Naftogaz plans to invest USD 7.3 bln in E&P by 2025

Ukraine’s leading natural gas producer Naftogaz
(NAFTO) is going to invest USD 7.3 bln in exploration and production (E&P)
of hydrocarbons in 2021-2025, according to its strategy presented on Feb. 18.
In the next ten years, the company is going to invest in E&P USD 20-25 bln.
The new investments will allow Naftogaz to stop the decline of its hydrocarbon
reserves by 2025, according to its press release. The company is planning to
perform exploration works by its own and attract partners at the development
and production stages. As announced in the strategy presentation, Naftogaz is
planning to expand to 2.87 mln clients and to 35% of the retail gas market in
2025, from 0.85 mln clients in February 2021. The company aims at providing
clients with “integrated energy solutions” and entering low-carbon businesses
in the mid-term. Through this, Naftogaz is planning to transform itself and get
ready for an IPO by 2025, its press release states.

Alexander Paraschiy: It is good that the company has ambitious goals in Ukraine’s natural
gas and energy retail market, which is in fact the key business of Naftogaz.
Still, it is unclear why the company needs to operate a gas E&P business to
achieve its goals in retail. Also, the strategy lacks clear plans of Naftogaz’s
natural gas production which is its biggest activity by size and cash flow,
although not the core business. All in all, we see that Naftogaz’s presented
strategy requires more detalisation and, possibly, a feasibility study.