020 500 5 600 Prepayment - - - 25 Gas-Oil Harant selling September 08.09.2020 1 000 5 400 Prepayment - - - 26 LNZ selling October 08.09.2020 1 000 5 450 Prepayment - - - UGS 27 DE Trading purchase 08.09.2020 2 500 4 500 Prepayment - - - (September) 28 Energy 365 selling September 08.09.2020 800 5 470 Prepayment - - - 29 Energy 365 selling November 08.09.2020 1 000 6 400 * - - - 30 Craft Energy selling September 09.09.2020 500 5 350 Prepayment - - - UGS 31 Craft Energy selling 09.09.2020 500 5 360 Prepayment - - - (September) 25% - until 10.09.2020, 32 Craft Energy selling October 09.09.2020 500 5 450 75% - until - - - 21.09.2020 33 Naftogas Trading selling September 09.09.2020 1 000 5 286 Prepayment 2 020 5 286 - 5 322 5 308 UGS 34 Naftogas Trading selling (September) 09.09.2020 1 000 5 346 Prepayment - - - 35 Naftogas Trading selling October 09.09.2020 1 000 5 370 * 2 750 5 370 - 5 430 5 418 36 Naftogas Trading selling UGS (October) 09.09.2020 1 000 5 430 * - - - 37 Naftogas Trading selling November 09.09.2020 1 000 6 252 * - - - UGS 38 Naftogas Trading selling 09.09.2020 1 000 6 312 * - (November) - - UGS 39 DE Trading purchase (September) 09.09.2020 2 500 4 500 Prepayment - - - 40 Gas-Oil Harant selling September 09.09.2020 1 000 5 400 Prepayment - - - 41 LNZ selling October 09.09.2020 990 5 400 Prepayment - - - 42 Naftogas Trading selling September 10.09.2020 1 000 5 262 Prepayment 20 5 262 5 262 UGS 43 Naftogas Trading selling (September) 10.09.2020 1 000 5 310 Prepayment - - -

07-13.09.2020

purchase Auction Initial price, Terms of Realized price, UAH/ Average price, № Seller/buyer Proposition Gas date Volume, tcm UAH/tcm VAT payment volume, tcm tcm VAT UAH/tcm VAT inclusive inclusive inclusive 44 Naftogas Trading selling October 10.09.2020 1 000 5 382 * - - - 45 Naftogas Trading selling UGS (October) 10.09.2020 1 000 5 436 * - - - 46 Naftogas Trading selling November 10.09.2020 1 000 6 258 * - - - UGS 47 Naftogas Trading selling (November) 10.09.2020 1 000 6 312 * - - - 48 Craft Energy selling September 10.09.2020 500 5 340 Prepayment - - - UGS 49 Craft Energy selling (September) 10.09.2020 500 5 300 Prepayment - - - 25% - until 11.09.2020, 50 Craft Energy selling October 10.09.2020 500 5 390 - - - 75% - until 21.09.2020 51 Gas-Oil Harant selling September 10.09.2020 1 000 5 400 Prepayment - - - UGS 52 DE Trading purchase (September) 10.09.2020 2 500 4 500 Prepayment - - - 53 Centreenergy selling September 10.09.2020 250 5 350 Prepayment - - - UGS 54 Centreenergy selling (September) 10.09.2020 250 5 350 Prepayment - - - 55 Centreenergy selling October 10.09.2020 250 5 450 Prepayment - - -

56 LNZ selling October 10.09.2020 990 5 320 Prepayment - - -

57 Craft Energy selling September 11.09.2020 500 5 250 Prepayment - - - UGS 58 Craft Energy selling (September) 11.09.2020 500 5 250 Prepayment - - - 25% - until 14.09.2020, 59 Craft Energy selling October 11.09.2020 500 5 350 - - - 75% - until 21.09.2020 60 Naftogas Trading selling September 11.09.2020 1 000 5 184 Prepayment 2 720 5 184 - 5 196 5 194 UGS 61 Naftogas Trading selling (September) 11.09.2020 1 000 5 232 Prepayment - - - 62 Naftogas Trading selling October 11.09.2020 1 000 5 286 * 4 750 5 298 - 5 334 5 313 63 Naftogas Trading selling UGS (October) 11.09.2020 1 000 5 322 * - - - 64 Naftogas Trading selling November 11.09.2020 1 000 6 234 * - - - UGS 65 Naftogas Trading selling (November) 11.09.2020 1 000 6 282 * - - - 66 Gas-Oil Harant selling September 11.09.2020 1 000 5 400 Prepayment - - - UGS 67 DE Trading purchase (September) 11.09.2020 2 500 4 500 Prepayment - - - 68 Ukrfingas purchase September 11.09.2020 1 000 5 250 Prepayment - - - 69 LNZ selling October 11.09.2020 990 5 200 Prepayment - - - * Payment terms for Naftogas Trading and Energy 365: 75% of the contract value - 1 business day before the trade notice is submitted

Auctions Held on Smarttender over the past week Initial price, Start accepting End of receipt of Volume, № Purchaser/Seller Proposition proposals Delivery time UAH/tcm VAT proposals tcm included 1 Cheese club purchase 10.09.2020 14.09.2020 01-31.10.2020 825 resource should encourage the end active, due to which trade activity will 5,000 per tcm next week. “If prices con - consumers to buy it more actively next increase,” another trader said. tinue to decline in Europe, in Ukraine week. “We are waiting for an increase Also on the market there were offers they will fall below UAH 5,000 per tcm,” in demand for the October resource for the sale of the November resource the trader says. starting next week. Lower prices should from UAH 5,700 per tcm, but the de - be a signal for the buyers,” the trader mand for it remains minimal. The activity of natural gas trading on says. “Producers should enter the mar- Some of the traders surveyed by ExPro the Ukrainian Energy Exchange re- ket closer to the 15th, and after them, expect a reduction in the price of natu - mained stable during the week. During the end consumers will become more ral gas on the domestic market to UAH the week, six companies offered for

07-13.09.2020

sale the resource of September, Oc- Dynamics of starting prices for September booked resource on UEEX, tober, November and gas in UGS, and Dynamics of starting prices for September booked resource on UEEX, UAH/tcm UAH/tcm two companies (DE Trading LLC and 5 700 Ukrfingaz LLC) held auctions for the purchase of natural gas, but did not 5 600 find suppliers. Among the sellers, the only company 5 500 that sold gas at its own auctions was 5 400 Naftogaz Trading LLC. It sold during the reporting week 5.86 mcm of Septem- 5 300 ber gas at prices of UAH 5,184-5,484 5 200 per tcm (weighted average was UAH

5,286 per tcm) and 1.5 mcm of gas in 5 100 UGS with transfer in September at UAH 08.09.2020 09.09.2020 10.09.2020 11.09.2020 5,520-5,538 per tcm (weighted average Naftogas Trading Gas-Oil Harant Centreenergy Craft Energy Energy 365 was UAH 5,532 per tcm). The company also sold 7.5 mcm of the October resource at UAH 5,298-5,430 Dynamics of starting prices for October booked resource on UEEX, Dynamics of starting prices for October booked resource on UEEX, per tcm (the weighted average was UAH/tcm UAH/tcm UAH 5,352 per tcm). Thus, Naftogaz 5 700 Trading during the reporting week sold 14.86 mcm of gas at the exchange for a 5 600 total of UAH 79 million (including VAT), 5 500 56% more than in the previous week (UAH 51 million). 5 400

5 300 Gas Customs Clearance. During the first half of September, five Ukrainian 5 200 companies cleared 43 mcm of natural 5 100 gas, twice as much as during the same 08.09.2020 09.09.2020 10.09.2020 11.09.2020 period in August. All gas is cleared af - Naftogas Trading Centreenergy Craft Energy LNZ ter its import to Ukraine. Most of the Weighted average costs for customs cleared imported, September 1 - Weighted average costs for customs cleared imported, September10, $1 /- tcm10, $/tcm

AXPO UKRAINE 115

EGAS 123

GAS COM TRADE 123

U COMMODITIES 138

CHERKASYGAS ZBUT 179

0 20 40 60 80 100 120 140 160 180 200

07-13.09.2020 gas was cleared by U Commodities CustomsCustoms clearance clearance of natural of gas,natural September gas, September 1 - 10, mcm 1 - 10, mcm LLC - 20 mcm, which the company purchased from GHG Emissions Trad- AXPO UKRAINE; 1,4 ers&Consultants. CHERKASYGAS ZBUT; Gaz Com Trade LLC has cleared 12 4,4 mcm of natural gas, which the company also purchased from GHG Emis- sions Traders and Consultants. Both EGAS; 5,3 companies cleared gas they imported U COMMODITIES; in August. Weighted average price 20,0 The resource delivered in September for the period was cleared only by Cherkassygazzbut - $136/tcm LLC in the first decade of the month - over 4 mcm, which the company purchased from Sangaz. The weighted average price of customs GAS COM TRADE; 11,7 clearance of natural gas for the specified period was $136 per tcm, 56% higher than in the same period last month. NaturalNatural gas sellersgas sellers at the at Ukrainianthe Ukrainian border, border September, September 1 - 110, - 10, mcmmcm

ProZorro Public Procurement AXPO; 1,4 Within a week, thirty-one new tender SANGAZ; 4,4 was announced in the ProZorro system for the purchase of 7.35 mcm of gas UAH 39 million (including VAT) worth. Expected prices range from UAH 3,222 PROMETHEUS ENERGY; 5,3 to UAH 10,000 per tcm (with VAT). The average level is about UAH 5,309 per tcm (with VAT). The largest tender was announced by the Oles Honchar Dnipro National Uni- GHG EMISSIONS TRADERS AND versity, which is looking for a supplier of CONSULTANTS; 2.6 mcm of gas by the end of 2020 for 31,7 UAH 8.5 million (including VAT) at an expected gas price of UAH 3,222 per tcm (including VAT) on the staged payment terms. Clarifications on the tender can be requested until October 1 and TOP 10 Prozorro tenders winners, September 7 - 11, 2020 the procurement terms can be disput- Price UAH 3 Amount of ed before October 7. The bidding dead- № Procurer (including VAT) Volume Mm tenders line is October 11, 2020. The auction is Naftogaz Trading Gas Company 1 LLC 581 760 744 132 254,0 3 scheduled on November 16, 2020. 2 Ug-Gaz LLC 142 347 378 25 406,0 4 The results of twenty-six tenders for the 3 Energy 365 LLC 2 654 999 900,0 1 purchase of 160 mcm of gas at UAH 733 million (including VAT) were also 4 Ekotehnoinvest LLC 1 182 124 274,0 3 announced. Price range was from UAH 5 Kastum LLC 1 140 000 180,0 1 2,950 to UAH 8,150 per tcm (with VAT) 6 Servic Group LTD LLC 899 460 202,6 1 and the average level was UAH 4,581 7 Gazpromservice LLC 869 400 210,0 1 per tcm (with VAT). 8 Lvivgaz zbut LLC 630 000 150,0 1 Yug-GAZ LLC will supply 25 mcm of 9 Ivano-Frankivskgas zbut LLC 572 488 150,0 1 gas to Ukrainian Railway JSC at UAH 10 Zhytomirgaz zbut LLC 375 084 90,0 1

07-13.09.2020

5,635 per tcm (including VAT) be- Announcement tendersAnnouncement of natural tenders gas of natural on gas Prozorro,on Prozorro, weeklyweekly 2020 2020 fore April 30, 2021 on a decade pay - 120 ment terms. Investservice GC LLC, 109

100 Naftogaz Trading LLC, Blahogaszbut 90

LLC and Tech Prom Gas LLC also 80 76 participated in the auction. 63 60 The lowest gas price during the re- 52 50

40 porting week was offered by Energy 31 25 23 17 16 365 LLC - UAH 2,950 per tcm (includ - 20 13 13 10 12 10 10 7 7 9 9 7 8 6 6 5 4 5 4 ing VAT). The company will supply 1 1 1 1 3 1 0 900 tcm of gas to the Kyiv Housing Maintenance Directorate. The highest price was offered by Kyivoblgaz LLC - UAH 8,150 per tcm (including VAT). Imbalabce prices, UAH/tcm (including VAT) The company will supply 8.6 tcm to 7 000 6691,62 the Fire and Rescue Detachment No. 6515,87 6515,87 3 in the Kyiv region. 6 500 6280,99 6253,69 6133,99 6135,42 Victory in the greatest number of tenders 5972,88 5972,88 6009,46 6 000 5757,58 5732,55 5624,14 was won by Yug-Gas LLC. The compa- 5576,35 5508,67 5429,89 5429,89 ny won 4 tenders for the supply of 25.4 5 500 5234,16 5211,41 5112,85 5007,88 mcm of gas at a weighted average price 5 000 of UAH 4,063 per tcm (with VAT). 5018,72 4886,9 4886,9 4 500 4710,74 4690,27 4601,57 4461,08 4507,09 4343,91 4343,91 Currency Market 4 000 4187,33 4169,13 During the reporting week, the 4090,28 4006,3 3 500 hryvnia lost an average of 35-36 ko- 05.09.2020 06.09.2020 07.09.2020 08.09.2020 09.09.2020 10.09.2020 11.09.2020 pecks against Euro and lost 20 ko- Purchase price (20%) Purchase price (10%) Sell price (10%) Sell price (20%) Base price pecks against USD. As of the end of the week on the interbank foreign Exchange rates, 2020 Exchange rates, 2020 exchange market Euro was bought 34 for UAH 33.0719 and sold for UAH 33.1046; USD was bought for UAH 32 27.93, and sold for UAH 27.96. Cur- 30 rency trading activity on Monday 28 (September 7) was weak due to the weekend in the United States, but 26 since Tuesday, activity has increased 24 sharply and remained at a high level until the end of the week. NBU, USD/UAH NBU, €/UAH Interbank sales, USD/UAH The exchange rate was influenced by the quotes of the USD and Euro on the Natural Gas Prices at the European Hubs and at the Ukrainian Border, world markets, and the domestic fac- Day Ahead Market (€/MWh) tors. A significant part of the foreign ex- Delivery date 07.09.2020 08.09.2020 09.09.2020 10.09.2020 11.09.2020 change market participants note that CEGH 12,052 11,618 11,250 11,191 10,935 the National Bank artificially does not GPL 11,679 11,280 10,681 10,655 10,473 allow hryvnia to strengthen. On Friday, Ukrgasbank sold USD at UAH 27.9. NCG 11,160 10,700 10,082 10,120 9,880 TTF 11,582 11,249 10,792 10,780 10,548 Price at the border (in the European Market 6 018,0 5 806,0 5 580,2 5 637,3 Ukrainian GTS), UAN/Mm3 5 526,7 In contrast to the previous week, the European markets showed a down- * - at the calculation are accounted quotes at the NCG, the average cost of transportation to the border of Ukraine (€2,8/MWh), the cost of entry into the Ukrainian gas transportation system ($4,45/mcm), seasonal ratio (1,2), the ward trend in spot prices for natural official exchange rates and VAT.

07-13.09.2020 gas. At the beginning of the week, the Natural gasNatural price Day gas Ahead price (Open),Day Ahead TTF, €/MWh (Open), TTF, €/MWh Day Ahead prices at the hubs were in 12 the range of €11.2-12.2 per MWh and 11 by the end of the week they decline to 10 €9.8-10.9 per MWh. Thus, the prices 9 fell by about 11% during the week. 8 7 The main reason for the decline in pric - 6 es during the week was the excess 5 gas in Europe due to increased sup- 4 plies from Norway after the completion 3 2 of scheduled repairs and technical in- spections. On the other hand, demand for natural gas remains stable. Since September 11, production at the Futures prices of natural gas, Front Month, TTF, €/MWh

Norwegian Troll field has decreased, 12 followed by gas supplies to Europe. 11 The shutdown is expected to last 6 10 days – until September 17. However, 9 foreign traders note that the shutdown may not significantly affect the pric- 8 es, since the air temperature and wind 7 strength increase are expected at the 6 weekend (September 12-13), which 5 will result in reduced demand for gas. 4

Futures prices for the October re- 3 source on the Dutch TTF rose by about 7.5% during the week - from €11.2 per MWh at the beginning of the week to Gas storage data in some European countries on September 11, 2020 €10.45 per MWh at the end of Friday. Сountry Gas in storage, TWh Full, % Germany 213,63 93,59 Italy 188,31 95,65 Gas Balance France 126,18 96,82 Gas production in Ukraine on Sep- Netherlands 120,52 86,22 Austria 84,17 88,13 tember 4-9 gradually decreased by Hungary 66,07 94,88 400 tcm, to 54.5 mcm, the lowest value Slovakia 38,53 90,55 since mid-June. In the first nine days Poland 35,01 98,45 Czech Republic 34,52 96,80 of September, Ukraine produced 492 Spain 31,94 93,26 mcm of gas, 1% (1 mcm) less than in Romania 29,39 89,08 the same period in August. Gas imports from the European des- Natural GasNatural Price Day Gas Ahead, Price HenryDay Ahead, Hub, $/MMBTUHenry Hub, $/MMBTU tinations remained relatively stable 2,8 during the reporting week – at the lev - 2,6 el of 77-78 mcm per day. However, on September 9, deliveries totalled to 70 2,4 mcm, which is 9% lower than during 2,2 the previous and next day. The de- crease was due to a 10% reduction in 2 deliveries from Slovakia to 48.9 mcm and an 8% reduction in deliveries form 1,8

Hungary to 16.7 mcm. 1,6 In the first ten days of September, Ukraine imported 776 mcm of natural 1,4 gas, which is 28% less than last month,

07-13.09.2020 due to the suspension of imports via Natural Gas Import from EU to Ukraine, mcm Budince due to scheduled repairs that Natural Gas Import from EU to Ukraine, mcm 100 will last until September 21. Since the Slovakia (Budince + Veľké Kapušany) beginning of the year as of September 90 VIP "Bereg" (Hungary) 10, Ukraine has imported a record in 80 VIP "Ukraine-Poland" the recent years 13.36 bcm of gas. 70 Daily gas consumption in Ukraine, ac- 60 cording to ExPro calculations, in the re- 50 porting week was in the range of 46- 40 47.5 mcm per day. 30 Gas injection in UGS during the re- 20 porting week was in the range of 78-88 10 mcm per day. Gas withdrawal from the 0 UGS also remained at a minimum level of about 1-11 thousand cubic metres per day. In the first 9 days, 768 mcm of gas were pumped into Ukrainian UGS, Natural GasNatural Import from Gas EU Import to Ukraine, from mcm EU to Ukraine, mcm which is 24% less than in August, due to the volume of imports. As of Sep - VIP "Ukraine-Poland" VIP "Bereg" (Hungary) Velke Kapusany (virtual reverse) Budince (Slovakia) tember 10, 26.486 bcm of natural gas Total were stored in Ukrainian UGS. Thus, 100 the storage facilities are 85.6% filled, 77,90 77,90 77,38 77,38 77,37 which is a record value. 80 76,88 Gas transit from Russia remained rel- 4,26 4,26 4,26 69,87 4,26 4,26 4,26 atively stable during the reporting week 4,26 18,14 18,14 18,07 18,14 18,14 60 18,14 – at the level of 152-154 mcm per day. 16,66 At the same time, the volume of phys - ical supplies to Europe and Moldova 40 was in a relatively wide range – 75- 55,50 55,50 54,55 54,98 54,98 54,98 83 mcm per day, which is explained 48,94 by the fluctuations in import supplies 20 to Ukraine under the virtual reverse mechanism. 0 6-Sep 7-Sep 8-Sep 9-Sep 10-Sep 11-Sep 12-Sep Oil Market Domestic Market. Last week, Ukrnaf- toburinnya PC PJSC sold 450 tonnes Natural gas production and consumption in Ukraine, mcm of oil at UAH 13,550 per tonne (includ - Natural gas production and consumption in Ukraine, mcm ing VAT), 9% lower than at the previ - 140 ous auction (UAH 14,850 per tonne). 130 The auction was attended by 11 par- 120 ticipants, of which three became the 110 winners. Since the beginning of Au- 100 gust, the sale price of UNB oil has de - 90 creased by 20% - from UAH 16,900 per 80 tonne (including VAT) to UAH 13,550 70 per tonne (including VAT). 60

UNB also sold 500 tonnes of con- 50 densate at three auctions. In total, 60 40 tonnes of Sakhalinka condensate were sold at UAH 13,800 per tonne (includ- Production Consumption ing VAT), 10% lower than last time

07-13.09.2020

(UAH 15,300 per tonne). The compa- Transit of NaturalTransit Gas offrom Natural Russia Gas from through Russia Ukraine,through Ukraine mcm, mcm ny sold 440 tonnes of GCLHC (gas 120 condensate of light hydrocarbons) at

2 auctions at UAH 10,800 per tonne 100 (including VAT) and UAH 10,500 per tonne (including VAT), on average 9% 80 lower than at the previous auction (UAH 11,500 per tonne). All condensate auc- 60 tions were attended by 15 participants, of which 5 were the winners. 40 At the SmartTender platform, Ukrainian Drilling Company LLC put up for sale 20 40 tonnes of oil. Since the beginning of 0 August, UDC starting oil sales prices have decreased from UAH 14,500 per tonne (including VAT) to UAH 13,500 NGS Uzhgorod NGS Beregovo NGS Drozdovychi NGS Orlovka NGS Tekovo Moldova per tonne (including VAT). Cadogan Group put up for sale 75 Dynamics of daily natural gas production in Ukraine, mcm tonnes of oil at the starting price of UAH 8,700 per tonne (including VAT). At two 58 previous Cadogan Group auctions, the Company also offered its oil at the price 57 of UAH 8,700 per tonne (including VAT).

56 World Markets. Oil prices last week fell to their lowest levels since mid-June, 55 below $40 per barrel. Among the rea- sons are the decline in Saudi Aramco’s own selling prices for October, con- 54 cerns about a decline in demand due to the high number Covid-19 cases, and 53 an increase in US crude oil reserves.

Futures prices (November resource) 52 for Brent crude at the end of the week were $39.8 per barrel, which is 7% low - er than at the end of the last week. WTI crude (October futures) at the end of Inventories of natural gas in Ukrainian underground storage facilities in 2015-2020, mcm the week was traded at $37.2 per bar - Inventories of natural gas in Ukrainian underground storage facilities in 2015-2020, mcm rel, which is 6% lower than during the 30 000 last week.

25 000 NEWS BRIEFS

GTSOU sold 0.68 mcm/day booking of 20 000 Ukrainian-Hungarian gas interconnection capacity 15 000 The Gas TSO of Ukraine LLC(GT- SOU) sold 0.68 mcm/day booking of Ukrainian-Hungarian Bereg virtual in- 10 000 terconnection capacity at an auction on September 7, 2020. 5 000 1-Jul 8-Jul 1-Jan 8-Jan 3-Jun 7-Oct 1-Apr 8-Apr 5-Feb 2-Sep 9-Sep 2-Dec 9-Dec 5-Aug 15-Jul 22-Jul 29-Jul 4-Nov 4-Mar 6-May 15-Jan 22-Jan 29-Jan 10-Jun 17-Jun 24-Jun 14-Oct 21-Oct 28-Oct 15-Apr 22-Apr 29-Apr 12-Feb 19-Feb 26-Feb 16-Sep 23-Sep 30-Sep 16-Dec 23-Dec 30-Dec 12-Aug 19-Aug 26-Aug 11-Nov 18-Nov 25-Nov 11-Mar 18-Mar 25-Mar Capacity booking was sold for the Q1 13-May 20-May 27-May 2015р 2016р 2017р 2018р 2019р 2020р and Q2 of 2021, while for the Q3 and Q4

07-13.09.2020

Trades in Crude Oils and Natural Gas Condensate (Light Oils) Volumes Sold, Average Weighted Price, Price $/bar. Date Seller Commodities Bidders Bid Winners Density ton UAH/ton incl. 20 % VAT excl. 20 % VAT

09.09.2020 UNB Crude Oil 11 3 450 13 550 0,7675 49,56

Wide Spread of Light 08.09.2020 UNB Hydrocarbons 3 2 200 10 800 0,5765 29,73

Wide Spread of Light 10.09.2020 UNB Hydrocarbons 3 2 240 10 500 0,5765 28,82

10.09.2020 Sahalinka Gas condensate 9 1 60 13 800 0,7710 50,65

08.09.2020 Cadogan Group Crude Oil - - 75 - - -

Ukrainian drilling 09.09.2020 Crude Oil - - 40 - 0,7864 - company

Import of Crude oil in Ukraine, September 7 - 10, 2020

Types of raw Country of origin Importer Volume, th t Weighted average cost on the border, $/t

Crude oil (WTI) USA Ukrtatnafta 25,0 315,0 quarters the capacity was not purchased age customs value of imported natural different payment terms are available through an auction. Auctions were held gas, which was formed in the process of (prepayment, postpayment, 10-day af- on GSA Platform (Poland) and RBP Plat- its customs clearance in Ukraine in Au- terpayment). form (Hungary). gust 2020. According to the Ministry of The “quarterly” tariff will be available for The interconnection capacity booking was Economic Development and Trade, the Q4 of 2020 and for Q1 of 2021 in lots sold at the starting price 4.45 $/tcm for Q1 weighted average declared value of cus- of up to 150 tcm within the framework of 2021 the 1st quarter and 4,895 $/tcm for toms clearance of natural gas imports in of trading on the Ukrainian Energy Ex- Q2 of 202. At other natural gas interstate August 2020 was at 2 918.1317 UAH/ change (UEEX). interconnections there were no companies tcm, or estimated 106.11 $/tcm. The price of gas will be fixed at the interested in booking them so far. Compared to July 2020, the customs time of concluding of an agreement on clearance declared value decreased by the UEEX, and will remain unchanged Naftogaz Group joined Gas Traders of UAH 230 on a tcm ( -7%), or by $ 18 on throughout the quarter, with natural gas Ukraine Association a tcm (-15%). volumes delivered evenly throughout the The Gas Supply Company Naftogaz quarter. Trading LLC and Gas Traders of Ukraine Naftogaz has announced new natu- The “monthly” tariff is available in the Association (AGTU) have signed an ral gas tariffs for businesses, house- form of a lot of up to 50 tcm traded on agreement on membership in the asso- holds, and residents. the UEEX, with a fixed price during the ciation. This was reported by the press The NJSC Naftogaz of Ukraine has an- month. On can order gas under the service of AGTU. The AGTU was estab- nounced new tariffs for natural gas for “monthly” tariff with delivery during the lished in 2003. Today, the Association businesses, households, and residents current month, one month in advance, has more than 30 member-companies. “monthly”, “quarterly” and “annual”. This and two months in advance options. The Gas Supply Company Naftogaz was reported by the press service of the Two natural gas tariffs , “monthly” and Trading LLC is a subsidiary of the Naf- Naftogaz. “annual”, are available for household togaz Group, which retails natural gas to Tariffs were developed taking into ac- and residential consumers to be serviced the public, private, household, and resi- count the consumption profile of cus- by the Gas Supply Company Naftogaz dential consumers. tomers. According to the Naftogaz, the Trading LLC. “annual” tariff is best suited for gas sup- Under the terms of the “monthly” tariff, Average price of imported natural gas ply companies (gas distribution network the price of natural gas changes month- in August 2020 decreased by 15%, operators-companies). The “annual” tar- ly, depending on market price fluctua- down to 106 $/tcm iff takes into account the average pro- tions. Consumed volumes of natural gas The Ministry of Economic Develop- file for five years, prices are pegged to are to be paid next month after their de- ment (MEDT) has published the aver- daily quotes on the German NCG, and livery (afterpayment).

07-13.09.2020

Under the terms of the “annual” tariff, togaz Trading LLC won both auctions The Hungarian state-owned compa- the price and estimated volumes of nat- with its lowest bid proposals of UAH 334 ny MVM, through its trading subsidiary ural gas consumption is fixed at the con- million (incl. 20% VAT) at the first auction MFGK, has reserved 1 bcm per year of clusion of the contract. The consumer and UAH 239 million (incl. 20% VAT) at regasification capacity at the 2.6 bcm pays a fixed amount for gas every month the second auction. capacity LNG terminal in Croatia, which during the year, and if he uses less than In addition, the Gas Supply Company should start operating in January 2021. the planned amount of gas, at the end Naftogaz Trading LLC was recognized MFGK plans to buy gas only from West- of the year the saved amount will be re- the winner of the smallest auction for the ern European companies to reduce its turned to his account. supply of 1.75 mcm of natural gas val- dependence on Russian gas. ued at UAH 8 million (incl. 20% VAT). According to Minister of Foreign Affairs Naftogaz Trading to supply 132 mcm The Ug-Gas Ltd, the OKKO Contract PE and Trade Péter Szijjártó, LNG has be- of natural gas to Ukrtransgaz and SOCAR Ukraine Trading House LLC come more attractive to Hungary from a The the Gas Supply Company Naftogaz also took part in the bidding, however commercial point of view. “When we de- Trading LLC won three auctions of the caved to the the Gas Supply Company cide on gas supplies to Hungary, we take JSC Ukrtransgaz for the supply of 132 Naftogaz Trading LLC. into account two aspects: the reliability of mcm of naural gas by the end of 2020 at supplies and the price,” he said. a weighted average price of 4 430 UAH/ Shell to supply annually 250 mcm of tcm (incl. 20% VAT) and 10-day deferred natural gas to Hungary via LNG termi- Gas prices in Europe can be negative payments. The results of the auctions nal in Croatia The European Energy Exchange (EEX) were published on September 8, 2020 Shell has signed a long-term contract will allow negative spot prices for natu- on Prozorro e-procurement portal. with Hungary for the supply of LNG, ral gas on its own platform starting Octo- The two largest tenders for procurement about 250 million cubic meters per year ber 1, 2020. Relevant notifications were of 71 mcm and 59.5 mcm were contest- through the LNG terminal in Croatia. This sent by the EEX to market participants. ed by the Gas Supply Company Naf- was reported by S&P Global Platts with According to the EEX, this step will allow togaz Trading LLC and the ERU Trading reference to the Minister of Foreign Af- the EEX to cope with any price scenario LLC. The Gas Supply Company Naf- fairs and Trade Péter Szijjártó. that may arise in future.

Data on volumes and prices for natural gas were obtained from open sources (Ministry of Economic Development, Trade and Agriculture, NBU, Gas TSO of Ukraine, NJSC Naftogaz of Ukraine, JSC Ukrtransgaz, JSC UkrGasVydobuvannya, PJSC Ukrnafta, etc.), and by calling up and polling market participants. Weekly edition EXPRO owned and distributed by Exploration & Production Consulting (ExPro LLC) +38 097 233 90 65, e-mail: [email protected] EDITORIAL OFFICE EXPRO +38 067 208 76 16 [email protected] ExPro Gas&Oil GENNADII KOBAL, Director and Founder of the project expro.com.ua